MLS's $2.5 billion Apple TV deal: Game changer or disappointment?

MLS’s $2.5 billion Apple TV deal: Game changer or disappointment?

For months, Major League Soccer deliberated on what it wanted for its next TV deal: games in every home in America or a bigger check and product behind a paywall. The answer came on Tuesday when the league announced a 10-year deal to have every game broadcast on a new subscription service from tech giant Apple. The deal is worth at least $2.5 billion, according to several people familiar with the deal.

“MLS couldn’t keep everything. The only property that can keep it all is the NFL and maybe a handful of others,” media rights consultant Patrick Crakes said in a phone interview. “They had to give up reach, at least in an established sense, and either way you cut that, that kind of reach goes down.”

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Commissioner Don Garber launched a deal worth $400 million a year in the years leading up to this negotiation, but the current pact will not reach those lofty heights even after additional linear agreements are signed. Several MLS insiders expressed frustration that this was not the deal Garber promised.

But it still represents a jump of at least 400% from the previous pact after removing the value of the American football component, which represented almost half of the current $ 90 million a year deal and was sold. separately in March. Many in the MLS universe see significant upside in partnering with the world’s most valuable company on its biggest sports deal yet, after the brand entered the sport with Friday night baseball this season.

“It’s about choosing the right partner,” DC United co-owner and CEO Jason Levien said in a phone interview. “This is a very long-term decision on how we distribute our product. And if you take the long view, it’s hard to beat having the power of Apple on your side as a channel and product partner.

Levien also points to the impact of a more standardized schedule and start times, with matches almost entirely on Wednesday and Saturday nights, instead of the current hodgepodge format.

“I think it’s a game-changer for the league to collaborate with Apple and add a partner of their global stature and influence,” San Jose Earthquakes president Jared Shawlee said in an email. “This partnership continues to signal that MLS is at the forefront of innovation in the industry and will drive further change in the sport around the world.”

MLS is following the trend of recent years where football broadcast rights have moved behind a paywall to cater to the needs of young, digitally savvy audiences. La Liga and Bundesliga are both on ESPN+, while UEFA Champions League, NWSL and Serie A matches are hosted on Paramount+. The Premier League and Liga MX are exceptions. MLS will have a profit-sharing agreement with Apple after certain underwriting thresholds.

“If we grow our audience and thrive, we’ll have the opportunity to make more money,” Levien said. “And while the money is important, I think how this deal prepares us for the future is much more important.”

MLS is responsible for production costs under the deal with Apple, which reduces the teams’ net income. These could reach 25% of the annual guarantee. The teams also gave up their local broadcast rights as part of the deal, although those rights, outside of a few clubs like the LA Galaxy, weren’t worth much. Most teams receive no annual royalties and sell advertisements to cover production costs, with away game broadcasts usually resulting in an overall net loss to local media.

MLS team values ​​have skyrocketed in recent years, averaging $550 million per franchise last year. The upcoming TV deal played a part in the escalation, but the rising tide is more of a bet that American fans over the next two decades will begin to see the world’s most popular sport more like the rest of the planet. The ultimate impact of this agreement will probably not be known for five years or more.

“When I raise capital, I’m selling the vision and the path,” Levien said. “This deal with Apple improves on that and even boosts it in a number of ways. I’m not sure going back to a traditional linear carrier is as exciting for investors.”

National television money is a small part of the revenue pie for most MLS teams. The current deal is worth less than $3 million per team, after the American Football payment, while overall revenue for the typical team is expected to exceed $50 million this year for the gate-focused league. This new TV deal was never going to carry the financial weight of the NFL, or even the NHL, on the income statement.

“I think MLS is on a massive upward trajectory for people who take the long view,” Levien said. “I don’t think it’s a league where you want to start toppling teams.”

“MLS did something different because it anticipates where they fit into the media ecosystem,” Crakes said. “It’s betting on yourself, and while some other sports leagues don’t have to, MLS did it to increase its value.”

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