Why YouTube Is Paying The NFL $2 Billion Annually For Sunday Ticket
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Sorare is one of the fastest-growing companies in sports. Backed by superstar athletes like Lionel Messi, Kylian Mbappé, Rudy Gobert, Aaron Judge, and Serena Williams, they have built blockchain technology that allows fans to collect officially licensed NFT-backed player cards. Sorare, which started in Europe with fantasy football games, recently launched exclusive licensing deals with the MLB/MLBPA and NBA/NBPA to create a custom fantasy game for each sport. The concept is simple: Sorare lets you buy, sell, trade, and earn digital trading cards of your favorite players. But rather than just looking at them as a digital collectible, you can use these trading cards to enter fantasy sports competitions for prizes/rewards. So go check them out and use my link below for a free limited card — it’s free to get started! Friends, Did you know that YouTube was founded because of the NFL? The story goes like this: Tom Brady and the New England Patriots won Super Bowl XXXVIII on February 1st, 2004, in Houston, Texas. Adam Vinatieri made a 41-yard field goal with four seconds remaining to beat the Carolina Panthers, and Tom Brady was named Super Bowl MVP for the second time in his career. Neither team scored in the first or third quarter, yet they ended up with a combined 868 yards and 61 points, including a Super Bowl record 37 points in the fourth quarter alone. It was objectively a fantastic game. But still, headlines the next day weren’t dominated by the game itself — they all referenced the halftime show. The Super Bowl halftime show that year was headlined by Justin Timberlake and Janet Jackson, and we all know what happened next. Jackson suffered a wardrobe malfunction, her breast was exposed, and “Nipplegate” was born.
The backlash was intense. Many people believed it was intentional, and FCC Chairman Michael Powell called it “a classless, crass, and deplorable stunt.” Janet Jackson’s career was never the same, but the incident also highlighted another glaringly obvious problem in retrospect. The wardrobe malfunction occurred years before Twitter, Instagram, and TikTok were even ideas, and unless you set your TiVo or VCR before the game, you had no way of rewatching the live, unedited event. So a year after the spectacle, three PayPal employees (Chad Hurley, Steve Chen, and Jawed Karim) were at dinner joking about the incident and realized how tough it was to find any footage of it online — and that’s when YouTube was born. The video-sharing service officially launched in 2005, and YouTube ended the year hosting over two million videos per day on its website while averaging over 20 million daily active users. Google then acquired the company for $1.65 billion in late 2006, and YouTube generated $28.8 billion in revenue last year alone (+46% YoY). More than 2.5 billion people access YouTube at least once a month, and the platform now has more monthly active users than Instagram and TikTok combined.
But seventeen years after the launch of YouTube, the NFL is back on center stage. The NFL announced a multiyear agreement on Thursday for Google to distribute the league’s “Sunday Ticket” package on YouTube TV and YouTube Primetime channels. The out-of-market sports package allows fans to watch NFL regular season games (produced by Fox and CBS) that are unavailable on local affiliates, and DirecTV has been the sole provider of the package since 1994 (28 years!). The satellite provider has paid $1.5 billion per year on an eight-year contract that expires at the end of this season, and YouTube will now pay a rumored $2 billion-plus annually for the next seven years, starting in 2023. YouTube TV – Sunday Ticket Overview
The NFL was reportedly seeking $2.5 billion for the package. However, one important caveat is that this deal only includes residential rights, so the NFL might still be able to reach that target after selling commercial rights to bars and restaurants. But regardless, this is the second streaming deal that the NFL has signed in the last two years, including Amazon’s 11-year, $13 billion deal for Thursday Night Football, and it signifies a continued shift from traditional television to streaming. “For a number of years we have been focused on increased digital distribution of our games and this partnership is yet another example of us looking towards the future and building the next generation of NFL fans,” Roger Goodell said in a statement. Starting next season, consumers will have two ways to access Sunday Ticket: (1) an add-on package for existing YouTube TV subscribers or (2) a standalone app on YouTube Primetime Channels, which lets users subscribe and watch content from streaming services on the YouTube app (without purchasing YouTube TV). Google hasn’t confirmed what the additional price would be. But given that 2 million subscribers currently pay $300-$400 a season for Sunday Ticket and DirecTV is still losing $500 million-plus on the package, current YouTube TV subscribers should expect to pay a similar amount — in addition to their current streaming package. DirecTV Subscriber Count
For context, at $2 billion a year for Sunday Ticket, here’s the math on how many subscribers YouTube would need to break even:
So YouTube TV will almost certainly lose money on this deal, at least initially. DirecTV *only* had 2 million subscribers for the package, and while some logistical challenges might have suppressed that number, it’s highly doubtful that YouTube TV will be able to double or triple that subscriber base. Don’t forget, with the growth of RedZone and the NFL continuing to move games outside of traditional broadcast windows, an argument could be made that the importance of Sunday Ticket has been trending downward for years. But still, that doesn’t mean this is a bad deal for YouTube. The subscription streaming service has established itself as the world’s leading virtual multichannel video programming distributor (vMVPD) — ahead of Hulu, Sling, Fubo, etc. — but quarterly growth has significantly slowed over the last year (from 19% to 5%), and this partnership should immediately kick-start that growth engine again.
The $2 billion annual fee for Sunday Ticket represents less than 1% of YouTube’s annual revenue, so profit generation isn’t a necessity. Instead, the key for YouTube will be converting legacy Sunday Ticket consumers into YouTube TV subscribers. They should be able to do a much better job when it comes to tech integration — Sunday Ticket has huge gaps on split-screen viewing that inexplicitly make the screens much smaller than they need to be — and my guess is people will end up enjoying the product much better than the current version offered by DirecTV. But change is coming. Network television providers continue to lose subscribers at an alarming rate, and subscription services continue to grow steadily. Sports are one of the few things keeping TV networks in business (along with live news), and Amazon, Apple, and YouTube’s willingness to spend billions of dollars can no longer be ignored. I hope everyone has a great day. If you enjoyed this breakdown, please consider sharing it with your friends. Ps. this will be my last email of 2022. I can’t thank you guys enough for following along and spending five minutes with me every morning. I don’t take it for granted. I’ll be spending next week with family and friends, and I intend to unplug and get ready for 2023. I hope everyone is able to do the same. Enjoy the holiday, and we’ll talk in January. Your feedback helps me improve Huddle Up. How did you like today’s post? Loved | Great | Good | Meh | Bad Ryan Garcia: The Business Of Boxing, Fighting Jake Paul, And Building A Social Media EmpireIf you are not a subscriber of Huddle Up, join 74,000 other professional athletes, business executives & casual sports fans that receive it directly in their inbox each morning — it’s free.
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