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Perhaps the most important development for the media marketplace’s shift to retail-first, consumer-first business models was last week's release of Apple’s Sports app. The app has an icon design mirroring a soccer/football field, which seems convenient for the opening of the Major League Soccer season. This will be the second year of Apple’s 10-year, $250 million per year partnership with MLS.
The app’s user interface seems like Apple’s simplistic reimagining of a scoreboard one may find on the ESPN app or a sports betting app. The app asks the user to enter their favorite teams, and the scoreboard is instantly customized. The scoreboard includes betting odds from DraftKings. It all seems par for the course until the Apple TV notifications for the teams the user selected start popping up on the iPhone. That is what happened to me: Tune-in notifications for broadcasts of games for NBA and NCAA basketball teams I had selected buzzed my iPhone and Apple Watch all evening.
On Saturday, I received a notification from my Apple TV app to tune into a match between FC Barcelona—one of the teams I had selected—and Getafe. Curious about what would happen, I clicked on the notification. It took me to an Apple TV interface which offered me four different apps for me to tune into the match. On top was ESPN+—which I have on my phone—and the three others were offerings from Spectrum (my broadband provider in NYC). I could watch the match with an ESPN+ subscription—which I have—and so I did (on my TV).
The obvious takeaway is that Apple disintermediated ESPN’s app. Its TV notifications direct U.S. iPhone users (an estimated 120 million plus) to its TV app for sports tune-in, even if the match or game is not being broadcast *on* Apple TV. That is both good and bad for an app like ESPN+. It is good in the sense that the notifications may reinforce the value proposition of ESPN’s streaming deal with sports leagues like La Liga ($1.4 billion through 2029) to iPhone users. But, it is bad in the sense that it makes the ESPN+ app seem extraneous. Why isn’t Apple TV offering ESPN within its app?
Life would be so much easier for 120 million plus iPhone users if ESPN were integrated directly into Apple TV’s app. That may have been one of the messages Apple was sending with the release of its Sports app: That somewhere between the MLS deal and its sports app is a proof-of-concept of what comes after the cable box, and is the notification.
Key Takeaway
Is Apple is better off owning more sports rights? I think that is what this new Sports app and “Sync My Sports” option in Apple TV all about.
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Lessons Learned from Apple TV
The fun question here is whether Apple is an incumbent or a disruptor. It is an incumbent in the smartphone space (and laptop, tablet and watch spaces), but is angling to be a disruptor in the media distribution space. Its original content strategy—$5.8 billion spent in 2023 and $6 billion in 2024—has yet to be a competitive streaming business. Two years ago, it was estimated to have 25 million paid subscribers and an additional 50 million viewers who access the service via promotions. “Ted Lasso” was the most-watched original program in the US even though Apple TV+ “has a smaller relative footprint than the other platforms”
But, the service is rarely consumed in the U.S.: It had 0.32% share of US viewing via smart TVs & TV connected devices as of January. Its MLS Season Pass subscription ($14.99/month or $99/year) launched in 2023 with one million subscribers and reportedly ended the season with over 2 million subscribers. It is effectively subscale on its own.
Sync My Sports
That all may reflect a lesson learned from Netflix: A streaming app needs more than just to be a destination to drive engagement. It needs to be “on-demand, personalized, and available on any screen” as the linear TV is replaced. Apple’s library is a fraction of the size of Netflix’s: It offers over 30 original movies and 50+ TV shows, whereas Netflix has a library of over 13,000 titles across regions worldwide. Mathematically, it will always have fewer means of bringing iPhone owners into its app to consume content.
Live sports offers an interesting hack, which it accomplishes with a “Sync My Sports” option in the TV app’s settings. Unlike Netflix, Apple TV does not own any sports rights outside of MLS to drive consumers to watch. Its model is more like Amazon Prime Video Channels, The Roku Channel, or YouTube Channels: Apple consumers can sign up to watch a third-party app with sports rights within TV. It is effectively a win-win scenario for streaming partners with expensive sports rights.
But, Apple seems to understand that tune-in notifications to matches have their limits with consumers. Meaning, a consumer may not regard a match or game as “must-watch”, even with a notification. They need other reasons. Apple’s TV app has long had a “Game Notifications” setting for NBA games (which I have had so long that I do not remember how I previously had set it up). So, I receive notifications of close games.
Now, Apple TV is able to deliver that for any sports team in any league around the world whose matches are being broadcast on a streaming app. On Sunday morning, I received a notification that Luka Modric, the star midfielder for Real Madrid, was entering a match against Sevilla. It was late in the match, the score was 0-0 and the notification said something to the effect of “perhaps he will be the difference-maker.” Had I tuned in to watch the match, I would have seen him score the winning goal in the 81st minute. Apple cannot predict the future, but the people writing its notifications have an understanding of why someone may want to watch.
The Funnel
Netflix Co-CEO Ted Sarandos has long argued that Netflix will not distribute live sports because they do not see “a profit path to renting big sports today, not to say there never will be.” He added that the “economic models are built around the economics of pay television and [are] different on streaming.” In short, the economic models of pay television assume scale and scale in streaming is a different beast.
Apple has extraordinary scale: Over two billion devices worldwide. So, it would seem that the new Apple Sports app and its “tune in now” notifications will help it to drive more viewership to partnering sports apps. But there is friction in that viewer’s journey from notification to tune-in: It takes time and effort to sign up for a new app. The urgency that the notification is conveying gets lost in the setting up of a new account and the filling out of a credit card form.
The question becomes whether Apple is better off owning more sports rights? I think that is what this new Sports app and “Sync My Sports” option is testing out. If the notifications noticeably drive more TV app usage—something we may see in the Nielsen The Gauge given the bump sports events have given to Peacock and the Super Bowl is likely to give to Paramount+ next month—a rationale for Apple owning more sports rights will emerge.
Suddenly, an exit path for Paramount’s expensive sports rights deals—it may not be able to afford its $2 billion annual payment to the NFL for 2024 and beyond—and Disney’s ESPN starts to emerge. But, the test has to work, and Apple seems to be in no rush.
Why should it be? The longer it waits, the cheaper a declining ESPN and Paramount will be.