'Quality over quantity': How Apple wants to lure sports fans to its streaming service

Big tech and big media are ramping up the competition over sports rights with companies from Google (GOOGL) to Disney (DIS) racing to boost their respective offerings and capture a loyal audience of fans.

One company that seems committed to beefing up its sports slate is Apple (AAPL). Its deal with Major League Soccer (MLS) appears to be paying off. It's rumored to be bidding on Formula One (F1) and NBA rights. Some analysts have even wondered if the company could buy ESPN from Disney.

Having the right content is critical for Apple as it faces tough competition from companies like Netflix (NFLX), Disney (DIS), and Amazon (AMZN) as the streaming industry continues to evolve. The tech giant doesn't disclose subscriber figures for Apple TV+; however, the company has consistently reiterated the importance of services — like streaming — to its future.

"Given the success AAPL has had with Major League Soccer, especially post-Messi, we think sports remains a high focus area for the company to differentiate their TV offerings (AAPL also bid for NFL Sunday night ticket)," Evercore ISI analyst Amit Daryanani wrote in a recent note to clients.

But while Apple has indicated it wants sports, it doesn't seem to want just any sport. Rather, the company seems focused on sports that can deliver on three standards: exclusive, global, and premium.

"It's in line with their strategy of producing quality over quantity. They're not just spreading their bets across everything," Santosh Rao, head of research at Manhattan Venture Partners, told Yahoo Finance.

Apple's MLS deal highlighted this strategy after the company announced a 10-year, $2.5 billion agreement with the league nearly one year ago.

Longtime Apple executive and senior vice president of services Eddy Cue has been a big influence behind the company's push into sports content, including the MLS deal.

In an interview with GQ Sports last month, Cue told the outlet he wasn't interested in purchasing a small portion of regional rights — the typical rules of game distribution. Rather, he wanted a deal that would allow Apple to control "how to present [the game], deliver it, and use technology."

The MLS deal allowed for that flexibility — giving Apple full control of all of the league's matches globally.

And then the incredible happened. Argentinian soccer legend Lionel Messi signed an MLS deal with Inter Miami.

Messi joining the US-based league led to a surge in ticket sales, sports apparel, and, most importantly, sign-ups to Apple's streaming package MLS Season Pass.

According to analytics platform Antenna, 110,000 users signed up for the package on the day of Messi's debut, representing a 280% increase from the number of sign-ups generated on the first day of the 2023 season.

The Messi effect helped Apple achieve something unique within the sports world — a niche superstar that fed into the company's "less is more" strategy, coupled with an international component that benefits the company's global push.

Still, Cue told GQ he didn't initially think MLS would be "big enough" to satisfy the tech giant's ambitions, alluding to the potential for bigger deals down the line. That could come with Formula One.

'A premium product'

According to Business F1 Magazine, Apple is preparing a bid for the global television broadcast rights for F1. The reported bid, worth an estimated $2 billion a year for seven years, would be double what F1 currently earns from its existing media deals on an annual basis.

For reference, ESPN currently pays between $75 million to $90 million annually for its US rights. Apple did not respond to Yahoo Finance's request for comment on a bid.

Manhattan Venture's Rao called a possible F1 acquisition a "net additive" for the tech giant as "sports is the best real-time programming that anybody can have."

"The F1 audience is big. The target audience has a good profile, and it can bring in new people to give another layer of stickiness in the Apple ecosystem," the analyst said, adding F1 operates as a more "exclusive" sport that likely attracts a higher-income consumer.

"Apple has a premium product. It attracts a premium audience and that's what they hold on to. There's a sense of exclusivity with Apple. F1 will give them another layer of that."

Jon Christian, executive vice president at media consulting company Qvest, added traditional sports have been "having a little bit of a hard time with streaming," mostly due to the conversion of its older demographic to new services. The average age of NBA, NHL, and MLB viewers sits at 42, 49, and 57, respectably.

That makes F1's younger audience, with the average age of 36 years, the perfect entry point for growth.

"The things that stuck out to me is F1 is exclusive and global," he stressed to Yahoo Finance, explaining how the sport has surged in popularity in the US thanks to documentaries like Netflix's "Drive to Survive."

"Apple is looking for [sports] that, not only they could get the dedicated rights to, but a sport where they have the ability to grow," he said. "There's a huge base in the United States where that can grow."

As for bigger ambitions, don't rule out a potential ESPN deal — which one analyst called a "no-brainer" for the Cupertino-based tech giant.

"The answer and the shoe that fits for Apple is the golden ESPN assets which potentially may be on the table in one form or another as Iger and the Board strategically and carefully look at Disney's core assetsover the coming months," Wedbush analyst Dan Ives wrote in a note to clients on Aug. 16.

Ives said a deal would likely cost Apple about $50 billion but would allow it to "gain valuable sports content, major TV rights across each of the major professional and college sports packages, and change the cross-sell opportunities and attractiveness of Apple TV looking ahead while putting Apple on the sports map globally speaking."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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