Why Apple Music Likely Paid $40 – 50 Million for the Super Bowl Halftime Show
A few months ago, Pepsi declined to continue its 10-year deal as the halftime show’s presenting sponsor. It plans to shift that $40 – 50 million annual cost to digital marketing. Ironically, this isn’t the first time Pepsi cut its Super Bowl budget for the Internet (only to return to the Super Bowl a few years later).
This shift from Pepsi to Apple is music’s version of that legendary Steve Jobs quote to then-Pepsi CEO John Sculley in 1983 to convince him to join Apple.
“Do you really want to sell sugar water for the rest of your life? Or do you want to come with me and change the world?”
The Apple Music transition may not be quite as world-changing, but it’s a sign of how sponsorships and broadcast rights have evolved, who’s willing to pay for them, and how Apple Music will justify the cost.
The business of livestream entertainment
The big opportunity for Apple is the potential to livestream the halftime show on Apple Music and Apple TV+. Several streaming services have secured rights to livestream major festivals. Apple Music has livestreamed Verzuz battles, Ye’s Donda listening sessions, and concerts around the world with Billie Eilish and Wizkid. The Super Bowl Halftime show is the biggest stage there is. The show attracts many viewers who could care less about the game itself, especially since Roc Nation has helped the NFL attract a wider range of artists.
The halftime show’s reach across the world
In the U.S., the paid music streaming market is saturated. It reminds me of Will Page’s quote from our podcast episode on Trapital:
“I put Spotify’s US subscriber number at right about 45 million, Apple at 49 million, you dump on top YouTube, Amazon, Pandora, you’re well past 110, 120 million…This is crucial, because if you look at what Apple One’s bundle is doing, $30 a month for news, music, television, gaming, fitness and two TBs of storage per six accountholders is a household proposition. They’re saying to the home, I got you convenience…So when you have 110 million households, and you have more than 110 million subscribers in the United States, then we’re in a race to the finishing line before herbivores turn into carnivores.”
The NFL households who aren’t already paying for one of these services are likely more rural and have less willingness to pay for Apple Music, Apple TV+, or the Apple One’s bundle. The bigger opportunity for Apple Music and the Super Bowl is to expand the halftime show’s international reach.
American football may not be as attractive across the world, but the halftime show is! An Apple Music livestream can decouple the musical performance from the game itself. Watching U.S. broadcast TV can sometimes be a challenge for people outside of the U.S., but streaming makes it more accessible.
International markets are where most streaming and subscription-based products have had faster growth in recent years. And since music’s digital streaming providers have become more commoditized, valuable differentiated content is a win.
Every Oscar sells more AirPods. Every sports deal sells more iPhones
The deal makes more sense when we remember why Apple Music and the company’s other content services exist. They are not intended to be profitable as standalone entities. These are business lines that help the company attract more customers to sell them Apple products.
Here are some recent content moves that Apple has made this year:
– $10 million on CODA’s 2022 Oscar campaign to win Best Picture
– $50 million annually for the Super Bowl Halftime Show
– $85 million annually for MLB Friday Night Baseball (50 games)
– $250 million annually on Major League Soccer
– In talks for $2.5 billion NFL Sunday Ticket broadcast rights
– Estimated to spend $8 billion total on content in 2022
Even if you add those numbers up, it’s still less than the $12 billion revenue that Apple made from AirPods in 2021.
For further validation of these deals, Amazon’s initial results from Thursday Night Football look promising. Amazon Prime’s new exclusive broadcast of Thursday Night Football attracted a record number of Prime subscriptions in a three-hour period, beating out Prime Day and Cyber Monday. Amazon paid $13 billion for its 11-year Thursday Night deal. For 15 games per year, Amazon spends just under $80 million per game to reach an audience of 13 million for 3.5 hours per week.
Meanwhile, last year’s Super Bowl halftime show reached 120 million people for the 15-minute performance. That’s the audience Apple can reach (and potentially grow) in the future.
Apple’s ultimate dream is to have the NFL’s biggest games exclusively on Apple TV+. That may be the future, but one step at a time. The halftime show just spent the past decade selling sugar water. Let’s see how it does with selling AirPods.