Apple’s MLS Deal Shows It Wants to Distribute Rights, Not Buy Them

Apple recently won the exclusive rights to stream MLS games on its platforms for 10 years, beginning in 2023, with an offer worth at least $2.5 billion.

Some media observers have suggested the commitment is the latest indication the tech giant will be an incremental buyer for sports rights, at scale, moving forward. But others say that is an incorrect conclusion to draw from the tie-up.

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“This is more of a distribution partnership than a rights acquisition,” said Yannick Ramcke (founder, Offthefieldbusiness).

The tech giant is guaranteeing the North American soccer league at least $250 million/year (there is also a revenue-sharing component to the deal) for the exclusive right to distribute league games on a local, national and international basis via Apple TV and Apple TV+, along with a new, yet-to-be-named service.

JWS’ Take: Apple (and Amazon) want to be in the sports rights distribution business. But at $4.99/month, the Apple TV+ subscriber base is never going to be robust enough to support tier one rights acquisitions at scale.

“They don’t want to buy rights,” Ramcke said. “Even for them, unbundled streaming economics do not work for high-priced sports rights. Their low-priced SVODs offer limited capacity to absorb [the spending on buying live sports rights at scale] and limit what can be thrown into them for free.” Subscribers can purchase the streaming service without an iOS or tvOS device; AppleTV+ is available on many connected TV platforms. The digital media executive acknowledged Amazon has a few more levers it can pull to extract value from customers acquired via exclusive live sports content (think: re-targeting, contextual advertising, e-commerce).

But costs aside, “the tech companies don’t want to become media companies,” Ramcke said. They want to avoid having to provide content production, talent management or advertising sales support—necessary services to have in-house if buying TV rights at scale.

Ramcke expects the two tech giants will continue taking an opportunistic approach to sports rights to differentiate their respective SVOD offerings moving forward. “They will cherry-pick select assets here and there that are locally relevant, and only pursue select matches within those assets to throw into their SVOD” (see: MLB games in the U.S., Champions League games in the U.K., Germany and Italy). As a result, he does not expect either company to create much inflationary pressure on rights fees overall.

Apple and Amazon can make do with limited live sporting rights on their SVOD services because neither uses the programming as a means of retaining subscribers; they believe the breadth of on-demand content offered, which is much cheaper to license, will keep customers from canceling. The select games available on Apple TV+ and Amazon Prime Video are designed to drive incremental user acquisition and create awareness (think: halo effect) of the offering.

Instead, Apple is looking to generate scalable service revenues with the U.S. soccer league. The bulk of MLS games will be delivered as part of a new add-on subscription service available exclusively through the Apple TV app. Fans will not need to be Apple TV+ subscribers to purchase the league offering.

While fair to question how “locally relevant” MLS is within the U.S. sports landscape, it is easy to understand why Apple took a flyer on the league’s streaming rights—the offering seemingly checked three critical boxes for the company.

First, the league was prepared to deliver “a ready-made product seeking distribution,” Ramcke said. Second, Apple wanted to own content as opposed to renting it. “Ten years in sports is as close as [a distributor] can get to owning content without buying the entity,” Ramcke said. And third, Apple works on a global scale. MLS was willing to roll up and align its local, national and international media rights, as opposed to selling them on a market-by-market basis. “For the first time in the history of sports, fans will be able to access everything from a major professional sports league in one place,” Eddy Cue (senior vice president of Services, Apple) said in a statement. The company declined to comment further at this time.

The long-term partnership also gives Apple an opportunity to prove that “this is the distribution model of the future,” Ramcke said. “The end game is not only having an MLS [subscription offering], but a Premier League [a-la-carte version] sold exclusively via Apple TV, too,” like an iTunes of sports. NFL Sunday Ticket and NBA rights (including its NBA League Pass) would also seemingly appeal to the global streamer.

Rights owners are undoubtedly watching to see how the partnership unfolds; if it works, it could solve an existential problem. Most leagues understand they need to prepare for a world where streaming becomes the predominant means of content delivery. But because they cannot afford the huge revenue dip that would come with walking away from linear television in the short-term, they cannot make the transition to direct-to-consumer streaming on their own. The $250 million/year that Apple is guaranteeing MLS more than covers the short-term losses clubs would incur moving away from linear TV. The league’s current package with Fox and ESPN paid it $600 million over eight years. Univision added another $120 million over that same time period.

Media consultant Patrick Crakes said there was relatively little in the way of local media rights revenue. “MLS always struggled to get real traction with its local distribution rights. Figures vary by club, but the economics were never anywhere close to [what] the NBA, NHL and MLB receive.”

The tech giant also enables MLS to pursue its direct-to-consumer ambitions as part of a broader offering, with wider distribution, than it would have as a standalone service (think: old WWE Network). That should help expand the audience beyond the narrow group of die-hard fans.

If Amazon and Apple are going to underwrite rights owners’ moves to direct-to-consumer and provide the ancillary benefits cited, it is fair to wonder how that may influence private equity’s role in sports. Gordon Saint-Denis (sports finance group head, Monroe Capital) does not believe the tech giants’ involvement will slow the institutional money entering the space.

“The deals being done with leagues and franchises aren’t just media rights [related],” Saint-Denis said. “There are other contractual revenue streams and assets [Institutional Investors] can monetize for these [rights owners]. Areas such as merchandising rights, sponsorships (naming rights and the like) are other revenue streams that can be monetized. Moreover, portions of these media rights-related deals can be monetized for a specified period—not necessarily the full life of the contract.”

Some sports media observers have suggested MLS may have “short-changed” itself selling streaming rights so far into the future (even if it did meaningfully grow revenue). But Ramcke reminds, “It’s a minimum of $250 million/year; all of the talk regarding [MLS] not benefiting from the domestic World Cup” is misguided. If the league’s popularity grows in the 2026 event’s wake, it stands to benefit from the increased subscription revenue.

How much remains to be seen. The league believes the rev-share component of the partnership could be meaningful for both sides, though the absence of historical data makes it difficult to project.

Crakes viewed the deal as MLS taking advantage of an opportunity. “The established system would not validate MLS’ internal estimate of its value. So, [the league] turned to a new type of distributor who could value them closer to what they believe is accurate.”

While Apple’s new subscription service will replace local broadcasts of MLS games, the league is not disappearing from traditional television. There is a provision in the deal that allows MLS to continue simulcasting matches on linear TV. Deputy commissioner Gary Stevenson said in a Zoom conference Tuesday morning that both Apple and MLS felt the partnership would benefit from the league continuing to gain exposure across Fox, ESPN and Univision (think: fan creation, fan engagement).

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