THB Headline: "YouTube Paying Roughly $2 Billion a Year for NFL Sunday Ticket"

The headline is from the Wall St Journal reporters Joe Flint and Miles Kruppa, who broke the story when it finally went from being gossip to news.

The story matters to more than football fans because it stands as another example of the complication of interests in how “Legacy” and Streaming moves forward.

Sports is seen as the one sure bet in “Legacy” television right now. As a result, the NFL has been able to pile up massive growth in what it charges for rights. The average annual rights under their current deals are:

CBS - $2 billion
FOX - $2 billion
NBC Sunday Night Football - $2 billion
ESPN/Disney Monday Night Football - $2.7 billion
Amazon Thursday Night Football - $1 billion

Sunday Ticket is, simply, a package for fans to access the CBS and Fox games, with their national commercials, that does not include the playoffs or any other oddball national games that don’t compete with other games at the same time (like Thanksgiving or international games).

In recent years, the NFL has expanded to 18 weeks of games with teams playing 17. This has allowed them to add additional non-CBS/FOX opportunities to package/sell while not lessening the number of games being played under the CBS/FOX deals, which, by the way, produce all of their 200+ games every season. Still, not all games are created equal and the way things are set up, the CBS/FOX slots have more premium games taken away annually and for fans of specific teams, mostly, there are more games featuring their teams each year that are part of other platforms.

Sunday Ticket has been an exclusive product on DirecTV, meaning that unless you subscribed to DirecTV, you could not get Sunday Ticket (with a few narrow exceptions). DirecTV paid an estimated $1.5 million annually for this privilege and lost money on the deal every year, even with a $300/$400 a year price tag. (Est 2m subs… est avg $350 per sub = $700 million)

But the couple million subscribers to Sunday Ticket were stuck with DirecTV and the satellite content provider became infamous for charging for every single thing they could, taking what might a $135 a month offering to over $200 a month with the added charges (like charging for HD or for every TV or leasing you the box while also charging for “insurance” for the box).

Here is where this all feels a lot like the current evolution of the entire market, not just sports, from “Legacy” to Streaming. Consumers have been shackled to an increasingly predatory price scheme in cable/satellite - driven by channel licensing increases… but a different conversation - and now, they are free (assuming they have good internet access) of those chains, but the new boss may or may not be any better than the old boss.

One of the big challenges of being “free” to create your own home entertainment ecosystem is that you have to create your own home entertainment ecosystem. Like anything else, there are those who love the puzzle of it, those who would rather not but will design something because it gives them better access or saves money, and those who really just want to be given a new bundle they don’t have to think about that satisfies their needs and doesn’t overtax their wallet.

With Sunday Ticket pretty much assured of moving on from DirecTV after this season, the NFL had an interesting property to try to leverage. Unlike other packages they had built - first, adding Sunday Night Football, then allowing Monday Night Football to be on ESPN instead of a broadcast network, and then Thursday Night Football - there is no major branding opportunity. CBS & Fox are producing the content, period. The Red Zone Channel (an ADD endless run to and from every game closing in on a scoring opportunity) and the Fantasy channel that are included (and have been marketed to cable providers in recent years) are branded… but not the games themselves. Amazon and Apple have both leaned into producing their licensed games themselves so far.

And then there is the issue of whether Sunday Ticket will be allowed by the NFL and the current contracts be sold internationally… which is still an unknown, even after the Wall St Journal piece. Roger Goddell told the WSJ, “We’re going on an increasingly attractive platform that is growing on a global basis.” What does that mean, exactly? “Global.”

The YouTube blog offers, “YouTube remains an important outlet for NFL fans globally to access NFL content, and this new agreement will see a broader commitment to work together to engage with the NFL’s international fanbase. This will include increased content on the NFL channel, the creation of a bespoke NFL International show available on the YouTube platform and the creation of a creator content program for select top YouTube creators globally.”

So it doesn’t look like Google’s YouTube and YouTubeTV will have the right to sell this NFL package worldwide… just as DirecTV didn’t have that option.

To a bidding company like Disney, Sunday Ticket fit a number of their desires. It could have shored up the ESPN+ package and/or the Disney Bundle and/or the Hulu Live package. The pie-in-the-sky numbers for this deal floated by faux journalists who get all their intel from agents with vested interests and don’t question those interests, had this deal up to $4 billion. That number would make no sense unless there was some notion that Sunday Ticket could sell/drive millions of subscriptions internationally… especially for Disney, which is still much stronger domestically than internationally. An international opportunity might be worth losing more money on the deal in the short term (the deal for cricket in India being their most recent challenge of this type).

There is/should be a question of whether, given the ultimate much lower price tag, for domestic only, Disney should have matched or topped Google, but did not because of the pressures on the company right now, starting with Chapek and continuing with the stock market weakness since Iger’s return. Because, at $2 billion, the deal could easily be rationalized as a good choice to boost the Disney streaming model, another tool to ease the transition of the “Legacy” side of their business.

There is the very real possibility that at this price, considering Disney and Google as partners, the NFL simply preferred the less-encumbered bigger footprint of Google for a product that is not going to evolve much.

But back to the international issue… the deal with Google suggests that the NFL just wasn’t ready - after months of discussions with many potential Sunday Ticket licensees - to really give in to The Future.

Here are some of the issues that are not answered by the NFL in the WSJ piece and which are of major significance moving forward:

Pricing Details
International, ultimately
Single-Team Season Purchases
Single-Game/Game-Package Purchases
Alternate Programming by Google, similar to ESPN’s ManningCast.
Radio broadcast access, nationally
Local Blackouts Lifted

I suspect that we won’t see a lot of change next year, except for the big change, which is the availability for Sunday Ticket expanding from a potential consumer group of about 14 million households to at least 90 million.

That is when the question of pricing kicks in. And this is one of the fascinating issues, which also reflect the entire streaming universe. Unlike DirecTV, Google will make Sunday Ticket available to everyone, whether they have a YouTubeTV subscription or not.

Also unlike DirecTV, YouTubeTV operates in the “cancel anytime” universe of premium purchases. So unless they are really going to screw up, they will not be able to use Sunday Ticket as a giveaway to new subscribers (since you could cancel and re-up to get the new sub benefit) like DirecTV always did. I would expect some discounting for paying subscribers of YouTube premium deals and for YouTubeTV subs… but nothing too dramatic.

But there is an advantage to a package like Sunday Ticket as a part of your YouTubeTV platform rather than watching it on an independent app or YouTube proper. It becomes, functionally, a part of your “basic cable.”

I had the experience this year as a long-time subscriber to MLB.TV, which is almost exactly what Sunday Ticket is, but for Major League Baseball. MLB.TV internet-broadcasts local productions of games (aka, the vast majority of games) across America. Local blackouts exist, but the MLB.TV package has long included online access to every game that has been played in the season, access in most cases to game broadcasts from the local production of either team (watch from the NY perspective on YES or the Boston perspective on NESN), local radio broadcasts (often including a Spanish-language broadcast). And yes, there’s a standalone app for that.

This season, I decided to buy the annual package as an add-on to YouTubeTV.

Pricing was about the same. But it was nice to have my team’s games available as part of my first-stop streamer, which also reminded me when games were on or coming on. I could switch channels during commercials, whether to see another game or check the news or whatever else was on. The DVR service meant I didn’t mean anything if I got distracted. And I didn’t have to jump from one app to another. The baseball experience wasn’t isolated.

The downside was my relationship with the MLB.TV app, which was supposed to keep working the same way, but never did. I never could get live game footage on the app during the season. Of course, I could on YouTubeTV on my phone. But I might be checking the app for game progress and decide to watch, say, Aaron Judge at bat. Had to get out of one app and go to another. Not exactly torture… but an unnecessary step.

Also, this season, MLB.TV decided to start charging for the radio access, which I had loved, especially in the car. Again… SiriusXM has many of the baseball games, but not always and you don’t get to choose your announcing team. Radio on the MLB.TV app was only $10 more, I think… but it felt greedy of them while I was paying for a full subscription, which was more of the issue for me than the money.

This is the tug of war. All this access is great, but instead of “spend X number of dollars and you get full access,” the increases in rights costs (for sports, yes, but for all channels) keep pushing companies to try to find new ways to charge a little here and a little there.

The irony of the YouTubeTV/YouTube play for Sunday Ticket is that the consumer base at YouTubeTV is significantly smaller even than the shrinking DirecTV. How much will this marketing opportunity expand that base?

Disney, for all its need in streaming, is still working both sides of the fence. It is not in their immediate interest to cause more cord cutting. But Google is all about it.

Still, in negotiations, Google was kind of stuck. They would certainly love every one of the 2 million Sunday Ticket subscribers to cut the (satellite) cord and move to YouTubeTV. But because they only have 5 million or so current YTTVers, they needed to open the door wider to make this work for the NFL and their bottom line.

If you are a DirecTV sub and you want a cable-like platform with news and sports and the most popular basic cable channels (and have decent internet access at home), I personally suggest that you move to YouTubeTV. The Hulu Live product is, as I look at it, still more limited, even with the inclusion of the Disney bundle. We pay $65 a month for YouTubeTV and $20 a month for the Disney Bundle without ads. Hulu Live without ads is $83… but $10 more for more than 2 screens. YouTubeTV base offers 3 screens. There are 3 of us in this household. I don’t want to worry about one of us being blocked. On the local side, Hulu doesn’t include PBS stations here in L.A… YTTV does… but on the other hand, no Ch 5 in LA on YTTV but no Ch 13 on Hulu Live.

Your preference will be in the details. I’m sure they are both worthwhile. But for me, a discounted or more accessible Sunday Ticket might have moved my household from YouTubeTV to Hulu Live. These companies are wrestling with these choices every day and on every decision.

This deal between the NFL and Google/YouTube (and Google is actually Alphabet now… yes, I know… but I refuse to keep up) is the closer of this period for NFL deals. All the contracts are scheduled to renew around the same time in about 7 years. When that happens, who knows where the internet of entertainment will be? Of course, all the players can decide to make adjustments on the fly if trend and tech so demands.

I believe this deal is, as best we now know, somewhat conservative. But there are a lot of moving partners in all of this… just like the rest of the new media ecosystem.

Whatever details are next for Sunday Ticket, they will be micro issues. The macro discussion kinda ended when this deal was signed and all the other wilder possibilities were put aside.

Until tomorrow…