Amazon’s Attribution Approach To Streaming Sports Content

BY ADAM GROSSMAN

“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 steaming 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 providers for offering these channels to their subscribers.

Amazon is potentially again changing this traditional monetization model reportedly, “by bidding for broadcasting rights of Indian national team's matches and the IPL (Indian Premier League).” This follows a similar approach Amazon is using with Thursday Night Football where Amazon Prime members will be able to access the games.

Amazon has the capability to sell ads during sports competitions. While Amazon currently is estimated to have over 150 million Prime members, that it still far lower than the 328 million daily active global users on Twitter’s platform in 2017 when NFL Thursday night games were streamed on that platform. Therefore, Amazon’s potential reach right now is significantly lower, making it arguably less attractive to advertising.

However, Prime members are valuable to Amazon specifically because they are active users on the platform. Therefore, Amazon will continue to use sports content to try to increase the number of Amazon Prime members and to maximize Prime buyers’ time spent on its site as much as possible. By paying $119 per year, Prime customers will receive access to exclusive sports content while receiving other benefits such as faster shipping of products. The more frequently Amazon can get the users on the platform the more likely that Amazon can increase its revenue.

Advertisers can also 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 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 sports content such as cricket or football, a Prime customer will 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 sports content partnerships highlight a core element of how companies are determining value using our Corporate Asset Valuation Model. While Amazon is looking to increase the number of Prime Customers, it currently values sports content as a way to drive revenue from its most valuable customers. Amazon shows how focusing on driving engagement with specific customers, rather than maximizing audience reach, can be an effective way to leverage sports content.