Apple & The CFL

Scenario One: 

Apple Fully Controls Tier 1 & 2: Buys Out Teams and Broadcasts on Apple TV Plus

Cost to Apple in Year 1 and Year 2

Year 1

• Buyout of Top 6 Teams from Each of the Big Four Conferences (24 teams total): $1.25 billion per team. Total = $30 billion (24 teams * $1.25 billion).

• Start of the CFL and Players Association: Operational costs, infrastructure, and setup. Estimated $500 million.

Total Year 1 Cost: $30 billion + $500 million: $30.5 billion.

Year 2:

• Buyout of Next 3 Teams from Each Big Four Conference (12 teams): Adjusted to $750 million per team as a year has passed, and less money is needed for the CFA and PA creation. Total = $9 billion (12 teams * $750 million).

• Buyout of 12 Group of 5 Teams: Assume $250 million per team for the Group of 5 teams. Total: $3 billion.

Total Year 2 Cost: $9 billion + $3 billion: $12 billion.

Total Cost to Apple in Years 1 and 2 = $42.5 billion.

Revenue: 10-Year Contract

Revenue from Apple TV Plus Subscriptions

Assuming an annual $99.99 subscription price for an Annual Pass and 10 million subscribers in Year 1 with a 10% increase in subscribers every year.

• Year 1 Revenue: $99.99 * 10 million = $999.9 million.

• Year 2 Revenue: $99.99 * 11 million = $1.099 billion.

• Year 3 Revenue: $99.99 * 12.1 million = $1.210 billion.

• Year 4 Revenue: $99.99 * 13.31 million = $1.331 billion.

• … (continues with a 10% annual growth)...

Total Revenue over 10 years = $14.56 billion (Sum of increasing annual subscribers).

Ad Revenue:

• Tier 1 games draw high demand and Apple expects to earn 10% more per ad dollar compared to the last analysis.

• Estimated $2.2 billion/year in advertising revenue for Tier 1 games. Over 10 years: $2.2 billion * 10 = $22 billion.

• Tier 2 & 3 games, with a focus on mid-tier content, would still generate revenue but at a lower rate.

• Estimated $1.5 billion/year in advertising revenue for Tier 2 & 3 games. Over 10 years: $1.5 billion * 10 = $15 billion.

Revenue Share with Teams (Tier 1 & 2):

• Apple receives revenue share for playoff games and regular season Tier 1 & 2 games.

• Assume Apple shares 40% of this revenue with teams, leaving them with 60%.

• Over 10 years, this amounts to approximately $10 billion in revenue share passed down to teams (split between Tier 1 & 2 teams).

Total Revenue to Apple Over 10 Years:

• Subscriptions: $14.56 billion.

• Ad Revenue (Tier 1): $22 billion.

• Ad Revenue (Tier 2 & 3): $15 billion.

• Revenue Share (Tier 1 & 2): $10 billion.

Total: $61.56 billion.

Expected Payouts to Tier 1 Teams:

Minimum $75 million annually with Playoff Pot Distribution

Playoff Winner: $75 million + share of playoff pot; Estimated $90 million.

Playoff Loser: $75 million + share of playoff pot; Estimated $85 million.

Semifinal Losers: $75 million + share of playoff pot; Estimated $80 million.

Quarterfinal Losers: Minimum of $75 million for playing, plus share of playoff pot; Estimated $77 million.

Non-Playoff, Non-Relegation Teams: $75 million annually, paid through the playoff pool distribution; Estimated $75 million.

Relegation Teams: $75 million parachute payment.

Tier 2 & 3 Revenue Expectations:

Ad Revenue: Apple will still control the broadcasts for Tier 2 and Tier 3, generating substantial ad revenue. The teams in these tiers will benefit from this revenue, though they won't receive as much as Tier 1 teams. Estimated $1.5 billion/year in ad revenue for Tier 2 & 3 games. Over 10 years: $15 billion.

Tier 2 & 3 Average Team Annual Check Size:

Tier 2 Teams: With the revenue from Tier 2 & 3 ad revenue and Apple's direct control over the broadcasts, Tier 2 teams would each receive a portion of the total revenue from these games. Estimated $20 million/team/year in direct payments.

Tier 3 Teams: These teams, while less lucrative, would still benefit from the revenue generated by Apple's broadcasts of Tier 3 games. Estimated $10 million/team/year in direct payments.

Scenario Two: 

Apple Strikes Deal with Legacy Broadcasters

Cost to Apple in Year 1 and Year 2

Year 1

• Buyout of Top 6 Teams from Each of the Big Four Conferences (24 teams total): $1.25 billion per team. Total = $30 billion (24 teams * $1.25 billion).

• Start of the CFL and Players Association: Operational costs, infrastructure, and setup. Estimated $500 million.

• Total Year 1 Cost: $30 billion + $500 million: $30.5 billion.

Year 2

• Negotiates with the Remaining 44 Big Four Teams to join the CFL.

• No Buyout of the Remaining 44 Big Four Teams.

• Cede Regular Season Broadcasts for Tier 2 & 3 to Legacy Broadcasters for the Remainder of Their Contracts.

• Cede Tier 1 Playoff Broadcasts to Legacy Broadcasters for Five Years (with the 20% Tier 1 playoff revenue allocated to teams).

• Negotiate deal to incorporate Legacy Broadcasters: $500 million.

• Total Year 2 Cost: $0 (No additional buyouts).

Total Cost to Apple in Years 1 and 2: $31 billion.

Revenue to Apple Over the Course of the 10-Year Contract:

Revenue from Apple TV Plus Subscriptions: Same as Scenario One: Total Revenue over 10 years = $14.56 billion (Sum of increasing annual subscribers).

Ad Revenue:

• Tier 1 games draw high demand.

• Estimated $2.2 billion/year in advertising revenue for Tier 1 games. Over 10 years: $22 billion.

• Tier 2 & 3 games would still generate significant revenue.

• Estimated $1.5 billion/year in advertising revenue for Tier 2 & 3 games. Over 10 years: $15 billion.

Revenue Share with Teams (Tier 1 & 2):

• Apple receives revenue share for playoff games and regular season Tier 1 & 2 games.

• Assume Apple shares 40% of this revenue with teams, leaving them with 60%.

• Over 10 years, this amounts to approximately $10 billion in revenue share passed down to teams (split between Tier 1 & 2 teams).

Total Revenue to Apple Over 10 Years: $51.56 billion.

Summary Comparison:

Total Cost to Apple (Years 1-2)

Scenario One: $42.5 billion | Scenario Two : $31 billion

Total Revenue to Apple (10 Years)

Scenario One: $61.56 billion | Scenario Two : $51.56 billion

Apple's Expected Profit (10 Years)

Scenario One: $19.06 billion | Scenario Two : $20.56 billion

Tier 1 Team Payout (Annual)

Scenario One: $75M+ (with playoffs) | Scenario Two : $75M+ (with playoffs)

Tier 2 & 3 Revenue

Scenario One: $15 billion | Scenario Two : $15 billion

Tier 2 Average Annual Check

Scenario One: $20 million | Scenario Two : $20 million

Tier 3 Average Annual Check

Scenario One: $10 million | Scenario Two : $10 million

Analysis:

Scenario One: With a larger initial investment, Apple is expected to make a profit of $19.06 billion over 10 years, benefiting from full control of Tier 1 and 2 broadcasts.

Scenario Two: Apple will make a profit of $20.56 billion in Scenario Two due to the lower upfront costs, which include negotiating with legacy broadcasters and securing revenue for Tier 2 & 3 games.

Conclusion:

In both scenarios, Apple is well-positioned to turn a profit over the 10-year period. Scenario One offers higher revenue potential, but comes with higher upfront costs and more operational risks. Scenario Two offers lower upfront costs and greater operational flexibility, but Apple misses out on revenue from Tier 2 & 3 games and delays its control of Tier 1 playoff rights.

Ultimately, Apple's profitability in either scenario depends on:

• Subscriber growth: As long as Apple continues to grow its subscriber base by 10% each year, it stands to profit significantly, regardless of the scenario.

• Ad revenue from Tier 1 content: Apple can still command higher ad rates for Tier 1 content, particularly as it attracts more premium subscribers.

• Operational strategy: The amount of operational risk Apple is willing to take in running the entire league vs. partnering with legacy broadcasters.

If Apple is confident in its ability to manage the full league structure and is willing to shoulder more financial risk for higher long-term rewards, Scenario One is a strong choice. If they prefer a more strategic partnership model with lower upfront costs and less operational strain, Scenario Two offers a good balance, with a bit less revenue upside but less risk. Both paths ultimately seem like solid options for Apple, depending on their long-term strategic goals and their appetite for risk.