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Will Apple TV+ Get a Boost through Sports Streaming?

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Apple TV+ (AAPL) is making its foray into ground-breaking content, and sports may be next on its list. Apple’s streaming platform is eyeing deals for the James Bond franchise and the rights for college sports. On December 19, the Wall Street Journal reported that Apple executives met with MGM Holdings and the Pac-12 Conference for initial talks.

The discussion may move toward acquiring a stake in the media rights for the Pac-12 Conference. After launching nine original shows, Apple TV+ now wants to expand its range of content with various forms of entertainment. According to Business Insider, Apple would have to pay $5 billion for a stake in the Pac-12 and $10 billion for its MGM rights. The Wall Street Journal learned that the meetings occurred in February when the Pac-12 conference was seeking an equity partner.

More about the imminent deals

MGM plans to unleash a unique line of premium TV and movie content for Apple TV+. A contract with MGM would open gates to the classic James Bond and Rocky/Creed titles as well as Stargate SG-1. Included in the film library are The Hobbit, The Silence of the Lambs, and Four Weddings and a Funeral. We don’t know the details of the terms of these deals, as they are still in the preliminary stages.

However, according to Business Insider’s Audrey Schomer, if Apple acquires MGM, it would be exempt from licensing fees. Apple TV+ could also create a new version of James Bond or Stargate as an exclusive offering, added Schomer.

The Pac-12 Conference would unleash more than 100 marquee basketball and football games that are already licensed to Fox and ESPN until 2024. This implies that Apple would obtain access to a different set of games, but opportunities are immense amid aggressive cord-cutting.

Sports media consultant Lee Berke spoke to Deadline, noting that Apple is “sending a signal” that it is a player for big-time sports. Currently, the West Coast–based Pac-12 conference is restricted to that region. Apple TV+ can help the conference reach a larger audience.

Sports could give Apple TV+ a much-needed edge

Venturing into sports could give Apple a competitive advantage and add a new angle to its offerings. In terms of competition, Amazon (AMZN) is already present in this space through the English Premier League. Also, Facebook (FB) has a prominent foothold in sports streaming with partnerships with ESPN and Fox.

On the other hand, Netflix (NFLX) maintains that it isn’t interested in ads or sports bidding. According to Digital TV Europe, Ted Sarandos, Netflix’s Chief Content Officer, said at SeriesFest 2019 that advertisements and sports are “not core to the proposition.”

Sports could garner more viewers for Apple TV+, and the Pac-12 is a good starting point. The streaming service is in its first year, and we expect it to explore additional content options once its customers’ free trial offers end. Currently, users who purchased new iPhones, iPads, and Macs received a complimentary one-year subscription to Apple TV+.

After the trial period is over, Apple TV+ can look at more professional and prominent game franchises. With a cash balance of more than $200 billion, it wouldn’t be a surprise if Apple does that. However, until then, Apple must build a strong subscriber base and retain them with top-notch content.

A December 10 report by Investor’s Business Daily, UBS analyst Timothy Arcuri said, “While the giveaway with new devices buys time, it may likely have to ultimately also acquire an asset with a big backlog of catalog content.”

According to a January 2019 eMarketer report, sports video streaming could see significant traction in the coming years. The report noted, “In the next three to five years, worldwide revenues from sports digital media rights will grow by 11.5%, faster any other business area. By contrast, traditional TV rights will see the slowest growth at 3.2%.”

Apple TV+ needs enhancement in content offering

Apple TV+ is banking heavily on originals, but this wouldn’t be enough for it to survive amid the industry’s fierce competition. Streaming services like Netflix, HBO, Disney+, and Amazon Prime have a vast library of content, including original and licensed shows. In our view, providing a variety of genres is the only way to attract more customers through Apple TV+ and increase its popularity.

Apple TV+ has received mixed responses since its debut on November 1, and we believe it needs to experiment with more content types. In a December 3 Time article, Judy Berman wrote, “Apple might well be in the streaming wars for the long haul, but it won’t establish a real following until it consistently gives viewers more than just imitations of what they’re already watching.”

However, analysts have been upbeat about the long-term future of Apple TV+. Morgan Stanley’s Katy Huberty predicts that the company’s streaming service would generate up to $9 billion in revenue by 2025.

Meanwhile, we’ll be keeping tabs on further developments about Apple’s deal with MGM and the Pac-12. Stay tuned.

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