With Super Bowl 50 all wrapped up, the biggest NFL stories are happening off the field, and a scrum for streaming rights between some of the biggest names in tech could have a major impact on cord-cutting.
A Variety report indicating that Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Verizon (NYSE:VZ) are entering competing bids for streaming rights to Thursday Night Football next season suggests that one of cable's biggest assets is quickening its transition to a global online presence.
Yet, this news comes at a time when companies including Time Warner Cable and Comcast (NASDAQ:CMCSA) are reporting subscriber gains in their cable segments that defy cord-cutting predictions. Is the NFL's push into digital streams the beginning of the end for cable or just another false-start in the long-predicted cord-cutting revolution?
Why the NFL could tip the cord-cutting scales
With the announcement of the NFL's $450 million deal with CBS Corp (NYSE:CBS) and Comcast for split cable broadcast rights to next season's 10 Thursday Night Football broadcasts, the league also stated that it was looking for digital streaming partners for the content. The unsourced Variety report naming Alphabet, Apple, Amazon, and Verizon as potential competitors places some of the biggest names in technology and telecom as potential suitors and sets up what could be a crucial power struggle between new-TV and old-TV.
NFL games are among the most valuable and coveted programs in broadcasting, and, until recently, have lived almost-exclusively in the cable-and-satellite-television sphere. 2015's fall television season saw 26 of the top 27 best ratings performances go to NFL broadcasts, and this type of ratings dominance is the rule rather than the exception. More broadly, sports programming is one of cable's biggest draws and an asset that streaming competitors have to absorb before traditional TV can be dealt a deathblow.
Disney's ESPN is still the most valuable channel in the world, and NFL content is central to the broader sports equation that drives value for traditional subscription television. DirecTV's television service, for example, relies heavily on the appeal of its NFL Sunday Ticket platform, which gives subscribers access to out-of-market games. DirecTV is signed with the NFL through 2022, paying $1.5 billion annually -- a figure equal to roughly 4.5% of the company's revenue for fiscal 2014 -- for rights to the content, and securing broadcast rights beyond the current deal's expiration will likely be crucial for the health of DirecTV's current video model. Along with its cable competitors, DirecTV faces the dilemma of being sports-dependent at a time when the content is branching to new channels.
The trickle before the stream?
News that the NFL is looking into a bigger streaming presence is not surprising given the league's stated interest in developing markets and recent foray into online broadcasting. In October, the NFL teamed with Yahoo! to air the first official global live stream of a league game, bringing the prized content to a worldwide audience and putting up impressive numbers.
The streamed match-up between the Jacksonville Jaguars and the Buffalo Bills pulled in roughly 15.2 million unique viewers and recorded 33.6 million streams without factoring in viewership from China -- with roughly 33% of viewers being overseas. The stream's viewer count came in significantly higher than the 13 million viewer average for Monday Night Football broadcasts in 2015. These figures are made even more impressive by the fact that the NFL's first stream featured relatively unpopular teams -- put a rematch of this year's Super Bowl teams on a global stream and the results would be even better.
The league is targeting revenue of $16.1 billion in 2018 and $25 billion in 2027, and hitting the latter target will be difficult without significant international growth. Streaming represents the NFL's most direct path to growing viewers in untapped markets, and the traditional cable broadcast setup is also a viewership barrier in domestic markets, so increased emphasis on over-the-top digital distribution appears inevitable -- the big question is how cable companies will adapt.
As the recent resurgence in Time Warner Cable and Comcast video subscriber growth suggests, predicting the trajectory of cord-cutting trends is a difficult task. The cable stalwarts are working to improve their offerings, and the overall timeline for a consumer transition to OTT streaming is long enough and has enough variables to make even well-reasoned estimates subject to error. That said, there does seem to be an observable dynamic in the content battles that could be a deciding factor in the future of cable.
Securing NFL games would be a huge win for Apple's TV subscription package, Amazon's Prime platform, Alphabet's YouTube, or Verizon's Go90 mobile TV network. New streaming deals would secure added revenues and viewers for the league. The incentives are there for all parties, and the recent deal with CBS Corp and Comcast suggests that the NFL may choose to sign with multiple streaming partners. Increased competition is allowing the NFL to command a premium for its content, and this points to a depressing reality for cable companies: They're going to be paying more for their most valuable content while losing out on exclusivity. Regardless of how the cord-cutting trend develops, that's not a good position to be in.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any stocks mentioned and is not considered one of the top quarterback prospects in America. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, and Walt Disney. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.