Sports can be a race on Amazon’s playground

Last year, Amazon generated $31 billion in advertising, second only to Google and Facebook. In the fourth quarter alone, the amount was 32% higher than the year prior. But that number should be low compared to the revenue the company can report in the region on its next balance sheets. One of the main bets for achieving these gains is sports.

In recent months, Amazon has made an agreement under which it will be exclusively broadcasting NFL matches on Thursday night. For the next 11 seasons, “Friday Night Football,” as Thursday’s first game in the league is called, will be broadcast only on Prime Video, the company’s live streaming service.

For comparison purposes, it would be equivalent to the company guaranteeing the exclusive rights to broadcast the Brazilian soccer matches shown on Wednesdays which are usually broadcast by open broadcasters. Anyone who wants to follow the team must subscribe to the broadcast.

In the deal with the NFL, Amazon will have to pay $11 billion to the North American League. The value is high at first, but it can represent a bargain compared to the potential profits, as the company will be able to sell coverage space to advertisers.

There is still a way to find out the exact amounts Amazon will make by betting on American football. What is known so far, according to the portal Ad age, is that ad serving negotiations were 20% more expensive than usual. On the other hand, the cost of sponsorship amounted to 30 million US dollars.

To be able to negotiate higher values, Amazon is relying on studies showing that the audience that follows live sports, via live streaming, is expected to increase by 71% between 2021 and 2025, reaching 107 million people in the US alone.

It should be noted that Amazon has already noticed this growth in practice. When it began broadcasting matches in the Premier League, the major English soccer league, the company recorded an increase of 635,000 Prime Video subscriptions in the UK in just one quarter. Altogether, there are more than 200 million subscribers to the service.

More than just having more content to attract advertisers, Amazon’s strategy with this more nuanced look at the sport involves engaging with different arms of its business.

The Amazon homepage will direct consumers to weekly games, which will be streamed on Prime Video through browsers or apps. At the same time, the company will display in-game ads, which could bring audiences back to e-commerce.

All this, in addition to generating additional revenue from product sales, will allow the American company to collect data on the consumption habits of viewers.

In addition to the NFL and the Premier League, Amazon also has agreements to broadcast certain soccer leagues. In Brazil, the company has signed sub-licensing agreements with Globo, allowing the US company to broadcast matches from the Brazilian Championship and the Copa del Rey for men’s soccer.

Outside of the game, Amazon will bring MMA fights to Prime Video through an agreement with One Championship, one of the organizations that operates the category. The company also entered baseball by broadcasting 21 games exclusively for the New York Yankees.

The next target may be American basketball, but negotiations over broadcast rights to the NBA have not begun for two years.

The Seattle giant isn’t the only one monitoring the sports rights to various leagues and sports. Disney is expected to pay something close to $10 billion annually in this sector. On the other hand, DirecTV pays $2.5 billion a season to broadcast Sunday’s NFL games – which have a much larger audience than Thursday’s games.

Amazon revealed the numbers it earns from ads only in its latest annual report, released earlier this year. The numbers surprised analysts. For example, the consulting firm eMarketer estimated the company’s annual revenue of $24.4 billion from advertising in this period.

The department, called Amazon Ads, actually deals with more resources than other players’ ad domains. YouTube generated $28.8 billion in this segment in 2021, while Microsoft generated just over $10 billion in advertising in this period.

However, it should be noted that the unit represents a small slice of the Amazon pie. The division’s revenue made up just 6.6% of the company’s total revenue of $469.8 billion last year. But it’s already on par with other important businesses, such as the company’s subscription services, grouped together under the Prime banner, which has revenue of $31.7 billion.