Amazon’s Big Bet on Football Is (Sort Of) Paying Off

about double what they paid before. The NFL announced a new series of long term TV deals, including a historic contract that gives Amazon exclusive rights to Thursday Football broadcast you worship during the regular season is expected to be down about three from a year ago. It's Amazon They're being blamed for this drop, as Thursday Night Football moved

exclusively to Prime Video this season. Like you heard just there, Amazon is paying billions of dollars to lure viewers away from the TV networks and onto their prime streaming service, And with the Super Bowl coming up fast, it seemed like a good time to see how that deal is panning out, because if it's a success, the way you watch football and just about any other sport is going to change dramatically, and maybe not in ways you like.

And speaking of big bets on sports, at the end of this episode, I'll chat with Bloomberg Opinion editor Tim O'Brien. He's the host of the new podcast Crash Course, and he's launching a series of episodes digging into the booming sports betting industry. But first, my colleagues Jerry Smith and Felix Gillette. They've been covering the Amazon deal and all its implications, and they join me now from New York. Jerry, maybe i'll start with you. Amazon maybe a big bet

on the NFL last September. How's that working at Well, they just completed their first regular season where Amazon had the exclusive rights to Thursday Night Football, and the ratings, you know, they were better than what a lot of people expected, but they were a lot less than what they did the year before on traditional TV. Everybody in the sports media industry was watching this very closely because,

you know, this is really a new frontier. This is the first time that you could watch America's most popular sport only on a streaming service. And there were some real challenges and real questions going into this one being can Amazon pull this off? Just from a technical standpoint, live streaming is very challenging. We've seen a lot of streaming services broadcast sports and have glitches where the stream would just completely crash and fans would miss a last

minute goal or touchdown. Amazon did not have any problems this season. They did not have any reports of the stream crashing or anything like that. So just on that level, it's a success. From a viewership standpoint, this was about a forty percent dropped from what it was the year before, when it was on Fox, the NFL Network, and Amazon. It was what's called a tri cast, where you could watch the games on all three networks. This year you

could only get it on Amazon. So there was a real learning curve for people who have for years expected to get NFL games on their TV. Now all of a sudden, you've got to teach them. You've got to download Prime video, you've got to have a Prime subscription. So there was real questions about how that would go. And I think that Amazon overall is pretty pleased with the numbers, but it was not as much as what people were watching on on TV, and and that raises

some interesting questions as well. I mean, I suppose you need to expect that, right, because if you don't have a Prime account, which is now what a hundred and thirty nine bucks a year. The chances are you're going to pay that just to watch Thursday eight football is pretty low, So Amazon kind of thinks that's gonna creep up.

Do you think that that's likely to happen? Yeah, I mean, you know, they say that there's about eighty million people who watch Prime Video, which is about the same as the number of people who are watching cable TV, in fact a little bit more. A lot of these people had to be trained to go to Amazon Prime Video

to watch the games. I know that when I was getting Amazon Prime boxes delivered to my home, they were advertising Thursday night football, and the top of the Amazon dot com home page had banner saying, you know, our first regular season games on Prime Video. Here's how to get it. It's a little bit challenging as a fan. You suddenly now if you want to flip between the game and something else, you now have to leave the app, go to your cable system, flip the channel, and go

back and forth. It's not a seamless experience like it is if you're just watching on TV. But overall, Amazon said that that first game was they saw a huge increase in Prime subscriptions. So just on that level, I think that they're pretty happy about how things went. And I think also from Amazon's perspective, they have a different business model than the TV network, So it's not, you know, just about getting the audience there and serving them advertise.

It's just bringing them into the ecosystem where you can then sell Prime subscriptions, you can hit advertisements, you can get merchandise. There's just in terms of delivering time on the app, I'd say it's a win for Amazon overall. The technology standpoint, I actually thought it was pretty easy if you were using on a mobile device. I was just like wandering in the house with my phone and you know, you could open up the Prime app or

the Amazon Shopping app. They always had it advertised prominently on their one click and you're right in. So I think for the first season, I think they probably have to be pretty pleased with how it went. Yeah, I should mention they also had a lot of help. They've got a legendary NBC sports producer, Fred Gidilli, to be the producer for these games, so they had NBC essentially doing the production for them. So if you watch there's a night Football on Amazon it looked a lot like

NBC Sunday night football games. But the point you made before about how m ZON has a different business model, I mean, I think that's what's really fascinating and a little scary for the CBS s and the NBCs and Foxes of the world, as all of a sudden, they're now competing for sports rights with these massive tech companies who have incredibly deep pockets and also have different business objectives. Apple is another company that we've seen get into sports.

They are about to start a Major League Soccer package that they won the rights for, and they had Major League Baseball games last year, And all of a sudden, you've got a company like Apple. You know, a win for them could be you buy more Apple devices. They want to draw subscriptions to Apple TV plus uh, they want to sell advertising. Amazon they want to sell prime subscriptions.

They want to sell advertising. It's just a different business than you know, ESPN, for instance, which really is trying to make up the cost of these very very expensive sports rights deals with a combination of just advertising and

cable TV subscription fees. I want to talk just a little bit more about that because one of the things you have written Jerry, is that the networks are having trouble paying for Thursday Night Football because the league would kind of give them the less interesting games and there wasn't a lot of advertising revenue or there wasn't enough. Whereas Amazon, once you're in their ecosystem, man, they're gonna push you every product under the sun, and it's like

right in front of your eyes. So they could see a way of doing it without having to get advertising. That's right. I mean this Thursday Night Football just historically, all the big networks, Fox, CBS, NBC, they all had broadcast these games at some point and they all walked away from it because they were losing money and the amount of money they were spending was they just couldn't

make it up on the viewership and the advertising. And another thing that's really important to think about with Amazon is the NFL is obviously the biggest entertainment property and all of TV, but they also want to get other rights. The NBA is a really big deal coming up, and if you're the n b A, you're really looking at what the NFL has done here where they've old long term rights to all the big broadcasters. They've also carved

out a package for Amazon. NBA is thinking about, all right, well, are we going to renew our deal with ESPN and T n T and maybe we carve out some games for Amazon or Apple as well. The NBA, I think, was looking really closely at what Amazon did with this NFL season, how many viewers they got, because I think they are trying to replicate what the NFL is going to do and potentially carve out some games for a tech company. And also Jerry, I think was fascinating to

watch this. At the same time that Amazon is, you know, making this long term deal and paying a bunch of money for the NFL thres and that rights, they're also

making other bets in this TV streaming ecosystem. They had a huge bet this fall with the Lord of the Rings prequel, The Rings of Power, and you know, I think this is the most expensive scripted TV show ever made, ultimately going to be more than billion dollars, And it's interesting to think through, like from their perspective, those two bets, one on scripted television, one on live warts, what do

you get more out of? And I would say, when you think about the risk reward of those dollars they spent The thing that's great about the NFL is even in those kind of crappy Thursday night games, like you're just guaranteed an audience is going to show up right, And a scripted show, you know, even something as big as Lord of the Rings, you really don't know ahead of time is it gonna work? Is it not gonna work?

You're competing with endless choices in scripted drama. You know, there's just one NFL, There's one game on Thursday night. They're gonna come at an exact time and place, and you know the audience is going to be there. And I just think that has huge value. And Amazon proving that they can put these games on without any technological hitches, to me, that just sends a big sign you're going

to see more of this. Felix. The last time you were on this show, we were talking about how frustrating it can be for the viewers though, when they have to remember where all their favorite shows are on all these different platforms. Do you think that people are gonna want to have all of their sports viewing atomized across platforms where they have to have individual subscriptions and passwords and user names and all that kind of stuff that

drives us crazy. Now, I don't think from a viewer's perspective, I think the ideal scenario would be to have one big bundle where everything is available, almost like it was

in the previous era of cable and satellite. But now you know, like it or not, this whole thing has been splintered, and you do you kind of have to keep it a little chart of which service you're going too for each game of the week, and I think that's inevitable in this stage where we're kind of in between these two eras, the satellite and TV satellite cable era that's kind of dimming, and then this new streaming era. I think for the time being, you're going to see

it even more splintered. From the fans perspective, I think, you know, if there's any consolation, it's probably this will be the peaks blinter era, and I think five ten years down the road, you're going to see more consolidation of these services and you'll see more of these games ending up on one, two or three platforms. Yeah. Well, if you look at what the leagues have done is they're trying to balance two things. They obviously want to

have lots of bidders. They want to get as much money as they can, but one of the things they're most concerned about is reach, and they're afraid that if they go exclusively on a streaming service that they're going to lose the reach that they got on broadcast television. So what we saw with the NFL is they extended their long term deals with the NBCs and Foxes of

the world. So you still need to get to pay TV unless you have Rabbity ears, you still got to get pay TV to watch the NFL, and then you've also got to have Amazon Prime Video. With baseball, I mean,

it was the same thing this baseball season. There were a lot of fans who were frustrated because the league had carved up these little packages of rights where Apple had some games on Friday nights, Peacock NBC streaming sir this has had a few games on Sunday mornings, and so instead of just you know, here's the entire season on Amazon Prime Video on Thursdays, you really had to like go onto the website for your favorite team and look at where all right, where is it broadcasting? Now?

Which streaming service do I need? Like, do I need to pay for this, so it's getting very complicated. I mean, another thing to think about what the league's is. We've seen some other really big sports rights deals where Amazon came in and actually made a larger bid than broadcast channels like NBC, and the rights actually went to NBC and Fox and CBS. One example is the Big Ten.

Amazon did not get the rights to the Big Ten, even though I've heard that they made a significantly larger bid than some of the networks that ended up getting those rights. We've seen other streaming services come in and

actually outbid the broadcasters. And the point is is that these sports leagues, as much as they love the idea of having a big, depocketed tech company come in and throw a big check at them, they are very concerned about the fact these streaming services don't have the tens of millions of subscribers in some cases that you still do on TV. Felix and Jerry, please stick around. We'll

keep talking after the break. Felix. Right before the break, Jerry was talking about something interesting, this tension between the leagues where they want to make a lot of money off these games, but they also want to have influence and reach and be relevant and that the streaming services don't yet have that same sort of reach. Did Amazon have to really persuade NFL to give them this deal.

Streaming services offer something that the NFL needs, which is a little bit of relief from the growing anxiety that everyone has that's in cable and broadcast television. The whole audience level is sinking, and everybody is concerned about the future. Everyone's concerned about getting young viewers, getting the next generation. How are we gonna prove that this thing is going to keep going stronger and stronger five ten years out. And I think one way of doing that is doing

these piecemeal deals with the streaming services. And you know, it happens to be a moment in the evolution of the technology where you know, luckily for the NFL, there's someone who can basically overpay for this small piece of rights as a loss leader in order to get people

to come into these services. And I think, you know, right now is an incredible time for the sports leagues and anyone with any live TV rights to sell them for more than their worth to attach platform because all of these platforms right now and streaming are going through

this evolution of their own where for the past fifteen years. Essentially, when you look at the evolution of Netflix, Netflix started off as an ad free service, right and Read Hastings, the founder of Netflix, was always very adamant, We're not going to put ads on here. People don't like when they're viewing is interrupted. We're commercial free service. That's never going to change. Well, it did change right this year.

They finally said, you know that Wall Street was losing patience with some of these streaming services, that we're losing a lot of money. Said okay, it's time for you

to start making profits. And probably the best way to start making additional revenue sources is to bring an advertising, which Netflix has done, Disney is doing, Warner Brothers, Discovery, all the major streaming platforms are now saying we're gonna have to bring an advertising and to do that you really need live programming because so many advertisers want a commercial message delivered to an audience at a particular time, and you know, with a lot of on demand programming,

it's harder to guarantee that you can get the right demographic in front of that screen at the right time. The best way to do that, by far is live programming, and the best way within live programming is the NFL. But there's a whole hierarchy and you go down from the NFL and then you get to other sports, other live performances. That's why you see Netflix now doing a Chris Rock live comedy performance. They just picked up the

rights for a live award show. They're all dabbling in it because they need this to grow their advertising business, which is another reason that you can just see this is all going to grow and grow, That's right. I Mean one thing to think about. I think there's real questions longer term about the young demographic, the teenagers, fans in their twenties and thirties, and how they're consuming sports,

if they're consuming sports at all. Amazon I mean, one of the things that they were particularly proud of with this season of Thursday Night Football that they exclusively streamed was that they had a younger audience than what was on TV, but it was still a fairly older audience. I mean, we're not talking about an average age of twenty five. I mean, these are still middle aged people

watching on Amazon Prime Video. I Mean, one thing that Amazon did that didn't get a lot of attention, they had an alternate stream, which is becoming very popular now in sports media where you have essentially a separate group of broadcast announcers. So they had these guys do perfect is, come on in, coach, come on in. They essentially do like sports trick shots. And they're huge on YouTube. A lot of people and may not have heard of them,

but they're very big on YouTube. And they did an alternate broadcast of the Thursday Night Football and I think that was an acknowledgement by Amazon that, you know, we also need to start reaching out and finding new and interesting ways to make live sports appeal to the younger audience, which is really what the advertisers will pay more for. But you know, I think if you ask any nineteen year old how are you consuming sports? They're probably watching

highlights on Instagram or TikTok or Twitter. Are they watching the live game? Are they watching a four hour baseball game with their parents on the couch. Probably not. So I think longer term, all of these broadcasters, whether it's Amazon or the traditional TV networks and the league's, how are we going to appeal to people who just don't

watch TV the way that previous generations did. Felix I guess one of the reasons why sports are so lucrative and they're able to get these big advertising dollars is that if you just look at, like, I don't know, the top ten shows by audience for a year, a

lot of them are sports. Is that right? Yeah. One of the most dramatic statistics I saw was an article from Sportco recently that looked at the top one telecasts in the United States in two thousand twenty two e d two of the top hundred were NFL games, and then you go down the list and it was like Kentucky Derby, there was a couple of NBA playoff games, that was the World Cup games. It was basically all sports.

Um and it's the one thing that's really held onto an audience in this broadcast cable ecosystem where you know, not too long ago, scripted dramas like The Walking Dead on AMC we're drawing huge audiences. People were still showing up and like, you know, want to watch their our

drama that has just collapsed. It's just cratering and that audience it's disappearing, it's not coming back, And you know, all of these giant media companies are really dependent on the prior existing ecosystem to feed them revenue and profits, and they need to hold on to whatever is there in order to fuel their growth in their investments and streaming. That puts, you know, these audiences for these live events. It makes it even that much more important because everything

else has just fallen away. Yeah, that's right. I mean, if you think about all the scripted dramas, the reality shows, they've all for the most part, I mean, they're moving increasingly to streaming. So it's it's not so much that live sports viewership is like going through the roof. It's fairly flat. It's just that everything else in the TV landscape has really declined because people expect to get it on their streaming service. We'll be right back. So if

you're the NFL, you're in this enviable position. You're on the networks and advertisers are willing to pay top dollar for this huge audience. Or you say, the streaming services, well you can't deliver us a big audience, so you have to pay top dollar and either way, the NFL gets paid. Do you think that this calculation is just going to start to move from we want relevance to we just want the highest bidder. I think it's some

point there'll be a convergence of those two things. I think if you just look at the trend lines, the percentage of overall viewing that's taking place in the old world of broadcast and cable television versus like the new world of streaming. Every year it just tilts a little bit further and further and further towards streaming. So eventually there will come a point at which the streaming audiences

will be developing. Not just the buzz of a younger audience, not just the buzz of a new ecosystem, not just you know, the ability to overpay for these live TV rights as a loss leader to get people into their platforms, but at some point they're also going to have the biggest audiences and the most viewers, and then the advertising will also follow over there is that a year from now, five years from now, ten years from now. I think that's the question that everyone's looking at, is at what

rate will this all continue to migrate? Jerry, Live sports can be a giant money printing machine, but not everyone is getting rich. You recently wrote about Diamonds Sports Group, which is the largest owner of local sports channels and they've been having a tough time. What is happening. Diamond Sports. It's a company that's owned by Sinclair, and a few years ago, Sinclair bought about twenty of these regional sports channels from Disney. So Sinclair really bought these channels at

a really bad time. This was when cord cutting was really starting to accelerate. Just to step back a little, these are local sports channels in dozens of markets across the country. If you live in Cleveland and you want to watch the Cleveland Indians or the Cavaliers, you're subscribing to a Bally Sports channel. They're called Bally Sports because

they did a deal with Bally, the casino company. But there's a lot of these channels around the country where local fans are watching their local home team through these cable channels. Their subscribers are declining because people are cutting

the cord. This is company that was under an enormous amount of debt and is now really struggling to make the interest payments on these debts because at the same time they are paying Major League Baseball, the NBA, the NHL increasing amount of money for the rights to broadcast the game. So You've got cable subscribers, which is how they were paying for these rights. Those are declining, the rights fees are going up. You're already under a mountain

of debt. And what will be really interesting, and why it's such a huge story is because these media rights payments that these sports channels pay to the league's that affects everything. That affects how these teams decide the salary cap. How much players are getting paid depends in large part on how much money they're getting from the sports channels. So it's a fascinating story that has a lot of big implications for the entire sports industry. I'm curious, Jerry,

who wins out of this. If the regional sports and networks kind of fall apart, that audience has to go somewhere, right Well, I think Major League Baseball is looking at what's happened with these channels and they would like to take the rights back. They would like to do some sort of streaming service of their own. I mean, this is a business that was relying on a certain number of cable subscribers who were paying fees to these channels,

whether you watch them or not. And then not only were they losing cable subscribers over the last few years. But then your cable provider would maybe put those sports channels on a separate tier where not everyone was subscribing a lot of people who didn't care about sports were still paying to subsidize the sports fans. And that model starting to fall apart. And I think the sports leagues

are frustrated with what's happening. They're frustrated that these sports channels are losing subscribers, and they're looking to take their local rights back from these channels and maybe do their own streaming service. Maybe they could partner with an Amazon or an Apple or somebody else. But it's the next few months are gonna be really interesting. Felix and Jerry super Bowl coming up. We're talking about football, so I would be remiss if I didn't us Chiefs are Eagles,

Eagles Chiefs. Okay, there you have it, Jerry Smith, Felix Gillette, thanks so much for coming on the show. Thanks for having me. Thanks Wes. You can read more from Jerry Smith and Felix Gillette at Bloomberg dot com and shameless Plug here. Check out the book Felix has written with John Coblin it's called It's Not TV, The Spectacular, Rise, Revolution and Future of HBO. As I promised at the top of the show, Tim O'Brien is here, my colleague and host of the new podcast Crash Course. Hey Tim,

Hey Wes. Thank you for having me. I'm so glad to talk to you about this. Tell us about Crash Course. What is the podcast all about? Crash Course is all about disruption in the business, political and social spheres, with the idea that people can learn something from those collisions. So Crash Courses will play both on a collision and

a learning moment. And so what we try to distill in each episode is an understanding of something that is epic in terms of the nature of the collision and then instructive in terms of the lessons we can draw from it. So give us an idea of some of

the episodes you've done so far. Well, you'll be shocked to discover that we launched with Elon Musk, who is is sort of the red meat repository of disruptive moments like a literal and figurative, metaphorical and actual collision in Eddy in every way, we could probably just do three and sixty five days a year of Elon Musk, but we chose to do just one. We also did an episode about the pharmaceutical companies and the COVID vaccines and

the collision between their inventiveness and their greed. We did uh I think, a wonderful episode about the turmoil at the top of Disney in the cage match for the CEO suite there. And we have a multipart episode newly launching that we're very excited about about sports gambling, the sports gambling boom. It looks at the growth of sports gambling itself. I sat at length with a very hardcore sports gambler in Chicago and sort of watched him ply his trade. Um. I sat in London with digital gum

shoes who track match fixing and corruption. And then I spend time up in Foxwoods, a tribal casino in Connecticut, to look at how sports gambling is challenging an industry that's made a lot of money for Native Americans. You know, this is such a huge issue. We did an episode recently about the UK online gambling problem and how this has just become a really bad problem for gambling addiction, and how it's now heading to the US. And I have to say everywhere I go online now the as

for online sports betting, they're everywhere. It's just taking over the internet. How they are pushing these new betting platforms and TV and probably every transit station you through to their it's wallpapered with sports betting ads. Um you know, odds now scroll across the bottom of the TV screen during sporting events. It's it's becoming really woven into our daily lives. And I think one of the things that's so important about what happened in the UK is it's

a precursor. We can learn from what happened over there, because, uh, the US has never really confronted or tried to contend with something of this scope around gambling. Yes, there's been casinos, obviously, there's Vegas. There's been you know, back alley betting for eons, but it's now been wedded to the internet. It's getting legalized. It's in kids backpacks, it's in people's living rooms, it's in people's pockets, and it's going to change how we

relate to money, sports and one another. You know, I mean doing three episodes on the subject, is that right, three of them? And I think you know, it's a narrative approach. I think it's immersive. Our listeners get to meet the people were meeting. We take them inside those people's world, and I think it's a deep, immersive dive into this phenomenon, and it's one that we're particularly proud of. But we'll still have to earn our listeners loyalty. What's

the best part about doing the podcast so far? The privilege of getting to understand why all of the crazy, destructive and confounding and inspiring and innovative people who float around us do the things they do. Tim, thanks so much for coming on and talking about crash Course. I love listening to it. I'm really looking forward to listening more. Thank you, weus thanks for listening to us here at The Big Take. It's a daily podcast from Bloomberg and

I Heart Radio. For more shows from my Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Burgolina. Our senior producer is Katherine Fink. Our producers are Moe Barrow and Michael Lero. Raphael I'm Cely is our engineer our original music, who was composed by Leo Sidrin. I'm

West Casova. We'll be back tomorrow with another big take.