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Amazon’s NFL Streaming Deal Increases its Sports Market Footprint as Cord-Cutting Trend Continues

By: Andy Cooper

Jeff Bezos launched Amazon as an online bookstore in July 1994, just a few months prior to the start of an NFL season fans watched crowded around standard-definition box television sets so heavy they took entire offensive lines to move. Now, Amazon is the world’s fourth-most valuable company with a wide range of products and services, and it is confident the power of sports will set it apart further in an age of cord-cutting and mobile streaming.

Amazon shelled out $50 million in April to acquire streaming rights for the NFL’s Thursday Night Football games during the 2017 season, which will be available to Amazon’s estimated 80 million Prime subscribers in the U.S., plus others in more than 200 countries. That’s a hefty price to pay – Twitter paid $10 million to stream Thursday games last season – considering viewers still have the opportunity to watch those 10 games with linear TV options and on Verizon’s mobile app because of the NFL’s existing contracts.

But the value of teaming with a sports giant like the NFL greatly exceeds dollars spent in the short term. In 2015, Yahoo said it generated 33.6 million streams with 15.2 million unique viewers and over 460 million minutes of video viewed when it streamed the Buffalo-Jacksonville game in London exclusively on its site. It also said 33 percent of viewers were overseas. By comparison, the July Season 7 premier of the hit series Game of Thrones set streaming records for HBO through its HBO GO and HBO NOW apps with roughly 6 million streams.

“Our focus is on bringing customers the best premium video programming, when and how they want to watch it,” Amazon’s senior VP of business development and entertainment said in a statement after striking the NFL deal. “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. 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.”

The demand for live sports dwarfs the competition in the mobile and streaming realms as fans seek the thrill of cheering on their favorite team or monitoring their fantasy stars as the action happens. Couple that with the vast majority of the U.S. possessing smartphones and tablets that stream video-on-demand services, investing in sports is a wise move for a giant like Amazon to increase revenue – and set itself apart from streaming competitors like Netflix and Hulu.

Amazon made two other footprints in the sports market during July. It signed a three-year sponsorship deal with France’s national basketball league, Ligue Nationale de Basket, to portray its logo on teams’ shorts and locker rooms, while Amazon France also will sell 700 products of the league’s merchandise beginning in September. Amazon then paid an undisclosed amount to secure the audio-only rights to stream live games from Germany’s top two soccer leagues, Bundesliga and Bundesliga 2. Amazon Prime and Amazon Music Unlimited subscribers will have access to a minimum of 617 games over the next four seasons.

Later in the month, reports surfaced that Amazon is prioritizing the streaming of live tennis for 2018, specifically the ATP Masters. Amazon executives reportedly attended this year’s Wimbledon making contacts within the tennis industry as they prepare to potentially make a bid for specific tournaments.

Amazon’s deal with the NFL officially began its reach into the sports world, which certainly will drive a huge chunk of money into the mobile streaming market. Amazon is seeking $2.8 million from advertisers for 10-30 second spots during Thursday Night Football games, part of a package that also would include ads running on the Amazon website from September through February during football season, according to Reuters.

Recode reports that advertising spending on streaming video is projected to reach $18 billion in 2018 with the expectation that people will watch 25 percent more video on mobile devices. That would be a 49 percent increase in ad spending from this year and would exceed spending on non-mobile advertising for the first time. Expect those numbers to increase consistently as 2.6 billion new mobile broadband subscribers – more than one million per day – will be added through 2022, according to Ericsson.

Add in the fact 50 percent of households in the U.S. are watching internet video through a television screen, and Amazon’s investments and continuous pursuit to broadcast more sports could wind up setting it apart from the competition by a wide margin.

Amazon charges a $99 annual fee or $10.99 per month for a Prime subscription that also includes features such as free shipping for products purchased through its website or app. Prime TV has a Netflix-like model that allows subscribers to stream movies, TV shows and original Amazon content.

Compare that to a Fortune report stating the average cable TV bill hit an all-time high of $103 per month in 2016, marking a 4 percent increase from the previous year.

“The fact that one half of broadband households watch internet video on a television shows that we are well past a tipping point. The market has fundamentally changed,” Senior Director of Research for Park Associates Brett Sappington said in a press release earlier in July. “Broadcasters, cable networks, and pay-TV providers have noted a decline in viewership for live, linear TV channels and a corresponding increase in on-demand viewing. The abundance of alternatives is clearly impacting the traditional TV industry.”

The number of cable TV subscribers would be lower if not for sports, which accounts for 37 percent of all TV viewing, according to Wired. Dedicated fans still are concerned about receiving a high-definition, broadcast-quality product – which is nearly guaranteed with a linear television option – through a mobile device that may or may not receive a quality stream. That uncertainty is enough to keep at least some sports fans clinging to a more expensive cable package.

Still, the trend of cord-cutting and streaming is shifting overall, and networks like ESPN and NBC – which streams Olympic content – are putting some dollars behind streaming services. Amazon acquiring NFL rights helps ease some of the uncertainty of sports-fan cord-cutters and opens the door for more licensing agreements in other major sports down the road.

One-fourth of sports content is being viewed online or on-the-go, and that number continues to increase. Amazon wants to be a major player in the space of sports streaming, making its foray into the NFL a major coup as fans continue to demand their sports in the most convenient way possible.