U.S. Markets open in 6 hrs 39 mins

Did Amazon Score a Touchdown with Its $50 Million NFL Deal?

Benjamin Rains

Amazon.com, Inc. AMZN just paid $50 million to stream 10 NFL games during the upcoming 2017 season. The internet giant’s move into live sports coverage has grabbed headlines, but does it mean that internet power players are set to take a bite out of television’s last big cash cow?

The NFL agreed to a one-year deal with Amazon valued at around $50 million that will see the online retail giant live stream 10 “Thursday Night Football” games for its Amazon Prime members. Amazon will not have exclusive rights to these 10 games, as the NFL’s big television partners, CBS, NBC and its own NFL Network, will split up coverage of the same 10 games for the traditional broadcast and cable television audience.

Amazon outbid other giants such as Alphabet Inc.’s GOOGL Google, Twitter Inc. TWTR, and Facebook, Inc. FB for the 10-game NFL streaming package.

Amazon’s stock was up 0.27% to $909.28 per share Wednesday. Amazon is currently a Zacks Rank #3 (Hold).

An estimated 60 million households use Amazon Prime. The membership includes the popular shipping incentives, but it also includes Amazon’s ever-growing music, movies and TV offerings.

Even as Amazon continues to expand its core business and grow its artificial intelligence and cloud computing sectors, the company seems poised to keep pushing heavily into the media content business. Amazon already produces its own original television programming, which includes the Emmy Award-winning Transparent. Amazon also recently put Hollywood on notice when Manchester by the Sea took home two Oscars.

The Seattle-based company wants to give its Prime members not only more choices, but also more reasons to keep paying the $99 annual fee that includes free two-day shipping, as well as other services. “We’re focused on bringing our customers what they want to watch, Prime members want the NFL,” Amazon Senior Vice President Jeff Blackburn told the Wall Street Journal.

The Thursday night NFL deal represents a win for Amazon over some of its rivals, but does the small one-year, $50 million deal truly matter to a company that has shook up the retail industry for good and is now set to take on global shipping giants?

In short: Yes, it really does. Amazon is just starting its long-term game to eventually become a live sports content power. This move has the potential to change TV forever.

Now let’s take a look at the big picture to get a better understanding of what Amazon hopes to do with its new NFL deal.

2017 Impact

Last year, Twitter broke into the NFL with its “Thursday Night Football” deal. Twitter’s $10 million deal represented a step forward in the fight between non-traditional media companies and legacy media outlets to control live content.

In 2015, Yahoo! Inc. YHOO paid $17 million to live stream NFL games in London. Yahoo’s live stream, which played automatically on its homepage, reached an estimated 15.2 million people. However, the average viewership per minute was only 2.36 million.

Twitter’s foray into the NFL last year was even less successful. The average Twitter viewership for the 10 Thursday night games at any given minute was 266,000, compared to 15.8 million for the same games on broadcast and cable television.

So if the numbers aren’t that great, why did Jeff Bezos’ company pay $40 million more than Twitter did last year for its new NFL streaming deal? Paying $50 million for roughly 30 hours of coverage isn’t crazy for a company with a market cap of $439 billion. Still, the answer is even more straightforward: Amazon is now in the live content business.

The two deals are almost identical in terms of content and overall coverage hours. But Twitter streamed its NFL games for free. Amazon’s users have to pay the $99 per year Amazon Prime fee in order to watch the “Thursday Night Football” games.

But it’s not about making money now, it’s about offering more content. Movies, TV and now live sports will make Prime a long-term power in the content business as cable television’s viability declines further every day.

The NFL deal allows Amazon to offer a historic American product, and with that comes more creditability in the content world.

Amazon doesn’t necessarily see its new NFL deal as a money making move now, although it could end up profiting from the partnership by pushing NFL merchandise. But every company needs to have a proof of concept before it can really go to market and make it big.

Amazon is simply testing the live sporting waters in 2017 for a very small fee, and its first test subject isn’t a random league or game, it is the National Football League. Bezos and Amazon are investing in the future, and the future is live sports streaming on televisions, phones and tablets around the U.S. and the world.

When Will The Future of Sports Arrive?

Americans pay massive monthly cable fees in order to access hundreds of channels. However, most people only watch a few of the channels they pay for. According to Nielsen, in 2013, the average cable package provided 189 channels, but people watched an average of only 17.5 channels.

This has helped lead to a cord-cutting revolution. The array of content that Netflix Inc. NFLX, HULU and Amazon offer have helped lure the mostly-millennial audiences to leave cable television behind.

Amazon has already looked into live rights for the NBA, soccer, surfing and Indian Premier League cricket. The NFL marks a giant win on a small scale. If Amazon can prove the viability of its NFL streaming, then other leagues and live sporting events could soon join the party.

The NFL and Amazon already have a working relationship. In 2016, Amazon debuted its NFL Films-produced behind-the-scenes series “All or Nothing,” which documented the Arizona Cardinals’ entire 2015 season over eight roughly 50-minute episodes. Season two, which will feature the Rams’ first season back in Los Angeles in 2016, was just announced.

But none of the video on demand power players have ever really owned live sports rights until now. Some of the NFL’s current TV rights deals will expire in less than a decade. Once the streaming services own live sports rights, television, as we know it, will be changed forever.

Overtime

Amazon has to wait 15 years before it can try to win rights to the Olympics or NCAA March Madness, which are both tied up through 2032. However, look for Amazon to potentially bid on both the English Premier League and Major League Soccer in five years when the current TV deals expire. The global and youthful appeal of soccer could officially kick-off the live streaming sports era. 


Which Stocks are Zacks Experts Talking About?

Stocks in today's headlines may be tempting buys, but how would you like to peek behind the curtain to see all the best stocks Zacks' team of experts are recommending? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF and options moves...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). Click here for all Zacks trades >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Netflix, Inc. (NFLX): Free Stock Analysis Report
 
Yahoo! Inc. (YHOO): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
Alphabet Inc. (GOOGL): Free Stock Analysis Report
 
Twitter, Inc. (TWTR): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research