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Amazon Is Betting Billions on Thursday Night Football

By Adam Levy - Mar 22, 2021 at 8:45AM

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It'll be the exclusive home to Thursday games starting in 2023, but why football?

The NFL finalized its latest round of media rights negotiations, and one of the big standouts from the list of deals was Amazon's (AMZN 1.84%) bid for exclusive rights to Thursday Night Football. 

The online retailer is reportedly spending $1 billion per year for the games. That's a substantial jump from the $100 million per year it was spending to simulcast broadcasts from Fox and ViacomCBS.

Owning the exclusive rights can benefit Amazon in a few ways -- here's how its bet on the NFL could pay off handsomely.

A football sitting on the grass with players in the background.

Image source: Getty Images.

A massive piece of Amazon's content budget

Amazon is getting a lot for its money. First of all, the deal is an expansion of the Thursday Night Football package from 11 games to 15 games -- every Thursday night game on the schedule. Previously, the NFL held back some games as exclusives for its own cable network. 

Second, Amazon won't be competing with traditional television broadcasts for attention. That's important, because it means if people want to watch the Thursday games, they have to watch on Amazon.

But $1 billion per year (plus production costs) is a big piece of the company's content budget. Amazon spent a total of $11 billion on video and music content last year. And it isn't just stopping at producing the games. It'll have pre-game and post-game shows, plus a "weekly slate of original NFL programming."

To top it all off, the deal is good for 11 years -- that's a big commitment to the NFL. As such, these rights need to produce an outsized impact on Amazon's business in order to make them worth the price.

Growing Prime memberships

Exclusive Thursday Night Football broadcasts may be enough to encourage any holdouts to Amazon's membership program to sign up in September, just ahead of kickoff. For Amazon, football season is also the kickoff to its biggest shopping season, so getting more Prime sign-ups leading into fall is a big opportunity for Amazon to showcase the value of the membership to new members and to drive sales growth.

What's more, the exclusive games could improve retention among existing subscribers. With 142 million American consumers currently using Amazon Prime, retaining members is just as important as attracting new customers. Historically, increased engagement with Prime's digital benefits like Prime Video has been correlated with better subscriber retention.

And NFL games have some of the highest engagement of any content on television or streaming. Amazon had one exclusive game last year -- a dud of a match-up between Arizona and San Francisco on a Saturday. Still, the game drew 11.2 million total viewers.

The average Thursday Night Football game drew an audience of over 14 million last year, meaning there's strong potential for Amazon to engage a big chunk of its Prime members with the package.

The advertising opportunity is huge

Exclusive rights to Thursday Night Football also mean exclusive rights to the commercial time during the broadcasts. That's truly what accounts for the big price tag. In its previous deal, Amazon only had a few advertisements per game, but as the broadcaster and distributor, the company will be able to sell every commercial slot during Thursday Night Football. A typical NFL game allows about nine minutes of ads per quarter.

And advertising is quickly becoming a big source of revenue for Amazon. Last year, the company's "other" revenue line item, which consists primarily of advertising sales, grew more than 50% to $21.5 billion. That's over 5% of total revenue for the company and likely a significant share of its gross profit.

With the addition of several hours of premium video ad inventory from the NFL deal, Amazon is dramatically expanding its ad offerings to marketers. It may be able to monetize that ad inventory better than any traditional media company as it delivers 100% of the ads in a digital environment, where targeting and measurement is more efficient and effective. And Amazon's first-party shopper data can inform marketers how much the ads on Thursday nights are worth.

What's more, the company has the ability to package those traditional TV ads during the football games with more targeted ads on its marketplace. It can retarget customers that already saw an ad on Thursday night with a tie-in on its homepage or in the search results. As a result, the NFL ad inventory can benefit the entire ad ecosystem on Amazon. Combined with the potential improvements in Prime member growth, the company could see a nice payoff from this latest bet.

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