YouTube and YouTube TV are in the first year of a seven-year contract with the National Football League to serve as the exclusive home of NFL Sunday Ticket, the league’s out-of-market subscription service. The company has yet to release subscriber figures for the service, which it is reportedly paying $2 billion annually to carry, and could result in sizable losses.
According to a report from Sportico, estimates from Morgan Stanley’s equity research unit is projecting an almost $8.86 billion loss over the life of the deal – approximately $1.27 billion per year. These figures also took into account the escalators within the contract that bring it to a reported $14 billion through the next seven years, which will raise the fee to $2.24 billion at the end of the deal.
The platform has approximately 1.5 million subscribers through its tiered subscription plan, which gives users the ability to purchase the service outright or with a YouTube TV subscription. Morgan Stanley calculates that Alphabet, the platform’s parent company, is estimated to generate almost $570 million in revenue in the first season, which would lead to a total loss of $1.2 billion.
In order to prevent further losses and to reach a break-even point on the deal, the platform would need to double its subscriber count next season. Alphabet has not disclosed revenues from NFL Sunday Ticket subscribers throughout the year, but its most recent fiscal report states that it generated $22.3 billion in sales through the first three quarters of 2023.
Projections from Morgan Stanley, however, see the service rising to 2.5 million subscribers by 2029, which will create $835 million in revenue. Because of the rights fee of $2.24 billion during that final season, the company would still be facing a loss. Yet that could be presumably softened because of the concomitant estimate of 65% of those subscribers accessing the service through the YouTube TV bundle.
Ruth Porat, president and chief investment officer at Alphabet and Google, revealed on Wednesday’s earnings call that fourth quarter financial results will include revenues for the service, along with acquisition costs for associated content. She also stated that since Q4 2023 represents the first full quarter with Sunday Ticket, the service is contributing to higher customer acquisition costs (CAC) and within the overall subscription revenue being generated.
“As we look longer term, we expect to generate an attractive return over the life of the deal,” Porat said. “We’re continuing to invest in support of this and excited about the additional opportunities that come out of it, working with partners to deliver clips and other opportunities.”
For now, the company is pleased with how its first season with the service is going and understands the feedback from users regarding multi-view functionality. That aspect of the service was a staple on DIRECTV, which was the home of NFL Sunday Ticket since its launch in September 1994, and something that customers have implored the company to discover through innovation.
“I think, in the broader context, you have to look at it as overall, a YouTube subscription strategy,” Philipp Schindler, senior vice president and chief business officer at Google, said during the earnings call. “The great feedback we’ve gotten so far on the YouTube experience is very, very significant.”
