Original Article: Bloomberg, by Ira Boudway, May 10th, 2024

(Bloomberg Businessweek) -- On Black Friday, Amazon’s Prime Video streaming service will carry an NFL game between the Las Vegas Raiders and Kansas City Chiefs. It will be the second edition in what the league and Amazon want to make into a new holiday tradition. Both the NFL and the tech giant are hoping the Raiders and Chiefs can put on a better show than the Miami Dolphins and New York Jets did last year, when the Dolphins pounded the Jets 34-13 in front of 80,000 hushed fans at MetLife Stadium. Amazon.com Inc. paid the league about $100 million for the rights to that sad spectacle, an eye-popping figure for three hours of programming—about what it cost Prime to produce two seasons of the detective series Bosch.

For the world’s largest online retailer, however, the NFL on Black Friday isn’t just another show: It’s a way to insinuate itself in the life of millions of Americans on one of the biggest shopping days of the year. The Black Friday game is a showcase for Amazon’s broader strategy in sports and its leading laboratory in a long-term project to meld content and commerce in a way that will shape the viewing experience for fans—and the financial fate of leagues—for decades to come.

Among the big tech companies, Amazon has been the biggest buyer in the US sports rights market. In 2022, Prime Video became the first streaming service with exclusive rights to the NFL when it took over Thursday Night Football (TNF) at a cost of $1 billion annually through 2033. Earlier this year, Amazon signed an 11-year, $19.8 billion deal with the NBA that kicks in next season to air games on Thursday and Friday nights, including Black Friday. It also has deals with the National Women’s Soccer League, WNBA and Nascar.

This growing portfolio is all part of Amazon’s Prime subscription bundle, a hybrid of package delivery, online retail and video streaming unlike anything else in the market. “They’re a brand-new model,” says John Kosner, a sports media consultant and former executive with the NBA and ESPN.

When Amazon bought the rights to TNF, the deal did not include the biggest Thursday on the NFL calendar, Thanksgiving. The three Thanksgiving games belong to Fox, CBS and NBC. So Amazon pushed for a new window and, at a price of $100 million a game, persuaded the league to schedule its first Black Friday matchup since 1962. (According to the Sports Broadcasting Act of 1961, which exempted the NFL from antitrust laws, the league can’t play on Friday evenings or Saturdays during the fall, when high school and college football are still in season. Amazon’s Black Friday game circumvents the rule with a 3 p.m. EST kickoff.)

Last year, Amazon dropped Prime Video’s paywall for the game, making it available to anybody who registered with an email address. It hoped to draw at least 12 million viewers. In the end, fewer than 10 million watched—an underwhelming number compared with the 34.1 million average viewers for the three games the day before.

Amazon should do better this year. The paywall will be down again, and the Chiefs, back-to-back Super Bowl winners, are packed with star power in quarterback Patrick Mahomes and tight end Travis Kelce. (If Amazon is lucky, Taylor Swift will be in the stands.) TNF has shown that, with a little time, NFL fans are willing to adjust their viewing habits. Ratings have risen steadily since Prime Video took over in 2022, from an average of 9.6 million viewers a game in the first season to 13.2 million so far this year. Earlier this month, for the first time, TNF had a bigger audience than ESPN’s Monday Night Football during the same week.

And Amazon doesn’t need to match the audience of the legacy broadcasters to get a good return on its NFL investment. Its first exclusive TNF game in 2022 brought in a record number of new Prime subscriptions for a three-hour period. Gaining and keeping subscribers, as Amazon’s head of sports and advertising, Jay Marine, has made clear, is the primary basis for the company’s investment in sports. The goal is to make the $139 annual cost of Prime feel like a bargain—and to keep subscribers from leaving when the price goes up.

Amazon also does plenty of media business the old-fashioned way, by selling ads. (Advertising is one of the company’s fastest-growing revenue streams, hitting $46.9 billion last year, a 24% increase over 2022.) Ad time for this year’s Black Friday game sold out months in advance despite last year’s lackluster ratings, with 30-second spots going for $650,000 to $750,000, according to Ad Age. Many of these are traditional TV ads for cruise lines and razor blades, but Amazon is also experimenting with targeted and interactive ads.

Last year on Black Friday, roughly half of the ads during the game included QR codes that viewers could scan to buy the featured merchandise, including Nerf guns, Bose speakers and Columbia coats. And at the end of each quarter, Amazon ran spots for flash sales on its own site. Although there’s nothing especially novel about these “shoppable TV” techniques, Amazon is using the NFL to introduce them to viewers on an unprecedented scale.

The company declined to say how many Black Friday viewers used QR codes or took advantage of in-game discounts last year, suggesting the numbers aren’t yet much to brag about. But it did say that engagement with interactive ads was 250% higher on Black Friday than during the average TNF game. It’s still early days for these kinds of advertising tactics. If streaming sports can be used to get people to buy stuff online, it’s a good bet Amazon will figure out how to do it.

“They are the world’s largest retailer,” says longtime sports media consultant Lee Berke, “so with the Black Friday game, sure they want to drive ratings, sure they want to drive ad sales, but they also want to drive sales across the entire platform.”

For fans, the transition to this streaming economy is proving fairly seamless. Amazon is asking Americans to sit on their couches, watch football and shop on their phones, arguably the three things we’re best at. And so far, Prime Video has not had any major tech glitches in livestreaming NFL games. Netflix stumbled during its much-hyped boxing match between Mike Tyson and Jake Paul on Nov. 15, with streams being blurry and slow for many viewers, a bad omen for the service’s first NFL games coming on Christmas Day. (The fight’s peak of 65 million viewers, a record for Netflix Inc., created “many technical challenges, which the launch team tackled brilliantly by prioritizing stability of the stream for the majority of viewers,” Elizabeth Stone, the company’s chief technology officer, wrote in a company memo seen by Bloomberg News’ Mark Gurman.)

In an effort to provide continuity for fans, Amazon has taken a conservative approach to production, bringing in the experienced crew of NBC Sports to help with the back end and hiring familiar voices Al Michaels and Kirk Herbstreit to call games. If anything, Amazon has overdone it—80-year-old Michaels’ sometimes sleepy play-by-play has been a source of grumbling among fans. But this, too, is a sign that Amazon has arrived: For wherever two or three are gathered to watch sports, someone will complain about the announcers.

The biggest hassle for fans in the new sports media landscape is learning to juggle multiple streaming subscriptions—an increasingly expensive exercise that’s left some pining for the simpler days of the cable bundle. On this score, Amazon enjoys a major advantage over other streamers. It’s already built a service with about 180 million US subscribers. For most viewers, Prime Video is a bonus added to something they already pay for to get diapers, meat thermometers and self-help books delivered overnight.

This built-in reach makes Amazon an attractive partner for sports leagues, which are looking for distributors to take the place of the fast-crumbling cable networks. In its contract with the NBA, which runs through 2036, Amazon has promised to maintain a minimum reach of at least 80 million paid digital subscribers on Prime. Warner Bros. Discovery’s TNT cable network, which h as carried NBA games since 1988 but lost out to Amazon in the league’s latest round of rights deals, fell below that number in 2022, according to S&P Global Market Intelligence, and now reaches fewer than 70 million homes—though Warner is building its own streaming bundle under the Max brand.

It’s still unclear whether leagues can count on Amazon and its fellow streamers to match cable networks’ appetite for sports rights in the long run. “At ESPN, keeping a big sports property felt existential for us,” Kosner says. “That’s not the case with Amazon, and it’s not the case with tech giants in general.”

At its peak, the cable industry generated profits at rates rarely seen outside of banking and criminal enterprise. Regional monopolies and oligopolies gave carriers almost unlimited pricing power. Networks such as ESPN could afford to pay top dollar for sports because tens of millions of people paid for the programming in their monthly cable bill whether they watched it or not. Amazon has lots of ways to make money from sports rights, but none of them may turn out to be as lucrative as the carrier fees that once made ESPN and TNT cash cows.

So far, Amazon has been selective, picking up small packages from top-tier leagues and seeing how they perform. This is unfamiliar territory for leagues, which are accustomed to measuring themselves by the same TV ratings their media partners use. Amazon’s use of in-house data and its heavily analytic approach, Kosner says, are going to make future rights negotiations more difficult: “They’re going to know how these sports are performing better than the sports themselves.” The NFL and, beginning next year, the NBA can only hope that Amazon sells a lot of Nerf guns on Black Friday.

©2024 Bloomberg L.P.