Amazon Likely to Top the Perennial NFL Sunday Ticket Deal: Sources

Dallas Cowboys wide receiver Brandon Smith during the game between the Dallas Cowboys and Jacksonville Jaguars

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Amazon is in talks to acquire the rights to the National Football League’s “Sunday Ticket” package and is considered a front runner by others involved with the league, according to people familiar with the matter.

Amazon has a serious interest in the multi-year package of out-of-market games, said people who refused to be named because the discussions are private. Amazon agreed in May to pay about $ 1 billion a year to become the exclusive provider of Thursday Night football games starting next year. This deal made Amazon Prime Video the first ever streaming service to own an exclusive NFL broadcast package.

An Amazon spokesman declined to comment on the “Sunday ticket” discussions.

The NFL is expected to charge $ 2 billion to $ 2.5 billion a year for the package and finalize discussions before the end of the season in February, two of the people said. “Sunday Ticket” has been owned by DirecTV for 27 years. Talks with prospects are progressing, suggesting the league is getting closer to choosing a new provider, people said.

DirecTV, which was spun off from AT&T last month as a new company, extended the Sunday Ticket for eight years in 2014. The current contract ends after the 2022/23 season.

NFL commissioner Roger Goodell told CNBC on Wednesday that the Sunday game package “may be more attractive on a digital platform” as streaming platforms continue to add subscribers at the expense of traditional pay-TV. Goodell also suggested to CNBC that the league seek a strategic partner that would not only acquire the rights to the Sunday Ticket but also invest in the NFL Network, which airs year-round NFL content, and the NFL RedZone , which shows live footage of game action when teams are about to score touchdowns. The NFL currently owns both NFL Network and NFL RedZone.

Amazon has competition for Sunday game rights. ESPN chair Jimmy Pitaro told Bloomberg this week that “Sunday Ticket” was “an incredibly valuable product,” admitting that Disney had exploratory talks with the league. The news site Information reported that Apple had also expressed interest in the package. According to someone familiar with the matter, NBCUniversal’s Peacock is unlikely to bid for the rights.

Several media managers involved in the discussions told CNBC that they saw Amazon as the favorite to win the rights to the package. NBC News reported on Amazon and ESPN’s early interest in the package in July.

Term of office of DirecTV

DirecTV is still considering its options but may not have the balance sheet to compete with Amazon or Apple, whose market valuations are near or above $ 2 trillion, two of the people said.

DirecTV has paid around $ 1.5 billion a year for “Sunday Ticket” for the past seven seasons and is currently charging about $ 300 for the package as an add-on. The satellite TV provider is now also offering the “Sunday Ticket” as part of its “Choice”, “Ultimate” and “Premier” pay TV packages.

DirecTV has been losing money on Sunday Ticket for many years. At its current price of $ 300, DirecTV would need 5 million subscribers to break even. DirecTV has, on average, been closer to 2 million Sunday Ticket subscribers for many years, according to one familiar with the matter. Executives at DirecTV and its majority owner AT&T have argued that the Sunday Ticket has been watered down more and more over the years as the NFL removes Sunday games and adds Thursday, Saturday and Monday night games.

Still, DirecTV was ready to use Sunday Ticket as a loss guide in turning subscribers into long-term satellite TV customers. That way, the company could offset some of its losses by collecting monthly pay-TV fees during the NFL season and the seven-month off-season.

Why Amazon makes sense

The NFL can potentially expand the audience for the “Sunday Ticket” significantly by separating the product from DirecTV. The satellite TV provider allows customers to stream “Sunday Ticket” without becoming a DirecTV customer, only if they live in areas where they do not have access to DirecTV. A streaming service would give everyone access to the “Sunday Ticket” without having to switch pay TV providers in addition to DirecTV. That could make the product available to millions of Americans who purchase cable television services along with broadband. DirecTV does not offer high speed internet service.

Amazon also has a side business it wants to promote Sunday Ticket subscribers: an Amazon Prime membership. Amazon’s video strategy has long been about getting people excited about Prime. In its quest to be “The Everything Store”, Amazon can use live sports to create a direct connection to fans who are also interested in buying sporting goods. Amazon made agreements with Major League Baseball’s New York Yankees and Major League Soccer’s Seattle Sounders last year to connect with audiences with Prime Video and live sports.

Amazon also hopes to expand Prime Video’s business with the upcoming $ 8.45 billion acquisition of MGM and the purchase of Thursday Night Football to build a burgeoning advertising business that closed the second quarter year over year Grew 87% to more than $ 7.9 billion. While Amazon is still lagging behind digital advertising giants Facebook and Google in US market share, the company gained 10.3% of the US dollar for digital advertising last year, up from 7.8% in 2019, according to a report by research firm eMarketer .

Amazon Web Services was also the technology provider to the NFL in developing Next Gen Stats, which has been analyzing and storing data on every NFL player and game since 2017. The NFL has long worked with broadcast partners with whom it has developed relationships. At the beginning of the year, the league increased the transmission contracts with all of its existing media partners. While Apple’s purchasing power rivals that of Amazon, Apple doesn’t share the same relationship history with the NFL.

Buying live sports rights also allows Amazon to grow its business while regulators crack down on large technology acquisitions. Amazon was previously able to grow into new businesses by taking over Whole Foods, Ring and Zappos. That avenue could be temporarily curtailed as new FTC chairman Lina Khan, who criticizes Amazon’s growing market power and influence on the economy, investigates Amazon’s deals. How regulators see Amazon’s upcoming MGM deal will be a window in Khan’s thinking.

– CNBC’s Jabari Young helped make this story.

Disclosure: NBCUniversal is the parent company of CNBC.

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