YouTube is paying roughly $2 billion annually for "NFL Sunday Ticket," and it could be losing more than half of it every year.
Morgan Stanley's equity research team projected that Alphabet's (GOOGL) -) Google is projected to lose $8.86 billion on "NFL Sunday Ticket" through the remainder of its deal which goes until 2029.
The firm made some estimates to get to its data including 4% escalators for the 7-year, $14 billion-dollar contract and an estimated 1.5 million subscribers. Bloomberg reported earlier this month that YouTube TV had hit 1.3 million subscribers, which is already above the number of subscribers of Sunday Ticket under DirecTV.
Based on Morgan Stanley's projections, the firm would need to double the subscriber count at its current price point in order to breakeven on its deal by next season.
Related: YouTube shelled out a lot for the NFL and the early results are finally in
But according to Columbia University sports management professor Joe Favorito, the numbers aren't necessarily concerning.
"Projections are projections — sometimes those things can change," Favorito told TheStreet.
Favorito said that numbers are difficult to trust because the streaming world is "uncharted waters" for everyone, and that YouTube TV has the opportunity to benefit in other ways beyond just the apples-to-apples comparison of its deal with the NFL.
"If YouTube TV can use the power of the NFL as a marketing tool to grow everything that they're doing and additionally continue to bring in subscribers for Sunday Ticket ... I think you worry about today in the short term and then let the long term play out," Favorito said.
He also used the analogy of the NBA's former commissioner, the late David Stern, who once said that the NBA Store on Fifth Avenue in New York City didn't function to profit but instead was a "front porch" that would open the door for more fans.
"If you're YouTube TV, you're looking at this as 'How is that your front porch to bringing in new subscribers across the board as the very volatile and fluid world of streaming continues to progress? If this is a marketing tool that goes under a different line, that changes the way things are viewed," Favorito said.
But Favorito pointed out that regardless of the projections, YouTube TV needs to prioritize its user experience if its wants to be successful. And the company had a huge blunder on Oct. 29 in which many subscribers complained of streaming issues during the early portion of the Sunday NFL slate.
If you're experiencing buffering issues on YouTube our team is aware and working on a fix. YouTube TV or NFL Sunday Ticket may also be impacted. we'll follow-up here once this has been resolved.
— TeamYouTube (@TeamYouTube) October 29, 2023
One of the complaints even came from Buffalo Bills defensive tackle DaQuan Jones, who was likely watching at home nursing an injury and with his team having already played on "Thursday Night Football."
You pay all this money for streaming services…just so they don’t work on the days you actually need them 🫠
— DaQuan Jones (@RiDQulous_98) October 29, 2023
"Throughout this process, [user experience] has to be tantamount because your consumers are the ones who are going to make sure that subscriber numbers either goes down or that numbers continue to go up through word of mouth and everything else that has to be number one," Favorito said.
In May, YouTube TV dealt with a similar streaming issue after users complained of buffering during the NBA Playoffs that happened during the fourth quarter of a close game between the Miami Heat and Boston Celtics.
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