Apple Dropped the Ball on an NFL Deal 18 comments
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This past March DirecTV (DTV) re-signed the NFL to Sunday Ticket, extending their exclusive rights to 2014. The last deal, inked in 2004, had a 2010 expiration. Where was Apple (AAPL) during the negotiation?
There's room for additional distribution of NFL games. And the current Sunday Ticket model isn't a good match for everyone. DirecTV packages the NFL as an entire season, largely because that's the way the NFL wants it. During prior negotiations in 2002 and 2004 cable companies pushed for a la carte distribution, making games akin to pay-per-view events. The NFL dug in and sold exclusive rights to DirecTV.
But that was then and this is now. Times change and the NFL would be shortsighted if they didn't embrace other methods of distribution and other revenue streams. They already do through a deal with Yahoo! (YHOO), but not in the United States.
Granted, exclusives usually mean fat margins, and it looks like DirecTV overpays for Sunday Ticket, much like AT&T (T) pays full retail for iPhones. DirecTV is basically subsidizing Sunday Ticket and adding new subscribers for the expense. Sound familiar?
Even back in 2004 when DirecTV paid $400M for the rights to Sunday Ticket it was largely seen as a wash. The exclusive led to rooftop installations for customers who otherwise would have stuck with cable. Time Warner (TWX) and Comcast (CMCSA) have no competing product. Further, those same cable companies were in a squabble with the league over the NFL Network. Pricing for the network led to cable providers dropping the channel. That left diehard fans who wanted 24 hours of coverage further motivated to put up the dish.
What would an Apple NFL package look like? A la carte pricing fits right into the iTunes model. Fifteen dollars per game, streamed live in high-definition. DirecTV could point out that for about the same money their subscribers get multiple games each Sunday, along with the ability to hop between channels. At $300 for the season Sunday Ticket works out to about $17 per week.
The deal DirecTV signed in March was for four years, a billion dollars per year. Sounds like DirecTV can't survive without the NFL, and that should have given Apple leverage at the bargaining table. Apple has billions in cash they could have tapped for a deal. It would have reduced what DirecTV had to pay for its coverage, but perhaps opened the floodgates for cable companies to move in.
The NFL on Apple TV lifts the device from the "hobby" status Apple has assigned it. Buyers would benefit multiple ways over DirecTV: No monthly charge. No dish. No paying for games they won't watch. No contract. The exodus from DirecTV could be significant. And it could introduce a whole new market segment to Apple products.
Netflix offers a Roku set-top box for streaming their Watch Now content to subscriber televisions. The box is only a hundred dollars and has added a significant product: Major League Baseball. No, baseball isn't the NFL. But for thirty-five dollars fans can watch as much out-of-market baseball as they can take. Live, streaming in high-definition. Baseball might not have the pull that football does, but this was another wake-up call for traditional television outlets.
For many consumers looking to quit cable or the dish there was a problem: live sporting events. The MLB deal changes that, making live baseball games easily accessible and affordable. $35 for the rest of the season. Not every month - but for the remaining season. At only a hundred dollars the Roku box is almost a no-brainer for current Netflix (NFLX) customers, especially baseball fans.
If Jobs and Cook didn't negotiate with the NFL their stockholders should wonder why. Apple can always try again in 2014. Rumors are flying that Cupertino has Apple TV announcements lined up for next month. It's doubtful any of them are as big as an NFL deal would have been.
Disclosure: Long AAPL.
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Apple does not need the NFL and their problems. And who is to say AT&T would approve. They don't have the infrastructure to handle it anyway. Can't even get tethering.
Lets move on from Apple bashing
For starters, the Apple TV has a very low sales rate. Even if this deal was made, how many Apple TV units would they really sell? Who's going to spend a few hundred dollars for a device that only gives them NFL games?
Also, people who have DirecTV use it for all their cable channels, not just NFL content. There would be no "exodus" from DirecTV if NFL games were on Apple TV because Apple TV does not give you any cable programming.
Also, you say that "For many consumers looking to quit cable or the dish there was a problem: live sporting events. The MLB deal changes that, making live baseball games easily accessible and affordable."
But you neglect to mention that if you want to watch your local MLB team, live, you can't do that via Roku or the PC with MLB's offering. All local games are blacked out. So how does "the MLB deal change that"? It doesn't.
You said the Apple TV has low sales. That's the point. NFL access would be an immediate and major boost to sales.
Yes, some people use Directv for all their channels. But some only use it for football. Directv has gotten a huge number of new subscribers by offering Sunday Ticket. I know plenty of people who have both cable and sat subscriptions.
Apple could do exactly the same thing DirecTV did - add users via the NFL.
No Apple does not have cable programming. But leaving cable providers is becoming a far more prevalent practice now with alternatives like Netflix, Hulu, iTunes, and other outlets. Every additional outlet loosens the grip satellite and cable providers have on the market.
On Aug 21 11:52 AM Dan Rayburn wrote:
> This post makes no sense.
>
> For starters, the Apple TV has a very low sales rate. Even if this
> deal was made, how many Apple TV units would they really sell? Who's
> going to spend a few hundred dollars for a device that only gives
> them NFL games?
>
> Also, people who have DirecTV use it for all their cable channels,
> not just NFL content. There would be no "exodus" from DirecTV if
> NFL games were on Apple TV because Apple TV does not give you any
> cable programming.
>
> Also, you say that "For many consumers looking to quit cable or the
> dish there was a problem: live sporting events. The MLB deal changes
> that, making live baseball games easily accessible and affordable."
>
>
> But you neglect to mention that if you want to watch your local MLB
> team, live, you can't do that via Roku or the PC with MLB's offering.
> All local games are blacked out. So how does "the MLB deal change
> that"? It doesn't.
Let's be generous and say that AAPL has sold 2.5 million Apple TVs and that each and every one of those users would run out and sign up for the new NFL plan. At a cool billion, that'd be a customer acquisition cost of $400 per year.
At a billion dollars a year expense, to get that cost down to $40 per year, AAPL would need to increase the Apple TV sales to 25 million units a year!
Admittedly, AAPL would recoup some of that outlay by selling the games or subscriptions to the seasons. But I think they need a much larger installed base to sell into before it'd truly make economic sense.
And first I'd argue that Apple needs to get full NFL games on iTunes. And get the NFL "Follow your team" game season ticket back. After that they can worry about things like streaming live games.
Frankly, I doubt many Apple shareholders are "damn, I wish they had made a deal with the NFL." In general all the content Apple facilitates is designed to sell hardware - and while I own an AppleTV and like it, it's clearly not a device that's going to sell in great numbers; even if they added something like live streaming, and I don't think it's a high margin device either. Apple is going to make some big deal to court a fraction of the 2 million directTV subscribers? They sold 3.8 million iPhones last quarter; each with a higher sales price than an Apple TV.
How many Roku boxes are they selling? Sure the MLB/Roku deal is nice but I doubt it's pushing those devices out the door, nor are they generating that much profit.
So, while sure it'd be nice to have some live content on the AppleTV but outbidding DirectTV doesn't seem like high on their list.
Start with the NFL and then sell all you can eat access to shows and movies for a monthly fee.
And Dan Raybern - I think the point about baseball was that live sports CAN be delivered over the internet to living rooms now. For people clinging to traditional services just because of sports that's something. It means the technology is there for an Internet based living room.
Yes, I'm sure the NFL would love to be on the iPhone and I suspect they will not be renewing the Sprint exclusive deal but no one lse was willing to pohy up millions for it a few years agao other than Sprint.
But seriously, next time you consider jotting down rambling thoughts, search on the internet first before looking like an complete ***.
is seeking alpha the gizmodo of stock boards?
Everyone on his thread hinks dtv has an infinite deal. You're all so blind. Yes - dtv has it now. That didn't preclude others from negotiating betide the signing- which is what the post is about.
On Aug 21 11:30 AM blf wrote:
> Screw the NFL. Who gives a crap about that neanderthal BS. Football
> types buy Dell and Microsoft at Wal-Mart because it's cheap. They
> have no concept of quality or value, only to do what they are told.
The NFL brand has a certain image, whether we like it or not. Just look at the advertisers, and you can determine who that brand skews toward. Rather than say what products that is and get negged here, I think that is self explanatory.
The Apple brand has a virtually opposite image. Using the same assessment as the paragraph above for the NFL, a very different outcome would result.
Sure there is a wide overlap of brand advocates, but the NFL has become sort of a love it or hate it brand. Player character issues, owner image, community flaws, etc. have more than offset efforts to make them look like good guys.
I hear the opponents of the OP saying that the NFL brand would tarnish the Apple brand, and I agree. I have seen more brands lose their core audience through brand tarnishing than I have seen brands polish their valuable image and thrive.
"Sports" are surely not a niche. Things like the NFL and World Cup are gigantic, compelling consumer content categories that people will make major changes for. Apple TV needs some of that from somewhere. There's not much there now.