Amazon Prime Video will be spending $1.8 billion a year to stream National Basketball Association games under the new deal it reached with the league.
That’s a lot of money, but New Street Research analyst Dan Salmon expects Amazon to get some of that back by increasing the price for Prime Video in 2025, the year the NBA deal kicks in.
Amazon turned Prime Video into a mostly ad-supported business this year. And while sports attracts big numbers of viewers and are still coveted by advertisers, increased subscription video could help turn Prime into a money making business alongside Amazon’s online retail and web services businesses.
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“We think the addition of NBA rights puts Amazon in a better position to raise the price of Prime in 2025, after promising to leave price in place in 2024 as advertising rolls out on Prime Video, Salmon said in a research note.
With most streamers other than Netflix losing money on their direct-to-consumer business, subscription prices have been going up across the board, which is good for Wall Street, but not so good for consumers who thought their cable bills were too high.
Ad supported streaming services have lower subscription prices, offering viewers’ wallets, while subjecting their eyeballs to commercials.
To be sure, fueled by data from Amazon’s retail business, Prime Video will probably be able to ramp up its ad business faster than steaming rival Netflix, which belatedly launched a lower-priced tier that included commercials in shows..
“Amazon’s access to targeting data (shopper, retail, etc.) and proprietary ad tech create the potential for superior monetization than a traditional network could achieve on its own,” Salmon said. “Whether we will see that prove out will likely take several years to determine, but it’s easy to understand why the NBA would want to start proving that out sooner rather than later.”
Amazon will be announcing its second quarter earnings on Thursday. In the first quarter Amazon’s ad revenues--predominantly online retail advertising--rose 24% to $11.8 billion. The Wall Street consensus is that will increase to $11.7 billion in Q2.
Working with Amazon helped the NBA boost its rights fees in this go around and could continue to do so well into the future.
The NBA’s decision to go with Amazon–and reject long-time partner Turner Sports (now part of Warner Bros. Discovery)--”shows that major sports leagues are increasingly included to play ball with the streamers (pun intended) as their legacy linear network careers are existentially weakened by accelerated cord cutting,” he said.
“Starting a relationship today, even at slightly less favorable economics or smaller scale, may pay dividends in the future both as a stalking horse in future negotiations and as the natural evolution of a business that remains popular with consumers, but whose legacy delivery mechanism is not,” Salmon said.
Brad Altfest,managing director of media and entertainment at Agora, adds that the NBA sees Amazon as a better fit with its fans than traditional, linear media.
Altfest notes that 30% of NBA viewers are under the age of 35.
“The league might be looking to appeal to young, tech-savvy viewers by giving them a more interactive streaming experience,” he said. “Broadcasting games on Amazon can allow fans to interact with the game they love like never before, thanks to real-time engagement tools such as live polls, selectable camera angles, and interactive stats, making each game more immersive and personalized.”
On the ad side, Amazon can send viewers more personalized ads, making it easier for viewers to buy jerseys and other nicknacks featuring their favorite team’s logos and player names.
“In a league where the stars are the brightest, this can revolutionize the way fans can watch and interact with some of the biggest names in sports,” Altfest said. “It also provides a massive air of legitimacy to Amazon's live sports offerings- previously their biggest get was the NFL's Thursday Night Football, but they're graduating from one game a week to more consistent offerings, including the WNBA finals, that show that it's entry to the sports market is only just beginning."
