Welcome back to The Varsity, where speculation of the NFL’s coming rights negotiations continues to be front-of-mind for everyone. During Versant’s Q4 earnings call today, C.E.O. Mark Lazarus addressed the topic in response to a question from BofA Securities analyst Jessica Reif Ehrlich, who asked how the deal would affect Versant’s sports strategy. Laz: “We believe that there will be a rebalancing of the sports portfolios, and that will leave opportunity for us.” Laz highlighted USA Network, which has a long history in sports, as a potential outlet for sports properties “that we might not have otherwise gotten involved with.”

In today’s issue, Julia Alexander goes under the hood to inspect F1’s five-year, $750 million rights deal with Apple. The deal may put a lot more cash in F1’s pockets, but can it help the league to grow? Could that elusive growth be a reason why Apple is in the market to hire someone with 15-plus years of experience as a programming lead, who will develop shows to complement live sports? As you surely know by now, you need to be an Inner Circle member to read Julia’s work, so click here to upgrade.

Take it away, Julia…

Mentioned in this issue: Stefano Domenicali, Neal Mohan, Jimmy Kimmel, Rick Cordella, David Ellison, Gerard Piqué, John Ternus, Mark Goldbridge, Lionel Messi, Brian Roberts, Max Verstappen, Jimmy Pitaro, Don Garber, Tim Cook, Brad Pitt, Eddy Cue, Gary Neville, Brendan Carr, Charles Leclerc, and more...

Assuming Paramount clears the regulatory hurdles to acquire Warner Bros. Discovery, one of David Ellison’s first moves will be to combine Paramount+ and HBO Max—creating a streaming mini-behemoth that should claw market share back from the other services. The data really puts things into perspective: The two services have 7.6 million overlapping U.S. subscribers, per Antenna—about a quarter of their respective domestic audiences, not including linear HBO subs. Globally, the combination should have slightly more total subs than Disney+ and Hulu. Nothing to sneeze at, but the combined service will still only have about a 3.7 percent share of all connected TV engagement in the U.S.—about 5 percentage points less than Netflix, and about a quarter of YouTube’s share.

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The sixth World Baseball Classic starts this week with 20 countries and territories competing for the coveted international baseball championship.  With an all-time high of 78 MLB All-Stars competing, this year’s tournament features the most talented rosters in history along with more than 150 global brand partners and distribution to 172 countries on six continents.  Can Shohei Ohtani and Samurai Japan defend their title?  Can Aaron Judge and Team USA return to glory?  Tune in to the FOX family of networks to watch all the action and find more information at WorldBaseballClassic.com. 

The World Baseball Classic…..Expect Everything.

There are plenty of reasons why a sports league might want to partner with Apple, not least because the nearly $4 trillion market cap company can pay more cash than other partners for global, exclusive, end-to-end rights. This is why the MLS was able to lure over Lionel Messi, and why anxious league partners can sleep soundly without worrying too much about their P&L. However, one thing Apple can’t necessarily provide—and, yes, this isn’t unique to Apple—is a proven ability to grow an audience through its streaming service.

Alas, someone should probably explain this to Stefano Domenicali, Formula One’s C.E.O. He recently argued that because Apple’s technology “is in the hands of the majority of people,” the five-year, $150 million-per-year partnership, which was signed last October, will help the league reach new audiences and boost its relevance. Of course, MLS commissioner Don Garber thought the same thing when he signed his Apple deal back in 2022, and fantasized about getting “ahead of the business” by moving to a modern distribution platform. But the partnership ended prematurely, three years later, following several seasons wherein team owners complained about the lack of audience reach, minimal data about how many subscribers Apple TV+ (now just Apple TV) drove to the league, and scant evidence of the innovation many expected from the creators of the iPhone, iPad, AirPods, and Vision Pro.

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The sixth World Baseball Classic starts this week with 20 countries and territories competing for the coveted international baseball championship.  With an all-time high of 78 MLB All-Stars competing, this year’s tournament features the most talented rosters in history along with more than 150 global brand partners and distribution to 172 countries on six continents.  Can Shohei Ohtani and Samurai Japan defend their title?  Can Aaron Judge and Team USA return to glory?  Tune in to the FOX family of networks to watch all the action and find more information at WorldBaseballClassic.com. 

The World Baseball Classic…..Expect Everything.

Instead, the last few years have demonstrated that Apple’s hallowed innovation on the hardware side doesn’t necessarily translate to streaming. Apple TV is just a part of the company’s overall business, and a component of Apple’s Services division, which primarily makes its money through in-app purchases in games like Candy Crush. One executive I spoke with suggested that if hardware boss John Ternus ends up succeeding Tim Cook, Apple’s streaming experiment might even fizzle out, joining the product graveyard that includes the Newton and iBook. (Though Eddy Cue’s recent appearance on my colleague Matt Belloni’s podcast, The Town, may suggest Apple is in it for at least the medium haul.) However, for league executives determined to secure the dollars that come with an Apple deal, there are a number of options to increase viewership despite the limitations of streaming—and F1 might be well positioned to reap the benefits.

When it comes to reach, however, Apple is clearly learning from its own mistakes. Last week, MLS announced a nearly 60 percent increase in viewership across all opening weekend matches, bringing in roughly 9.7 million viewers. Perhaps it’s no coincidence that this is also the first season that Apple and MLS dropped the MLS Season Pass paywall ($15 a month or $100 for the season), effectively making games accessible to all the platform’s estimated 40-plus million subscribers.

It’s hard to say definitively that dropping the paywall was responsible for the viewership boost, but it’s a perfect example of what Apple should be doing to help league partners. At the same time, Apple is co-streaming the eighth season of Netflix’s Drive to Survive to gin up interest in the upcoming F1 season, even though the show came down from the heights of its pandemic popularity long ago. Netflix, in turn, will get to co-stream the Canadian Grand Prix in May. Surely Apple Studios is already eyeing the marketing possibilities for its in-development sequel to the $630 million–grossing, Brad Pitt–starring F1 movie.

There are other options on the table, too. Simulcasting select races on, say, ESPN, which carries races internationally, could boost viewership and drive a percentage of those fans back to Apple. The company could also use its technology to better monetize and engage the league’s most intense fans. Why not attach spatial cameras to the cars, which may drive adoption of higher-priced tier plans on Vision Pro headsets? Or it could throw workout routines from popular drivers, like Charles Leclerc or Max Verstappen, exclusively on Apple Fitness. There’s potential here to drive more Apple One subscriptions while retaining those customers beyond the race season.

It’s also possible that Apple is viewing any success with F1 in the domestic market through the lens of a potential global expansion in years ahead. Although Apple products dominate in the United States, Android devices are more commonly used in foreign territories. And while there’s no real evidence of a correlation between gaining streaming subscribers and users purchasing products, being able to tap into an audience that is primarily international might help, or at least can’t hurt.

In the end, Apple and F1 may want fundamentally different things: The league wants to reach the largest audience possible while growing its impact in the United States, while Apple wants to monetize F1 fans’ end-to-end journey. Anyway, there are only so many Brad Pitt movies that are going to move the needle—and Apple may need more than a gimmicky tie-in to make the deal worth it on paper. Even for a $3.8 trillion company.

Thanks, Julia. See you all on Thursday,
John

Puck sports correspondent John Ourand and a rotating cast of industry insiders take you inside the executive suites and owners boxes where the decisions that shape the entire sports business are made. You’ll hear interviews with players, network execs, and everyone in between. The Varsity is an extension of John’s private email for Puck by the same name. New episodes publish every Wednesday and Sunday.

Ace media reporter Dylan Byers brings readers into the C-suite as he chronicles the biggest stories in the industry: the future of cable news in the streaming era, the transformation of legacy publishers, the tech giants remaking the market, and all the egos involved.

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