Apple (AAPL -2.19%) recently inked a 10-year deal with Major League Soccer (MLS), reportedly paying a minimum guarantee of $250 million per year to the American soccer league. The deal gives Apple TV+ exclusive global media rights to stream every MLS match.
The move follows a deal with Major League Baseball to stream two regular-season games every Friday night this season. Apple is also the apparent front-runner for the NFL's Sunday Ticket package, and rumors indicate it has already secured those rights as well.
All told, Apple is spending billions on sports rights to fuel the growth of its streaming business.
Is Apple getting good value for its money?
Apple's deal with the MLS is interesting for a couple of reasons. First, the deal is structured as a revenue share with a minimum $250 million guarantee. So if Apple can sell more subscriptions for the MLS package, the league also earns more.
That means the league will likely help push the premium subscription and Apple TV in order to maximize the value of the deal. That's a very interesting strategy from Apple, and it also likely helped it win the bid for the media rights.
The second notable aspect is that games are exempt from local broadcast blackouts. Most leagues are very protective of their television broadcast rights, blacking out local games and pushing fans to subscribe to the cable bundle. Apple's deal will allow local fans to watch their favorite team without a cable subscription.
Apple, unlike some of its competitors, has no financial interest in keeping consumers subscribed to cable. In fact, it may benefit from more cord-cutting. Not paying for cable TV means more room in the budget for streaming services like Apple TV+.
The growing popularity of the MLS could also mean Apple is getting good value for its money. While the MLS surpassed the National Hockey League (NHL) as the fourth-most-popular sports league in the United States last year, the NHL commands $600 million per year for its U.S. media rights alone. Granted, the NHL has more games per season, but Apple's deal allows it to distribute matches internationally (where the MLS is also gaining traction).
Apple will look to cross-promote the MLS service with Apple TV+. Its subscribers will get free access to select games, which could increase the fan base and grow interest in the $4.99-per-month subscription video-on-demand service. Likewise, MLS fans will sign up and access the service through the Apple TV app, giving Apple plenty of opportunities to upsell subscribers.
Winning the game
Sports rights appear to be the next big category for streaming services to go after. Sports have remained one of the big tentpoles of live television programming, keeping consumers subscribed to a cable bundle. But as more consumers cut the cord, sports rights are providing diminishing returns for broadcasters. Meanwhile, they can be a substantial differentiator for a streaming service with the plethora of new competitors.
Even Netflix (NFLX -2.52%), which long eschewed the idea of streaming live sports, is starting to change its tune on the matter. There's no doubt the competition is having at least some impact on its subscriber numbers, which declined in the first quarter. The company sees a push into live programming as a way to keep subscribers engaged and reduce churn. Indeed, a four-to-six-month season of regular broadcasts has a much higher chance of keeping members as subscribers than a drama or comedy series that people could binge-watch in one weekend.
Teaming up with popular sports leagues like the MLS, MLB, and NFL can also be a great promotional tool for a streaming service like Apple TV+. No matter how a consumer watches the games (on television, live, or streamed), Apple can get its branding in front of the consumer with a relevant message. That kind of ad integration could prove extremely valuable for pushing sign-ups (as well as other Apple products).
Apple will spend billions of dollars on sports rights in the coming years. The earlier it gets in and the longer the terms of these deals, the better value Apple will likely receive. Sports rights are only increasing in value. While some investors might look at the prices it's paying and get sticker shock, the potential value these deals bring to the streaming service is worth making the bet.
