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Analyst: Amazon Might Not Sell Spots on NFL Stream

Object is to sell Prime subscriptions and promote original programming

One analyst thinks that Amazon, which won the bidding for streaming rights to NFL Thursday Night Football games, won’t sell its commercial inventory to advertisers.

Instead, analyst Kannan Venkateshwar of Barclays says Amazon might use the spots to promote other programming available on Amazon Prime.

The NFL on Wednesday formally announced that Amazon won the bidding for the Thursday streaming rights. Published reports peg the bid at $50 million a year, much higher than the $10 million Twitter paid last year.

Like last year, five of the 16 Thursday night NFL games will be broadcast by CBS; another five will be broadcast by NBC. Those 10 games will also be simulcast by the NFL Network and streamed by Amazon. NFL Network will televise another six Thursday NFL games.

“We are continually looking for ways to deliver our games to fans wherever they watch, whether on television or on digital platforms and we are thrilled to bring Thursday Night Football to Amazon”, said Brian Rolapp, chief media and business officer for the NFL. “As has been the case with all our streaming initiatives, we look forward to continuing to innovate with our partners as we learn the best ways to serve our fans both this season and into the future.” 

Amazon and the NFL previously collaborated on All or Nothing, an original series taking a look at an NFL team over the course of a season. The series was nominated for an Emmy and was renewed for season 2.

“Our focus is on bringing customers the best premium video programming, when and how they want to watch it. Streaming Thursday Night Football on Prime Video is a great step for us toward that vision, and offers tremendous new value for Prime members around the world,” said Jeff Blackburn, senior VP of business development & entertainment at Amazon. “And we're thrilled to extend our ongoing content relationship with the NFL—the gold standard for sports entertainment—on behalf of our Prime customers.”

Venkateshwar says Twitter generated about $50 million in gross revenue from its deal with the NFL last season, earning $15 million gross profit and $7 million in earnings before interest, taxes, depreciation and amortization.

But Amazon is a very different company and won’t have to justify the cost of its NFL deal every quarter because video is a tiny part of its business, representing just 2.2% of revenues. Amazon will also be using the NFL deal as a way to sell more $99 a month subscriptions to Amazon Prime, which in turn encourages consumers to buy things on Amazon.

“While media companies have to earn direct returns on content, Amazon needs content to cross sell other services,” Venkateshwar said. “Given the differences in investor bases, Amazon’s investment horizon is likely much longer than a typical media company, as a result of which Amazon may not need to immediately justify a return.”

In fact, Venkateshwar says Amazon might not try to monetize the NFL deal by selling the local ads in its OTT feed, as Twitter did.

“Amazon seems keen to use its limited advertising inventory on TNF (just the local advertising avails on legacy television) to promote shows on its own platform, instead of selling ads to third parties,” he said.

Over the longer term, Amazon entry into the sports rights arena could be disruptive to the TV companies that depend on sports for ratings, ad revenue and leverage with distributors.

“While on one level, Amazon’s entry is just a continuation of the present arrangement albeit with a different company in the mix, we believe Amazon has the potential to be a major disruptor long term relative to other OTT entrants,” Venkateshwar said.

“Amazon is one of the biggest and most diversified aggregation platforms with much deeper insights on individual consumers given its shopping platform,” he said. “In this environment, adding football or other live events over time should allow Amazon to not only drive up engagement across other services, it could over time help enable a bootstrapping process to replicate the broadcast flywheel, potentially with much bigger monetization potential.”

Amazon Video is a core application on connected TV, giving viewers the ability to watch Amazon’s stream on both mobile devices and big screens. Amazon can also promote the NFL stream in its platform and might be able to reach a broader range of viewers than the millennials who use Twitter.

“Overall, while on the surface a potential deal between Amazon and NFL is not that different compared to the arrangement last year with Twitter and near-term television economics are likely to be unchanged, we believe longer-term implications of someone like Amazon formally acquiring sports rights bears watching," the analyst said.