Advanced Television

Amazon EPL deal: Industry reaction

June 8, 2018

By Colin Mann

Following the news that streaming giant Amazon is to become a player in live coverage of English Premier League football from the 2019/20 season onwards, a number of industry observers have shared their thoughts on the development with advanced—

“While the immediate reaction will be to see this as a long-term threat to Sky (and BT (and other Pay-TV operators globally), we do not see that as the case,” say analysts at investment bank Liberum. “We see Amazon’s primary rationale for buying the rights as a way to boost takeup of Amazon Prime, whose customers purchase an estimated >20x more on Amazon than ‘normal’ Amazon customers,” they note.

“Amazon has purchased the rights to 20 Premier League matches per season between 2019-2022. While it has not disclosed a price, BT announced that it had purchased the other package that had been left remaining post-the sale of most of the rights in February for £90m [€102.21m], which is likely to be similar to what Amazon is paying for the rights,” they suggest.

“The initial reaction would be to view this as a threat to Sky and BT as it would suggest an aggressive move into Pay-TV by Amazon and also to other Pay-TV operators worldwide as it would suggest an appetite to bid for rights. Amazon has already paid $40m for the exclusive rights in the UK for the US Open tennis tournament,” they report.

“We do not see this as the case and instead view this as a way to boost both retention and take-up of the Amazon Prime package rather than Amazon looking to become a Pay-TV operator. The simple fact is a Prime customer is very lucrative for Amazon. We estimate a Prime customer purchases 20x more on Amazon than a non-Prime customer. Anything therefore that can boost Prime take-up for Amazon is very lucrative. Moreover, there is an argument that adding Premier League rights may increase Prime’s attractiveness to under-represented demographics,” they say.

“However, crucially, Amazon does not need to offer the best matches to boost take-up of Prime but only some matches. Amazon should therefore not be a major threat to rights providers,” they conclude.

“This will be an important step for Amazon in attracting new users in the UK to its video offerings,” states Chase Buckle, Senior Trends Analyst, GlobalWebIndex. “Three in 10 UK Premier League fans already say they use Amazon Prime Video each month, with just over half saying they use Netflix. Six in 10 of these fans are watching sports online on a monthly basis too, so there’s a substantial market for Amazon. In its competition with Netflix, original content has been a key focus, but live sports entertainment is where Amazon can really differentiate from Netflix.”

“The Premier League being shown on Amazon’s dedicated OTT service is the latest in a number of deals that are seeing major sporting brands move to online broadcasting,” observes Jonathan Smith, Managing Director EMEA, Limelight Networks. “However, just because these games are online doesn’t mean they aren’t being watched on the big screen, with recent trends for OTT viewing showing that users are now likely to stream content on their smart TVs as opposed to other smaller devices, particularly when it comes to live sporting events.”

“We also have to consider the impact of new and emerging technologies such as virtual reality (VR) and the impact this will inevitably have on consumer’s viewing habits. New and visually exciting customer experiences will continue to raise viewer expectations and alter how they wish to consume sport, music, and other forms of media entertainment,” he predicts.

“The challenge for Amazon will be delivering the high quality, high resolution, live sport experience that users are accustomed to when watching through pay-TV channels. The difficulty of getting content from stadium to screen can’t be understated and the use of private content delivery networks and recent innovations in live streaming, such as WebRTC, will be critical for ensuring that latency issues don’t turn consumers off from this new way of watching,” he advises.

“As regularly reported by IABM’s Business Intelligence Unit over the last couple of years, Big Tech’s investment in media continues to grow, with Netflix projected to invest $8bn in original content in 2018, Amazon $5bn and Facebook and Apple $1bn each,” says Peter White, IABM CEO. “Until recently, however, live sports has been regarded as the last bastion for traditional broadcasters – their crown jewels and birthright. But Amazon signalled some intentions in this area when it snapped up the US Open and World Tour tennis rights, and just this April, renewed its deal with the NFL to stream Thursday night games. So the news that it has now bought a three-year rights package from the Premier League to show 20 live soccer games per season should perhaps come as no surprise,” he notes.

“What’s new here is that the Premier League is the world’s most-watched sports league and the fixtures Amazon has bought are not also-rans but full rounds of matches including all the top teams in sports primetime. From the outside, while Amazon may have got its package for what it would consider a bargain, this move looks like a massive step up in ambition; could we see Amazon or other FAANG companies bidding for full-on sports rights in the near future? Or, given that Amazon will not be charging a premium for viewing the games but including them in its standard Prime package, is this just another step by Amazon to lock in more potential customers to its core online retailing business?”

According to White, the latter is probably true for us for three important reasons:

Video as a Tool

Amazon has revealed that the inclusion of original video content on Amazon Prime – which has surpassed 100m subscribers in April 2018 – has increased the likelihood of purchase of other goods on its e-commerce platform. From this perspective, Amazon views video as a tool to incentivise every customer purchase, from clothing to groceries, rather than a mission-critical business.

Data Hunger

With the launch of video on Prime, Amazon has been able to gain direct control of granular data on consumer viewing habits which it didn’t have access to before. Its algorithms can now work with a variety of information on customer preferences, including valuable video engagement data. The addition of the Premier League will further strengthen this.

Content Rights

Sports content rights continue to be sold on a country-specific basis, making a full swing into live sports by the FAANG less likely. Digital behemoths are global companies with a weaker incentive to invest billions on something that could be monetised in only one country. However, they will continue to snatch packages that are instrumental to their ends.

For White, what is also interesting is that the Premier League, having now sold all six rights packages for 2019-2022, will receive less total income from them than it got from just BT Sport and Sky in the 2015-2018 round. “Rights holders had been hoping that the entry of Big Tech would further increase competition and so prices, but certainly in the case of the Premier League, this has not happened. Have sports rights prices finally hit their ceiling? Only time will tell,” he concludes.

“Amazon’s purchase of Premier League rights follows the pattern of the Internet giant aggressively pursuing opportunities in TV, but only time will tell if its business model can support a full sports broadcasting offering,” suggests Stuart Ferreira-Cole, Commercial Director at Ostmodern. “There are marked differences between streaming films and TV shows to consumers, which the likes of Amazon and Netflix have been doing for years, to offering a fully polished live sports service to discerning fans.”

“The most successful sports broadcasters build an audience base by engaging with them pre- and post-match, as well as offering interactive and sophisticated viewing experiences as the match itself unfolds. The communal nature of sports-watching means that viewers want to participate in engagement through a variety of mediums, be it fantasy league football, social media or access to extra facts and stats about their team. Currently, internet streaming businesses are based on a pay-per-view model, meaning the ability to create a narrative over a longer period of time is restricted.”

“Despite the obvious challenges for a company entering a new arena, Amazon undoubtedly has the confidence to add huge value to today’s live sport experience. It is steadily building its sports portfolio, with NFL and tennis already part of its offering. Amazon has also cleverly taken advantage of its ability to easily and cost-effectively offer several simultaneous matches by buying a package that includes the right to make available a full round of live Premier League games, which doesn’t work commercially nor operationally for traditional TV scheduling patterns, some may argue that this package was designed with a tech giant in mind at the outset to allow the Premier League to broaden its commercial appeal.”

“Clearly, traditional broadcasters and content owners will be sitting up and taking note – Amazon has fully arrived into the sports arena, disrupting the media landscape and propelling it into a new era of internet-driven TV for live events. Sky and BT Sport must surely look to consider what their strategies should be for future Premier League rights deals so that they can compete with what could potentially be an unstoppable force in the shape of Amazon.”

According to David Mercer, Principal Analyst at Strategy Analytics, the move is strategically significant as Amazon is the first player to break the Sky/BT stranglehold since 2013, and it will be the first to broadcast games only through an internet streaming service. “While Amazon will be showing only 10 per cent of live games each season this time round, it sounds a warning that Sky and BT cannot afford to be complacent during the next rights battle in 2021.”

“Amazon already has extensive technical experience of streaming live Premier League games through its partnership with Sky’s NOW TV platform, so we don’t expect to see major technical issues when it starts using Prime Video for live broadcasts. Amazon does have work to do, however, when it comes to delivering the sort of high quality TV sports production which Sky and BT are known for.”

“From a consumer perspective this could be seen as creating more complexity and added costs, especially for football fans who don’t want to miss any games. There will be some fans who will pay for a monthly subscription to Amazon Prime just to watch a few extra games, and we may well also see an uptick in free trial subscriptions prior to each of Amazon’s Premier League fixture blocks.”

“This isn’t the first time Amazon has made a play for streaming rights – last year winning the bid to stream live NFL games, as well as outbidding Sky on the ATP World Tour,” notes Garrett Goodman, VP of Business Development, at video creation platform Wochit. The integration of Premier League matches for Prime customers was the next natural step in Amazon’s climb to sports-streaming dominance.”

“With each addition and integration into their streamed and owned content, Amazon is building its credibility within live sports broadcasting. English Premier League football is among the most lucrative and with Sky and BT both bidding for the rights, what Amazon’s win tells us is that the future is here, and it’s online.”

“Viewership is down across traditional mediums – like TV – and Amazon clearly understands the value of increasing its Prime offering. Now customers can watch their favourite teams across devices, making it easier to catch the latest updates on the go. As they continue to assert their value with sporting audiences, I believe we’ll continue to see Premier League owners making the move to partner with the online giant.”

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