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Amazon's Thursday night football: Why it's a 'long-term play' for the tech giant

Amazon’s (AMZN) getting ready for kickoff.

The tech giant streams its first installation of "Thursday Night Football" on its Prime Video platform this week, marking the first-ever NFL game to be exclusively provided via streaming service. It’s a monumental moment for America’s largest professional sports league, for Amazon, and for sports streaming as a whole.

“It really portends the future of sports broadcasting,” Kansas City Chiefs Chairman and CEO Clark Hunt told Yahoo Finance.

Hunt’s Chiefs will play the Los Angeles Chargers for the inaugural broadcast and Amazon spent big to make it happen. To become the exclusive "Thursday Night Football" provider, the company has reportedly agreed to drop $1 billion annually throughout an 11-year deal.

For consumers, there’s a kicker. If you’re hoping to watch the game, you need an Amazon Prime account or a Prime Video membership, which start at $8.99. That’s not an accident or a bug. It’s a feature.

Sure, Amazon’s spending on sports for Prime has been on par with what traditional broadcasters like Comcast (CMCSA), Fox (FOX), and CBS (PARA) spent for rights to Big Ten football. However, Amazon has a different endgame in mind. Broadcasters like Fox are incentivized to keep spending lavishly on sports broadcast rights to hold onto market share, while Amazon’s efforts are fundamentally about finding growth. For Amazon, it’s about getting consumers to buy into its ecosystem permanently.

Sep 11, 2022; Glendale, Arizona, USA; Kansas City Chiefs guard Nick Allegretti (73) against the Arizona Cardinals at State Farm Stadium. Mandatory Credit: Mark J. Rebilas-USA TODAY Sports
Sep 11, 2022; Glendale, Arizona, USA; Kansas City Chiefs guard Nick Allegretti (73) against the Arizona Cardinals at State Farm Stadium. Mandatory Credit: Mark J. Rebilas-USA TODAY Sports

“Clearly, for Amazon this has to be a really long-term play,” said Mark Patricof, founder of athlete-focused private investment platform Patricof Co.

Laura Martin, analyst at Needham & Co., agrees. For Amazon, this isn’t just about getting NFL games on its platform, it’s about driving Prime subscriptions and more spending across the company’s entire ecosystem for years, even decades, to come.

“You’re going to go there and maybe you’ll stay longer to watch ‘Lord of the Rings,’ because on Prime you can’t escape the ‘Lord of the Rings’ advertising,” she said. “Then, that puts Amazon in a higher brand category in terms of relevance to your life and it takes on a bigger role in consumers’ value perception.”

To this end, Amazon has paid handsomely for its content. The latest case of this, of course, is the reported $465 million the company spent to make "Lord of the Rings: The Rings of Power." This kind of content investment from Amazon isn’t anomalous, and is set to continue: This year, including sports, Amazon is projected to spend $15 billion on programming, according to Bloomberg Intelligence. Head of Amazon Studios, Jen Salke, has a $10 billion budget all her own. This all sounds like a lot (and it is), but it’s also important to note that last quarter alone, Amazon produced $121 billion in revenue.

In July, Amazon Prime reported that it had north of 200 million subscribers globally. The company did not return repeated requests for comment for this story.

Why Amazon and the NFL could be a fit

Revenues, budgets, all of it will fall to the side at kickoff. Above all else, this is a sports broadcast and Amazon will be judged by millions of passionate fans on its presentation and the performance of its broadcast crew, headlined by Al Michaels and Kirk Herbstreit.

The company’s hoping to see about 12 million viewers, per its projections. That viewer count is important in more ways than one, as it will have a direct impact on how advertisers pace their payments. Headed into the opener, questions linger about how Amazon’s ad revenue will shake out.

But, again, this goes back to the long game. Amazon over time could also be set to make a killing in ads linked to NFL content. Unlike old-school broadcasters, Amazon’s targeted advertising capabilities are nuanced, expansive, and innate. Even if the company loses money on "Thursday Night Football" at first, it may not matter down the line, said Andrew Boone, analyst at Citizens-owned JMP Securities.

“If you start to look ahead, they have advantages, including doing ads dynamically, which should increase the value of those ads over time,” he said. “Theoretically, over time, pricing should solve itself with those dynamics, but it’s still early.”

Big Tech’s forays into sports broadcasting have been bumpy so far. When Apple (AAPL) debuted its first installation of Major League Baseball on Apple TV+ in April, fans weren’t thrilled with the results. Still, Apple as barreled forward and, no matter what happens during the premiere (or even this year), Amazon will too.

“If they don't get it right in year one, no problem [since] they’re going to have these rights for a decade,” Martin told Yahoo Finance. “Because they’re an entrepreneurial culture, they’ll figure out how to make the most money from that spending each year, even if we don't know what that's going to be upfront… We've never had these kinds of prestigious sports rights on a streamer before.”

The NFL’s had its own reasons to take a chance on Amazon. For one, "Thursday Night Football" has long been in search of a permanent home, having been on numerous networks — including CBS, NBC, and Fox — in less than 10 years.

“The NFL knows that if Amazon makes this work, they can pay way more for streaming rights than just about anyone else,” said Patricof. “So, the NFL, where the cost of business is going up, is looking two or three contracts down the line.”

The league also hopes that Amazon can drive expansion, said Hunt.

“Long-term streaming will be available not only in the United States, but on an international basis,” he said. “If you have fans in Europe, South America, or Asia, they're going to be able to watch games much more easily than they have in the past. It’s a frontier we’re really focused on.”

Though NFL Sunday Ticket will soon be up for grabs, there won’t be many more opportunities for Amazon to buy up more professional football rights for the foreseeable future. However, this is just the start of a major shift in sports, where all leagues will have a well-developed streaming component, Hunt added.

For Amazon, this isn’t necessarily going to be easy. It may not have great ratings off the cuff and might have to build an audience by converting NFL fans to Prime, but this is just the first quarter, said Patricof.

“This is just the beginning for Amazon, they’ll need to go far to get the most benefits from this, but I think this will stick,” he said.

Josh is a reporter and producer for Yahoo Finance. Allie is senior tech reporter at Yahoo Finance.

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