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HomeSportWhy the NFL's Big Streaming Deal Goes into Overtime

Why the NFL’s Big Streaming Deal Goes into Overtime

National Football League Commissioner Roger Goodell flew to Sun Valley, Idaho for the annual Allen & Company media conference this summer, confident that the NFL is close to announcing its latest blockbuster TV rights deal.

“Perhaps by the autumn we will make some decision,” he said. told CNBC at the time.

But nearly five months later, the league is still looking for a tech or media company willing to replace DirecTV as the owner of a Sunday ticket that lets fans watch every NFL game, not just the ones that air in their area. The talks are expected to last until next year, according to five people familiar with the talks.

The Sunday Ticket negotiations were closely followed by analysts and executives. Live sports, especially NFL games, are one of the last remaining staples of traditional television. Who wins the bid, how much they pay and how the deal is structured will have seismic implications for sports, media and technology.

Bidding for a valuable package of Sunday Ticket games could set a precedent for how much tech firms like Apple and Google are willing to pay to poach viewers away from traditional TV networks that still rely on cable subscription fees and advertising to stay on. afloat.

According to people familiar with the talks, the competitive landscape for the Sunday Ticket has changed as the talks dragged on. Sports and media executives have long seen Apple as the leader, with some bidders saying they think the tech giant has reached an agreement.

But in the absence of a deal, Google has stepped up its efforts to win a package for YouTube TV, the company’s cable streaming service, four of the people said. Other interested bidders include Amazon and ESPN Disney.

Robert Kinkle, YouTube’s chief commercial officer, played a key role in Google’s pursuit. Although he will take up a new position as chief executive of Warner Music Group early next year, Mr. Kinkle has committed to working with YouTube to see the deal through, three people familiar with his priorities said. He has a relationship with Brian Rollup, the NFL’s chief business officer who worked with Mr. Nykle during Google’s failed Sunday Ticket bid in 2013.

The league’s talks with Apple, Google and others have dragged on, the people said, because it’s trying to merge the retired NFL Sunday games package with other media assets, including the NFL Network and NFL’s RedZone channel.

Last year, the NFL hired Goldman Sachs to help explore selling stakes in these media companies. The decision was partly driven by the league’s recognition that the Sunday Ticket competes for subscribers with the RedZone channel, which bounces back and forth through live Sunday football games as teams approach scoring touchdowns.

While looking for investors for the channel and other media companies, the NFL should negotiate how to structure the joint venture with an investment partner who is likely to want to have a say in the operating structure of the jointly owned company, the people said.

One media executive who negotiated with both Apple and the NFL cited another reason for the months-long stalemate: Both sides were used to getting their way in negotiations.

NFL, Apple, Amazon and ESPN declined to comment. Google did not immediately receive a comment.

The league is asking for more than $2.5 billion a year, up $1 billion from the current eight-year deal that expires at the end of this season. He needs a long-term rights partner as he locked down his core packages for Thursday, Sunday and Monday games last year with 11-year deals.

A slowdown in the economy could pose another challenge for the NFL as it tries to strike a deal that could top $10 billion in its lifetime. Both tech and media companies are under pressure from Wall Street and investors for staff cuts and cost controls, a reversal after years of lavish spending.

The recession has helped anger some Wall Street analysts over Amazon’s $1 billion a year deal for Football on Thursdays. Tom Forte, an analyst at investment bank DA Davidson, said he was skeptical that the company would attract enough new Amazon Prime members or ad revenue to cover its costs. He added that because Amazon is struggling to make money, it’s unlikely that it will make a serious bet on the Sunday Ticket.

“At a time when tech companies are tightening their belts, it would be shocking to see Amazon spending more on NFL rights given the challenges they are already facing,” Mr. Forte said.

Equally skeptical is the viability of the ESPN bid. Rich Greenfield, an analyst with LightShed Partners, said that the return of Robert Iger to the post of chief executive increased the likelihood that Disney, which owns 80 percent of ESPN, will cut costs on ESPN or sell it. He quoted Mr. Eiger at a conference hosted by Vox Media in September when he said he was not optimistic about some traditional media companies.

Google also faced the need to cut costs and reduce its ranks. After reporting in October that YouTube and search sales were slowing, Google executives made a commitment to halve headcount and cut costs.

But Mr. Kinkle said closing the Sunday Ticket deal would not depend on belt-tightening by the company, two people familiar with the matter said. He said it would be a good investment because it would provide YouTube TV subscribers that could compete with the roughly two million subscribers that DirecTV is lending in its current Sunday ticket deal.

Apple has avoided a downturn in its business for most of the year, but the Covid-19 outbreak at its largest iPhone factory in China has led to a drop in production and could hurt sales over the Christmas holiday. However, Tim Cook, Apple’s chief executive, said he believes in investing during the economic downturn, and a deal with the NFL for a decade would be in line with that philosophy.

The NFL aggressively pursued Apple as a Sunday Ticket partner earlier this year in part because it didn’t have a serious business relationship with the tech giant, three people familiar with the talks said. But the urgency waned after the league reached an agreement this fall to make Apple the sponsor of the Super Bowl halftime show.

As negotiations with the Sunday Ticket stalled, the NFL focused on a separate search for an independent studio to help produce and distribute football films with the league. NFL Films, which makes documentaries and other shows, has put forward an offer that has sparked interest from bidders including Sony, A24, North Road and Skydance, the studio that co-produced Top Gun: Maverick, according to two people familiar with the search. . .

Mr. Rolapp, who negotiated the league, met with bidders in recent months and settled on Skydance Sports, which will team up with the NFL to develop and distribute film and TV projects. One of the NFL’s biggest goals is marketing the sport by reaching younger audiences and viewers outside of the United States.

Work on the deal shifted the league’s focus away from Sunday ticket negotiations, some of those people said. Only a few top NFL executives participate in media talks, making it difficult for the league to fully participate in multiple simultaneous talks. Now that Skydance has been chosen, the league is expected to resume negotiations for Sunday tickets.

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