For Sunday Ticket, the playing field just got bigger
One of the hidden attractions of the NFL Sunday Ticket deal for YouTube and its parent Alphabet has to do with distribution, the ages-old determinant of size, stature and stamina in the pay TV business.
I say “hidden” because a first-blush reckoning suggests there’s nothing particularly new here. We all know the original Sunday Ticket rightsholder, DirecTV, has the ability to spray its video signal across the entire U.S., save for an unknown number of hard-to-reach apartments and campus buildings. So writ large, the possible universe for Sunday Ticket has been nearly as expansive as the country itself: Nearly 120 million dwelling units (again discounting the slice of impenetrable apartments and such).
Underneath the surface, though, there’s an important distinction between what DirecTV could achieve and what YouTube can muster. The curse of the satellite television category has always been the infrastructure at the household level: With exceptions in only a handful of places, you have to bolt a pizza-sized receiving dish on your rooftop or wall to rein in the DirecTV Signal, Sunday Ticket included.
For decades, both DirecTV and its rival Dish TV have labored long and hard to convince would-be patrons that it’s no biggie to do just that: to ditch the cable guy and start pulling in signals from the sky. Except of course, it is. There is undoubtedly some segment of the U.S. market that has always had some reservation about clamping the dish to the house. The hassle of installation, the idea of a guy climbing on the roof and drilling into the shingles, the perceived unsightliness of a grey orb protruding near the chimney; all of these are real factors that have had at least some modest gating effect on DirecTV and its competitor. So have restrictions imposed by homeowners associations, and again, apartment building owners.
This is one reason satellite TV, for all its virtues — lots of channels, pristine digital signals, packaging deals that at least give the appearance of being cheaper than cable — has always played a second-stage role in the broader pay TV business.
MVPD breakdown
That persists today. As of the first quarter of 2023, of the nation’s 75 million or so “MVPD” households — a catch-all for bundled pay television services, regardless of enabling technology — about 20.5 million, or less than 30 percent, percent are claimed by the two warring satellite guys.
The rest are a mix of classic “cable” homes (about 45 million, or 60 percent); and newer multichannel streaming services (YouTube TV, Hulu with Live TV, Fubo TV, etc., with the remaining 10 percent or so). So the upshot is that satellite TV — the sole means by which Sunday Ticket has been available for nearly 30 years — is still a bit player on the U.S. TV scene.
It strikes as even more limiting when you consider that Dish accounts for 7.5 million of those satellite TV homes, leaving DirecTV with about 13 million. This, friends, is the rub. I shall repeat: Since 1994, when the NFL first awarded the Sunday Ticket package to DirecTV, you had to have DirecTV to have Sunday Ticket. The gating factor was always how many homes were willing to affix a dish to the roof. This is why, if you roam over to the new YouTube Sunday Ticket web page, you’ll see the language “No satellite dish needed” displayed prominently.
The fact that DirecTV reportedly sold close to 2.4 million subscriptions to Sunday Ticket during the last NFL season tells us that as much as 15 percent of the DirecTV subscriber population shelled out the $290/year needed to watch the out-of-market football games. Caveats: Some of these people got Sunday Ticket for free as part of high-end spender promotional deals. Also, some unknown number of Sunday Ticket subscribers are bars and restaurants. Let’s temporarily leave them out of the equation because a) it doesn’t really change the argument and b) the math is a whole lot easier.
YouTube, which won the contest to become DirecTV’s successor and take over Sunday Ticket distribution starting this coming September, confronts a very different-looking market. Rather than being relegated to selling Sunday Ticket to the subset of homes that have DirecTV — again, 13 million — YouTube can sell Sunday Ticket to anybody with a broadband Internet connection. At last count (our research superhero Bruce Leichtman at work here), there are more than 110 million of these in the U.S. So if we do super-simple guesstimating, knowing of DirecTV’s 15 percent “penetration rate” — Sunday Ticket accounts divided by total DirecTV accounts — we can surmise that YouTube might quickly rack up a whole lot more Sunday Ticket subscribers than DirecTV did.
Yes, we know: Caveats, caveats. It’s true that there has been nothing in the past to prevent a non-DirecTV customer from getting Sunday Ticket, other than having to first establish a DirecTV subscription, satellite dish included. So maybe it’s possible those 2 million subscribers represent most of the demand for Sunday Ticket anyway.
Boundaries
I don’t think so. Again, inertia and the unwillingness of some homeowners to slap a dish on the roof have put some boundaries around the opportunity. Keep in mind that now, with YouTube’s offering, all it takes to get Sunday Ticket is the sort of broadband connection more than 110 million households already have. No dish, no visit from a technician required, and no long-term contract. Just a few clicks on a video application and a credit card number.
I suppose the NFL and YouTube figured this all into their calculus already. YouTube’s guys likely argued for the lowball thesis: There really isn’t a ton of Sunday Ticket market upside that hasn’t already been accounted for given the broad availability of DirecTV to the masses. The NFL likely countered with “give us a break. You and I know well that you’re about to enjoy a big distribution advantage because of ubiquitous broadband connectivity in the U.S.”
I side with the NFL argument. I think YouTube is going to a) get back most of the 2 million customers that already had Sunday Ticket via DirecTV; and b) add another big batch of subscribers by virtue of now having access to the entire broadband universe, not just the people with satellite TV. YouTube has apparently theorized demand is strong enough to support a pricing premium. The high-end price is a chunky $449 — well more than what most DirecTV subscribers paid — for those who are buying the thing in the open, sans an underlying YouTube TV subscription.
In a past life, working as an analyst for the media research firm Kagan World Media, we used to concoct lots of projection tables reflecting the market opportunity for new technologies and services; everything from video-on-demand over cable to high-speed Internet to voice-over-Internet phone connections. We always started at the top: By tallying up the total number of possible households a service might reach, and parsing down from there.
If we do that now for Sunday Ticket, our table header shows close to 110 million potential subscribers. In the DirecTV world, we would have started with 13 million. Who’s going to sell more Sunday Ticket subscriptions? You do the math.
