Image via Amazon Prime
“Content is king” is a familiar refrain in the media and entertainment industry. More specifically, compelling content enables companies to attract large audiences regardless of the distribution channel. Sports is the king of kings in this context. The reason that companies have spent billions of dollars on media rights deals with leagues, teams, and events is that sports consistently attracts large audiences watching live programming.
Traditionally, there have been two ways to monetize sports audiences. Broadcast networks and digital companies with streaming platforms such as Twitter, Facebook, and Yahoo have focused on using sports to sell advertisements to companies looking to target lucrative sports audiences. ESPN and regional sports networks (RSNs) have generated billions of dollars annually in the carriage fees that they charge cable and satellite providers for offering these channels to their subscribers.
The fact that Amazon is potentially breaking this traditional monetization model is what makes its new over-the-top streaming deal for Thursday night football games particularly interesting. Starting this Thursday, a reported 80 million Amazon Prime members will be able to access the games for free.
Amazon has the capability to sell ads during these NFL games. While 80 million is a large potential audience, it is far lower than the 328 million daily active global users on Twitter’s platform where NFL Thursday night games were streamed last year. Therefore, Amazon’s potential reach right now is significantly lower, making it arguably less attractive to advertising.
In addition, Amazon will be using NFL content to try to increase the number of Amazon Prime users. By paying $99 per year, Prime customers will receive access to exclusive NFL content while receiving other benefits such as faster shipping of products. However, Prime users make up only a relatively small portion of Amazon’s total customer base. Unlike ESPN and RSNs, a large number of Amazon’s customers are not using the ecommerce platform because it has NFL content.
Instead, Amazon’s platform enables a company to focus on the quality of its audience rather than the quantity of its audience. More specifically, Amazon users that become Prime customers sign up because they are active buyers of products. Amazon’s NFL stream becomes compelling content for two reasons. Amazon’s wants its Prime buyers on its site as much as possible. In particular, the customers specifically buy Prime accounts because they are active users on the platform. The more frequently Amazon can get the users on the platform the more likely that Amazon can increase its revenue.
In addition, advertisers can maximize the probability of driving direct revenue by using Amazon through commercials. On other channels, when people see a commercial showcasing something that they may wish to purchase, they have to go to another website to make the purchase. With Amazon, however, a customer is watching a game on the platform where they can also buy the products being advertised directly. Reducing the customer journey will make it easier for companies to sell more products while also enabling companies to much more clearly attribute advertising dollars to a specific promotion or channel.
Examining click-through rates (CTR) is a good example of this new model. In the past, a company would typically measure how often customers clicked on an advertisement to come to its website. It then could measure how many people that clicked on the ad and made a purchase. This required the customer to leave the platform where they were viewing content and also to have a time lag for when they made the purchase. This effort is one reason that CTRs are often lower than companies would like.
For Thursday Night Football, a Prime customer does not have to leave Amazon’s platform to make a purchase. This makes it as easy as possible for customers who are the most likely to make a purchase to complete a transaction. Companies can then also potentially see when spikes in purchasing activity occur from Amazon and likely attribute this success to this channel.
This does not mean that companies do not receive significant value from working in other more traditional channels.
Reaching a large audience is a critical objective for many companies. In particular, there are many companies for which revenue from Amazon or ecommerce does not constitute a large proportion of total revenues. Also, there are several other channels that companies need to explore from an advertising and sponsorship perspective that will help companies achieve their revenue and brand goals. In particular, reaching as large of an audience as possible to increase customer acquisition and brand awareness is a critical objective for many companies looking to advertise in or sponsor sports.
However, Amazon’s streaming of NFL games does have the capability to change the content dynamic for sports in a positive way. As some sports have seen a decline in ratings, focusing on the quality of the audience watching games and events is critical. The fact that Amazon has the capability to show significant lifts in purchases and revenue for companies during streams can extend sports’ reign as content king for years to come.
Adam Grossman is the CEO of the sports sponsorship and technology company Block Six Analytics. He is a Faculty Member for Northwestern University’s Masters of Sports Administration Program. He is also the co-author of the The Sports Strategist: Developing Leaders For A High Performance Industry.
