Why bars and restaurants are shedding ‘Sunday Ticket’ subscriptions

As most NFL fans know, Google’s YouTube replaced DirecTV last year as the exclusive provider of “Sunday Ticket.” YouTube ended DirecTV’s nearly 30-year-long exclusive ownership of the out-of-market games package by paying the NFL $2 billion annually.

What’s less known is the YouTube deal only applies to residential homes. DirecTV still provides bars, restaurants, small businesses and hotels with game access — but it no longer has the exclusive rights. That changed last year, too. Those additional rights are owned by EverPass Media, a new joint venture co-owned by the NFL and private equity firm RedBird Capital Partners.

EverPass struck a deal with DirecTV last year, allowing the satellite TV provider to maintain its commercial relationships. As a condition of that deal, EverPass included the right to build its own commercial streaming connection for “Sunday Ticket,” bypassing third-party licensing. That has now happened, as my colleague Lillian Rizzo reported in July. EverPass acquired UPshow, a platform with the tech capabilities to allow commercial establishments to stream live sports. 

EverPass sets all the pricing for “Sunday Ticket,” both for its new streaming product and DirecTV’s satellite offering. Both cost the same amount. If a small sports bar — fire code occupancy of less than 100 — received “Sunday Ticket” last year, it will pay $1,100 for the product this year, a $100 increase, according to a pricing document obtained by CNBC. 

The larger the establishment, the higher the price. A bar/restaurant that can fit more than 10,001 people has to pay $306,200 for the season. 

Just six weeks into this NFL season, DirecTV has lost more than 10% of its commercial customers, according to people familiar with the matter. Previously, DirecTV has said it serves about 300,000 commercial establishments.

So while EverPass sets identical pricing for satellite and streaming, there are certain reasons why a commercial establishment may want the internet version over DirecTV, or vice versa.

The streaming version of “Sunday Ticket” can be bundled in with other services EverPass provides, such as Peacock Sports Pass, the NBCUniversal streaming service’s commercial product, and Amazon Prime Video. So, if you also want to make sure your bar or restaurant has exclusive Peacock sports content and “Thursday Night Football” (exclusively on Prime Video), this may be appealing. Everpass also offers short-form channels to businesses, such as sports trivia, betting odds and viral videos, which may be appealing to certain establishments.

On the flip side, satellite TV for commercial establishments still has far better latency than streaming. While DirecTV’s lag from actual events is usually a couple of seconds, streaming can be closer to a minute or longer. Sports bars concerned about having all of their TVs show games without a delay probably would opt for the DirecTV product. DirecTV also has different exclusive sports packages from EverPass, including MLS Season Pass from Apple, Friday night MLB doubleheaders, and ESPN+ for businesses.

So, why the avalanche of DirecTV defections? One of the three things is happening. The first two are pretty straightforward.

1) Some commercial establishments are switching to EverPass’s internet product. Part of the draw here is that EverPass offers discounts to first-time “Sunday Ticket” customers. Because DirecTV has never shared its customer data with EverPass, it’s possible some establishments are claiming they are first-year customers to get discounts when they’ve actually historically been DirecTV subscribers, according to people familiar with the matter.

2) Some commercial establishments are cutting the cord on pay-TV in general. It’s not just households who don’t see the value of traditional TV anymore. If commercial establishments feel like they can survive without paying a monthly cable bill and instead rely on a few streaming services, then they’ll cancel DirecTV. Still, this is more likely to hit hotels and small businesses than sports bars, which may rely on ESPN. Until next year, at least, ESPN is only available via the traditional cable bundle (not streaming).

The third option is arguably the most interesting.

3) Certain commercial establishments are using YouTube’s “Sunday Ticket” and paying residential prices (about $500 per year) instead of the higher business rates. 

This would hurt both DirecTV and EverPass. Indeed, EverPass has invested in technology to root out piracy, which it believes is happening, the company said in a statement. Identifying pesky “Sunday Ticket” rule-breakers has become easier because watermarks are embedded in the broadcasts, allowing EverPass to use advanced digital tracking tools and AI-based monitoring to identify unlicensed streams and pinpoint the source of distribution. 

EverPass also conducts in-person checks, according to a company spokesperson. Restaurateurs, be warned!

“EverPass is deeply committed to protecting the rights of our customers and ensuring the integrity of NFL Sunday Ticket in the commercial marketplace,” the company said in a statement provided to CNBC. “Commercial establishments must have the proper licensing to show NFL Sunday Ticket, and those found in violation may face penalties, up to and including fines and/or legal action. EverPass remains vigilant in tracking and addressing piracy to uphold the value of our offering and protect the interests of our customers and partners.”

The league is on to the problem, too.

“The NFL has a long history of vigorously defending our intellectual property in all corners of our business, including ‘NFL Sunday Ticket,‘” a league spokesman said in a statement to CNBC. “Policing media delivered via streaming brings new challenges and requires new solutions to enforce the rules, but we continue to be vigilant in this area and will pursue those who are accessing ‘NFL Sunday Ticket’ in unauthorized ways.”

YouTube said it is trying to ensure commercial venues do not show its “Sunday Ticket” offering.

“We understand that piracy is a concern, and are taking measures to ensure that our NFL Sunday Ticket offering is made available only to residential customers. We continue to work on improving these efforts with all of our partners,” a YouTube spokesperson said.

Still, it’s unclear how big of an issue YouTube piracy really is. DirecTV’s customer defections are far higher this year than last year, even though YouTube began selling its residential product in 2023.

Perversely, there’s a silver lining to DirecTV’s declining commercial business. It announced a merger with longtime rival Dish Network last month. The “Sunday Ticket” wars are another example that new competition has made the satellite TV business less monopolistic than it once was.