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Apple and Amazon could ‘destroy the streaming business,’ analyst argues

·Producer
·3 min read

Apple (AAPL) and Amazon (AMZN) have thrown billions of dollars at sports media rights over the last few months, outbidding traditional competitors and spiraling the streaming wars into its next stage of battle.

One Wall Street analyst believes the tech giants' spending sprees could potentially cannibalize the streaming industry.

"They can actually destroy the streaming business because they have other businesses that will actually make up profit or higher profit,” Laura Martin, senior media and internet analyst at Needham and Company, told Yahoo Finance Live (video above). “iPhones are $1,300 these days. They can make profit on some other part of their business that justifies them spending this money on sports rights.”

Amazon and Apple hold billions of dollars in cash on their balance sheet, and therefore the timeline for return investment, if there even is one at all, is vastly different than broadcasters and other streamers like Netflix (NFLX), Martin argued in a recent note to clients. For Apple and Amazon, the spend isn’t about directly being paid back via subscribers, but the focus is on bringing more people into the various channels of the ecosystem.

Apple recently spent $2.5 billion for MLS streaming rights and is reportedly in talks to spend at least $2.5 billion annually on NFL Sunday Ticket.

And this fall, Amazon enters the first season of its 11-year, $11 billion bet on sports streaming with the NFL’s Thursday Night Football. Google (GOOGL) and Amazon have also contacted America’s largest sports league about the Sunday streaming rights while streaming battles for international soccer and college football are taking place as well.

The latest round of NFL broadcasting rights, which have been led by traditional tech giants rather than streaming conglomerates, has marked a material shift in the streaming wars from broadband dominance to a Silicon Valley-driven industry. Martin noted Apple and Amazon will be winners of the streaming wars because they have “virtually unlimited resources.”

“They never have to get to profitability in their streaming business,” Martin said. “Often they do these, they do these rights deals to drive iPhone sales or to drive prime sign-ups because that has doubled the average e-commerce sales.”

Disney (DIS), which owns ESPN, could also maintain its position as a player in the space because of its ability to market homegrown brands, she said. From Disney characters like Cinderella to ESPN’s significance in the sports world, the company has familiarity with consumers.

A man walks past a logo of Amazon Prime Video during a launch event in Mumbai, India, April 28, 2022. REUTERS/Francis Mascarenhas
A man walks past a logo of Amazon Prime Video during a launch event in Mumbai, India, April 28, 2022. REUTERS/Francis Mascarenhas

Along with Hulu, which has binge-worthy offerings akin to Netflix, Disney can combine three services into one with its ESPN+, Disney+, and Hulu combination. Analysts have told Yahoo Finance in the past that ESPN+’s looming price hike would likely drive more bundle subscribers.

That bundled package could be a positive catalyst for Disney, according to Martin.

"Part of their case is they can bundle," she said. "Churn is what's killing you. As competition increases, consumers stay shorter on your service because they watch what they want, they turn it off and sign up or another service to watch what they want to watch that month. Churn kills you. What's great about the Walt Disney Company is they have sister subsidiaries."

Josh is a reporter and producer for Yahoo Finance.

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