Over the past several years, Amazon (AMZN 0.58%) has been gradually augmenting the content on its Prime Video service, adding a growing list of live sports programming. The first such deal came in 2017, when Amazon inked a $50 million, one-year deal with the National Football League (NFL), giving it non-exclusive rights to stream 10 Thursday Night Football games.
This was the first of many sports deals to come, following months of rumors that Amazon was considering an exclusive premium sports package that would be available to Prime subscribers. Now, six years later, it seems those ambitions may finally come to fruition.
Image source: Getty Images.
There's an app for that
Amazon is reportedly working on a stand-alone streaming app for sports fans, according to The Information, citing "people briefed on the conversations." It isn't clear whether use of the app would be included with Prime or if the company would charge an additional fee beyond the basic Prime subscription for those wanting to watch live sports.
This comes amid an increasing push by Amazon to expand further into sports programming. CEO Andy Jassy touched on the matter briefly at The New York Times DealBook Summit last month, when asked about the importance of sports rights over the long term.
Jassy cited Amazon's forays into Thursday Night Football and Union of European Football Associations (UEFA) soccer, saying, "You'll continue to see us investing in sports." He went on to say, "Sports is such a unique asset ... If you look every year at the most watched programs, sport often occupies 75% of those spots." He also noted that sports programming helped boost Prime subscriptions.
Are you ready for some football?
Amazon spent heavily to secure exclusive broadcast rights to Thursday Night Football, paying the NFL roughly $1 billion per year through 2033. Yet despite the hefty price tag, the company appears to have thrown a touchdown.
Indeed, Amazon's first exclusive broadcast of Thursday Night Football in mid-September between the Kansas City Chiefs and the Los Angeles Chargers attracted an impressive 15 million viewers, surpassing Amazon's internal estimates.
Perhaps more importantly, it attracted a record number of Prime subscribers during an intense three-hour period, outperforming similar time spans during Prime Day, Black Friday, and Cyber Monday, according to an in-house memo obtained by CNBC. "By every measure, Thursday Night Football on Prime Video was a resounding success," wrote Jay Marine, global head of Amazon's sports division.
Amazon is also moving to create additional sport-centric content. The company recently launched Sports Talk, "a new, original sports-talk programming block" that airs from Monday through Friday from 8 a.m. ET to 8 p.m. ET. The programming is available on Prime, Freevee (the company's ad-supported streaming service), and Amp (Amazon's live radio app without a Prime membership). The slate of programming includes seven daily shows devoted to sports.
Show me the money
Amazon has spent billions of dollars to bring a variety of live sports programming to subscribers of its Prime Video streaming service, who pay $139 per year or $14.99 per month. Breaking out the content into a sports-centric app would give Amazon a way to recoup some of that hefty investment. The move would also "declutter Amazon's main Prime Video app," according to the report.
Amazon closed out 2021 with 200 million Prime subscribers, but it remains to be seen how many would be willing to shell out an additional fee above and beyond the cost of Prime. Keep in mind, however, that Amazon has extensive information regarding how its customers use Prime Video -- including what sports programming they watch, for how long, and how often -- so any decision will no doubt be data-driven.
What this could mean to Amazon investors
Reports suggest that Amazon had toyed with the idea of an exclusive premium sports package for Prime subscribers more than six years ago, even floating the concept to some of the sports leagues it negotiated with at the time. Furthermore, it isn't clear when Amazon might launch the sports app or if it will go through with its plans at all.
However, the company could follow the template that it used for Amazon Music Unlimited. Prime members get access for $8.99 per month, while non-Prime members pay a slightly higher $9.99 per month. This way, it could offer sports to a much wider audience and recoup some of its lavish spending on sports content.
Don't forget the flywheel
Amazon's growth flywheel leverages a positive customer experience to drive traffic to its platform. Simply put, anything that encourages potential subscribers to sign up is a good thing. Furthermore, history has shown that Prime members tend to buy much more from its e-commerce platform, spending nearly $2,000 per year on Amazon's e-commerce platform, roughly four times the amount spent by non-members.
As former CEO Jeff Bezos famously said "When we win a Golden Globe, it helps us sell more shoes." That concept applies equally well to highly sought-after sports content.
If the company eventually debuts a sports streaming app, it would be an overall win for Amazon and its investors -- though the benefit would be difficult to quantify.
