YouTube TV wins NFL Sunday Ticket, but analysts warn package ‘leads to a loss’
YouTube (GOOGL) has acquired the exclusive rights to NFL Sunday Ticket — but don’t expect the package to be profitable, warns one analyst.
“They’re not making money on this — that’s a loss leader,” Michael Pachter, managing director of equity research at Wedbush, told Yahoo Finance Live, referring to YouTube TV’s current price of $64.99. “I don’t think they make a penny at that level.”
Sunday Ticket, which brings out-of-market games to fans across the country, will be available as a YouTube TV add-on package and a standalone à la carte on YouTube Primetime channels starting with the 2023 NFL season. The terms of the deal were not disclosed.
However, a recent report from The New York Times indicated that YouTube was willing to pay up to $2.5 billion for the rights — $1 billion more than previous rights holder DirecTV paid for the package.
The report indicated that the NFL may receive additional payments depending on the number of YouTube subscribers added to the service, along with other performance criteria.
“It’s a very expensive content package,” Tim Nollen, an analyst with Macquarie Group, previously told Yahoo Finance Live, noting that the Sunday Ticket package was not a profitable service for DirecTV.
The cable provider previously boasted of 1.5 million to 2 million Sunday Ticket subscribers with each user paying about $300 a season. YouTube TV has over 5 million subscribers and beta users as of July.
Butcher stressed that “five million subscribers is not enough.” “Even if the five millionaires paid $400 a year…they would barely cover their costs.”
However, despite the lack of profitability and higher prices, Pachter noted that YouTube may be in a better position to take advantage of the package, especially with the growing demand for live sports.
“I think they can be smart about how they segment the content,” said Butcher, noting that the platform could more easily sell games to bars and restaurants. “There’s an opportunity for them to exploit this better than DirecTV given the overrated nature of YouTube. Anyone with an internet connection can get it, so in the end maybe it’s worthwhile.”
“There’s a lot of money in sports”
According to PwC’s Semi-Annual US Deal Forecast, demand for live sports, including in sports-related industries such as sports gambling, is likely to drive future merger and acquisition activity in the media space.
“There is a lot of money in sports, and bringing live sports to streaming platforms is an area that hasn’t been fully tapped yet,” John Christian, executive vice president of digital media supply chain at Qvest, the largest advisory firm focused on media and entertainment, previously told Yahoo Finance.
“The question is: can they pencil it in? Because the price is too high for the content. Will they now be able to get the subscribers necessary to be profitable in this business?”
“The math is tough” given the rising costs, Nolen agreed, though it may be a necessary step forward for companies hoping to survive the streaming wars.
“Linear subscribers are falling by the wayside,” Nolen said. “Streaming subscribers are still growing. It’s competitive, but it’s still growing, and over time more sports can help get more users onto those platforms.”
“How are they going to make enough money to justify the double or whatever the price increase is? Do you think they’re going to have to double the price of streaming services,” Nolen said.
Alexandra is the chief media and entertainment correspondent for Yahoo Finance. Follow her on Twitter aliecanal8193 and email it to firstname.lastname@example.org
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