Amazon-Premier League deal shows tech giant still learning

  • Amazon paid between £21m and £30 per season for 20 live Premier League games in the UK
  • The matches, offered as part of Amazon Prime Video, will have multiple benefits for the company
  • The retail giant is still in an exploratory phase with sports content

If the importance of a media rights deal can be measured by the number of column inches dedicated to it, the agreement the Premier League struck in June with Amazon for one of two packages of rights unsold in its January auction – telco BT picked up the other – has to be one of the most important ever. Yet coming in somewhere between £21m (€23.4m/$27.9m) and £30m per season for the period 2018-19 to 2020-21, it will probably be the lowest-value domestic live rights deal signed by a major football league this year. It is usually Amazon running summer clearance sales. This time it was the Premier League.

The retail giant and technology company acquired the rights to 20 Premier League matches per season – 10 per match day on two match days: one on Boxing Day (December 26) and one midweek fixture programme. It will not become clear how many of the 10 games will kick off simultaneously until the league publishes its broadcast schedule, but it is unlikely that there will be more than three separate slots on each day.

The media frenzy reflects a fascination with whatever the tech giants – Amazon, Apple, Facebook, Netflix and Google – are up to. But also a need for an answer to a question that sports leagues and federations have been asking for at least five years: are these guys ever going to open their cheque books?

Given the nature of Amazon’s deal with the Premier League only one thing is clear: we still don’t know.

Amazon founder Jeff Bezos has not said very much about how live sports will fit into the company’s strategy going forward. He has talked more about space travel. Bear in mind the Premier League deal takes Amazon’s spending on sports rights in the last 12 months to about $100m. It will invest over $5bn in original entertainment content in 2018.

The Premier League investment is part of Amazon’s toe-in-the-water exploratory phase. In the UK, this also includes ATP World Tour tennis at £10m per year for five years, 2019 to 2023, and US Open tennis at $7m per year, for five years from 2018. In the US, it acquired the streaming rights to NFL games this season, paying $50m for 11 non-excusive games also being aired live on network TV.

Having the Premier League matches will do the following for the company:

Drive subscription revenue. Amazon Prime costs £79 per year in the UK. Having Premier League games could add tens of thousands or hundreds of thousands of new subscribers. Ampere Analysis says the company would need to add 400,000 new subscribers over the term of the contract to make a profit on the Premier League deal, based on the upper-end valuation of £30m per season.

It is estimated that there are currently about 8.5 million Amazon Prime customers in the UK, so there is a huge margin for growth. Free one-month trial offers are expected to be promoted around the match-days. Based on data available in the US, about 70 per cent of those who take a free trial sign up for a subscription.

Drive retail revenue. Amazon’s $820bn market capitalisation is based heavily on the power and reach of its retail business. Along with cloud computing, it is the biggest segment of a business which generates revenues of $178bn per year.

Amazon Prime customers spend 20 times more on average than ordinary Amazon customers. They stay on longer and buy more stuff. Attractive content helps with customer retention and increases the number of times subscribers want to visit the site.

According to SportTechie, for Amazon’s live NFL coverage, the viewers who watched at least 30 seconds of a game logged an average of 63 minutes on the website that day, producing total consumption of 12.5 million hours across 224 countries. Average-minute live audience for the 11 games was 310,000

Having matches in the middle of the Christmas shopping period should maximise related retail purchases. It is timed perfectly for Amazon’s Christmas Day and Boxing Day sales.

Drive advertising revenue. Amazon paid $4.5m per match for its NFL rights. During each game it was allowed to air 10 30-second spots. It began by asking advertisers $2.8m for a package of ads but is reported to have settled for $1m less. The packages also enable the brands to run ads on the Amazon website in the run-up to the games.

The value for brands is not just reach but the quality of the data Amazon supplies about those engaging with the content. Brands know not only how many people see their ads but what they go on to do on Amazon.com or other websites, and whether they buy something. This kind of data is not something linear television can deliver. Similar advertising packages sold around NFL games on the NBC and CBS networks reportedly go for $550,000 to $590,000.

Advertising accounts for an increasingly large percentage of the company’s overall revenue. In the fourth quarter of 2017, the ad business grew to about $1.7bn, a 60-per-cent increase on the same period in 2016.

Take market share from Netflix. Amazon Prime Video is not a default destination in the same way that Facebook or Netflix is. Amazon wants to change that.

About five million people in the UK regularly use Prime Video, about half the number that use Netflix, but Prime Video take-up is growing faster. It enjoyed a 41-per-cent increase in take up in 2017. Amazon wants to improve on that. Netflix, not Sky or BT, is Amazon’s target and rationale for buying Premier League rights. It does not need 100 matches per season for this. Having any live sports differentiates it from its rival, which has so far stayed out of the sports-rights market.

Worldwide, Amazon Prime now has over 100 million customers and is closing rapidly on Netflix, which had 125 million in April.

Provide a testing ground for delivering high-quality streaming and an entertainment experience that meets viewers’ needs. Armchair fans want more than just 90 minutes of football. They expect polished presentation and in-depth expert analysis.

Provide valuable data about the viewing and engagement habits of Premier League fans, including evaluating how they respond to personalised ads during match coverage.

Provide a big marketing uplift. Some experts say the media value of the news coverage generated around the acquisition alone could justify the £1m-£1.5m per match cost of acquiring the rights.

Compare the value of output deals with third-party providers with that of owning and producing sports content. As well as buying rights, Amazon has agreed deals to carry third-party sports channels as part of the Prime subscription. In Germany and Austria, for example, it carries the Sport1 channel, the Edgesport action sports channel and the Eurosport Player streaming channel of pan-European sports broadcaster Eurosport. Amazon will be able to evaluate whether carriage deals are most cost-effective than buying and producing premium live sport, in much the same way telcos have been juggling with the question in the last decade or so.

Amazon is opening its cheque book for sports content but cautiously, picking up bargains where it can. The company will take its time, crunch the numbers and then take some more cautious steps. A left-field, multi-billion dollar bid for the exclusive global rights to a football league or a motor sports series does not appear to be in the company’s thinking right now. But if the numbers make sense, within five to 10 years Amazon Prime will be a go-to destination for sports fans everywhere.

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