Media business watchers always assumed that with Google/Alphabet's YouTube paying around $2 billion a season to license NFL Sunday Ticket, the out-of-market games package would serve as a loss leader.
Alphabet didn't reveal much Tuesday during its Q3 earnings call about how its Sunday Ticket business was going in season 1, but Morgan Stanley Research released projections suggesting the aforementioned loss-leader assumptions are correct.
Morgan Stanley's estimates were tweeted out Wednesday by Forbes Media assistant managing editor Mike Ozanian, and they are compelling.
Morgan Stanley doesn't expect YouTube's NFL Sunday Ticket subscription to be profitable, but other forms of monetization can help improve the profitability of the deal over time. pic.twitter.com/je6orz452SOctober 25, 2023
Morgan Stanley estimates that Google has sold around 1.5 million NFL Sunday Ticket subscriptions so far through YouTube and its YouTube TV virtual pay TV platform, generating revenue of $569 million. (Notably, 80% of subscribers, the equity research outfit suggests, are not choosing the bundled YouTube TV option and are paying full $399-a-season freight.)
Projecting a first-year rights cost of $1.773 billion, Morgan Stanley projects that Google will lose $1.204 billion in its first year. It would take 3.18 million subscribers for Google/YouTube to break even.
By 2029, the research outfit predicts, Google will have 2.5 million NFL Sunday Ticket customers, generating around $835 million in revenue. But rights costs will rise to $2.243 billion, Morgan Stanley projects, and losses will reach $1.408 billion.
By 2029, however, it's projected that 65% of Sunday Ticket subscribers are getting it as a bundled option via YouTube, suggesting that the package is driving subscriber growth for the vMVPD.
The Morgan Stanley math comes after Rob Thun, chief content officer for NFL Sunday Ticket’s ancestral home, DirecTV, told Sports Business Journal that the satellite pay TV company isn't having any residual regrets from letting Google take over the package.
“Well, let me ask you a question: Do you like losing a billion dollars a year?” Thun responded when asked if DirecTV missed Sunday Ticket.
“That was the old deal. The new deal, it’d be a billion and a half,” he added. “It didn’t make sense for our platform because … We’re losing subs because we’re a pure-play video provider and the price of content continues to escalate beyond what people are willing to pay.”
