Amazon.com (AMZN) and Alphabet's (GOOGL) Google are unlikely to step up with mega-offers for digital sports streaming rights, but telecom giants AT&T (T) and Verizon Communications (VZ) loom as wild cards if they acquire media properties, an analyst says.
Steven Cahall, an RBC Capital analyst, said in a note to clients that AT&T could be a more aggressive bidder if it wins a legal battle to acquire media giant Time Warner (TWX), a deal that would include Turner Broadcasting.
"AT&T's role could expand should it acquire Time Warner, given it currently has 'Sunday Ticket,' " Cahall said. "If AT&T-Time Warner happens, then we think a network like TNT would be a credible bidder for 'Sunday Night Football' or 'Monday Night Football.' "
Verizon also looms as a bigger player in bidding for sports rights, says Cahall. There's been speculation Verizon could also merge with a media company, perhaps Walt Disney (DIS) or smaller CBS (CBS).
"M&A could mean other major distributors like Verizon own networks by 2020 that could change the game," he said. Verizon, though, could have a near-term problem renewing its wireless deal with the NFL, says Cahall.
U.S. sports leagues currently garner roughly $11 billion a year from broadcasters and ESPN. Rights for the National Football League's "Monday Night Football" and Major League Baseball games go up for renewal in 2021-22, and there's been speculation that Amazon, Google, Apple (AAPL) or others could get involved.
Amazon holds rights for streaming "Thursday Night Football" and has been linked to an upcoming auction for U.K. Premier League soccer matches. Facebook (FB), meanwhile, recently raised eyebrows by bidding $610 million to stream cricket games in India, but lost out to a rival.
For "Thursday Night Football," Amazon has streaming rights while Comcast's (CMCSA) NBC Network and CBS (CBS) split broadcast rights. Amazon, thanks to the NFL's influence, gets video feeds from CBS or NBC and doesn't do its own production.
"We don't think big internet/tech wants to pay media-level rights fees for long-duration contracts, and the NFL isn't going to take major games off of broadcast or cable," Cahall said. "The NFL is also not going to turn over production to untested parties."
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The Department of Justice has sued to block the AT&T-Time Warner deal. The DOJ says the megamerger would be harmful to consumers because the combined company might extract higher prices for Time Warner content from other video distributors.
Turner Broadcasting, which operates cable channel CNN, holds the rights to broadcast National Basketball Association games and Major League Baseball games. AT&T's DirecTV satellite unit, meanwhile, already has rights to Sunday NFL games, notes Cahall.
Verizon has been paying the NFL $250 million per season from 2014 to 2017 for the rights to provide live home-market feeds of NFL games to its wireless subscribers, as well as all playoff games and the Super Bowl.
"We think traditional media is not happy with Verizon's exclusive mobile deal as it covers devices with screens up to 7 inches, meaning subscribers on services like Hulu Live, YouTube TV and CBS All Access can't watch games streaming on a mobile phone unless they're Verizon customers," said Cahall. "Verizon's deal ends at the end of this season, and the NFL is likely to look for something much larger across multiple carriers (AT&T, Sprint) given the growth in mobile connectivity in recent years."