TV Answer Man, I am confused by something. If the Sunday Ticket makes a profit, why doesn’t DIRECTV try to keep it after this season? And if it doesn’t make a profit, why do companies like Apple and Amazon want it? What am I missing here? — Steve, Dallas.
Steve, as you probably know, DIRECTV has carried the NFL Sunday Ticket as an exclusive since its launch in 1994. However, the satcaster’s exclusive deal expires after this season and multiple news reports say either Apple TV+ or Amazon’s Prime Video will likely take over the rights starting with the 2023 season. The reports add that DIRECTV might continue providing the Ticket to bars and restaurants, but even that is uncertain.
Now to your question: If the Sunday Ticket is so profitable, why doesn’t DIRECTV want to keep it as an exclusive after this season? And if it’s not a money-maker, why are Apple and Amazon prepared to pay more than $2 billion a year for the rights, according to the news reports?
The answer lies in uncovering one of the great myths about the NFL Sunday Ticket: It does not make a profit, has never made a profit, and will never make a profit.
How do I know this?
AT&T told us.
The telco last year filed a statement with the Securities and Exchange Commission that said it had agreed to pay up to $2.1 billion in losses stemming from the Sunday Ticket contract as part of its sale of a minority stake in DIRECTV to the private equity firm, TPG.
This might surprise some people, but DIRECTV’s last eight-year contract with the NFL called for it to pay $1.5 billion a year for the Ticket’s rights. The satcaster’s base price for the Ticket starts at $293 a season with the Max plan at $395. For DIRECTV to make a profit, it would have to get more than 20 percent of its total subscribers to subscribe. And over the years, the number has actually been around 10-15 percent, according to various sources I’ve talked to in my 28 years of covering the company.
The 10-15 percent number may surprise you, too, but remember that the Ticket starts at $293. That’s a significant amount of money for a single package of out-of-market Sunday afternoon games that’s only available for four months of the year. While the Ticket gets a lot of attention, it has never been something that gets a lot of subscribers.
The number of people who now watch the Ticket is somewhat higher than the 10-15 percent thanks to DIRECTV including it for free to new customers. But if you’re only talking about subscribers, it’s less than 20 percent despite what one suspect consumer survey says.
DIRECTV also generates revenue from selling the Ticket to bars and restaurants, but it’s not enough to offset the losses from the consumer business.
So if DIRECTV loses money on the Ticket, why has it continued to renew its exclusive contract for nearly three decades? And why would Apple and Amazon want a business that loses money?
Branding and retention.
The Sunday Ticket deal helped put DIRECTV on the map in 1994 when the company first launched and it has continued to give the satcaster a competitive edge. While the number of actual subscribers has been relatively low, the Ticket has been a great marketing weapon. Consumers are drawn to DIRECTV because it has something big that no one else does. Even if you’re not interested in subscribing to the Ticket, the fact that it’s there makes you associate quality and uniqueness with DIRECTV.
And those who do subscribe to the Ticket are usually rabid sports fans who are more likely to stay with the satcaster to continue getting the Ticket. In an era of escalating subscriber churn, that makes it a highly valuable commodity.
Both Apple and Amazon know that if they secure the rights to the next Ticket deal, it will mean getting those extremely loyal sports fans as well as giving non-sports fans a reason to give their streaming services a second look.
With the streaming competition escalating, that makes the Ticket a highly coveted commodity, one that both companies are likely prepared to lose money over.
Steve, hope that makes sense. Happy viewing and stay safe!
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— Phillip Swann