Twenty-First Century Fox (NASDAQ:FOXA) won the rights to the NFL's Thursday Night Football for the next five years, but it had to pay up for it. The deal is valued at $3.3 billion, according to The Wall Street Journal, which comes to about $60 million per game. That's a big jump from the $40 million CBS and NBC spent per game last year.

Fox isn't the only one willing to pay more for NFL rights. Amazon (NASDAQ:AMZN), Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube, Verizon, and Twitter (NYSE:TWTR) are all bidding on the digital streaming rights for Thursday Night Football. Twitter paid $10 million for those rights in 2016, and Amazon paid $50 million for them in 2017. Those companies have offered "hundreds of millions of dollars" for multiyear streaming rights, according to Bloomberg, and the winning bidder will probably spend more than Amazon did last year.

Bids for the NFL's content are climbing despite the fact that the league saw its TV ratings fall roughly 10% last year. Amazon said its streaming broadcasts reached an average of 310,000 viewers, which didn't exactly make it the most popular asset on its streaming video service. So, why is the price still increasing for the NFL?

A football on turf, black background.

Image source: Getty Images.

"You either have the most watched content on television, or you don't"

In an interview at Code Media, Fox Networks CEO Peter Rice told the audience Fox didn't overpay for rights because the NFL is still extremely popular. "You either have the most watched content on television, or you don't have it," he told Julia Boorstein.

Indeed, Fox has struggled to win viewers in prime time, especially Thursday nights, where it falls behind other scripted series from ABC, NBC, and CBS. Thursday Night Football (TNF), despite its relative decline, still manages to top the ratings in its time slot regardless of whatever else might be on. TNF averaged 14 million viewers per game in 2017 and it was the No. 2 show on television after Sunday Night Football.

"In terms of what's valuable in the TV ecosystem for advertisers, having this type of unduplicated live reach is why the dollars have not come out of TV yet," analyst Michael Nathanson said at the conference. In fact, the top 50 broadcasts last year included no scripted content at all.

So, if Fox wants to compete (or just survive), especially as it becomes a smaller company in the future, it needs big live broadcast rights like the NFL. It's willing to pay a premium for that even as the NFL ratings decline.

The digital players see an opportunity to seize ad dollars

The NFL isn't the only one experiencing a ratings drop. Television viewing is declining across the board as digital streaming has started to replace traditional TV time.

But unlike television, most digital streamers aren't watching the same exact thing, and they're certainly not watching it at the same exact time. As such, there's no large, aggregated audience in digital, which may make the format less appealing for big-brand advertisements.

Much of Google and Amazon's ad revenue comes from direct-response advertising, where the ad is designed to make the viewer take action. Twitter still generates most of its revenue from brand advertising, and video ads in particular, but it's a significantly different medium than television. 

Television advertising spending in the U.S. totaled about $70 billion last year and that number is still growing. That's a big opportunity for digital streamers to establish stronger relationships with large-scale television advertisers, who they don't really compete well for today. NFL streaming rights represent a small step toward seizing a chunk of those ad dollars.  

If companies want to win over advertisers, they need to have the most popular content. And despite its declining ratings, the NFL is still the best way to gather an audience. That's why demand and the price for NFL rights are only going up.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.