Amazon May Charge $2.8 Million for NFL Ad Packages on Prime Video as It Looks to Recoup Investment

Amazon.com Inc is looking to charge advertisers $2.8 million (roughly Rs. 18 crores) for packages that include 30-second spots during the Thursday night National Football League games it will stream live to its Prime customers this coming season, two people familiar with the matter told Reuters.

The offering will be closely watched by the advertising and broadcasting industries as the world's largest online retailer and cloud-computing company makes its first high-profile push into live sports.

Amazon is paying $50 million to the NFL to stream this season's 10 Thursday night games, sources told Reuters in April. The games will be shown simultaneously on either CBS Corp or Comcast Corp's NBC, which are broadcasting five games each.

Amazon takes over from Twitter Inc, which paid $10 million to stream Thursday night games last season.

The live-streamed games will only be available to subscribers to Amazon's $99-per-year (currently Rs. 499 in India) Prime service, which includes fast shipping and free video.

Streaming NFL games - regularly the most-watched events on US television - is the latest move by Amazon to get customers to its website, in the hope they will subscribe to Prime and spend more online.

It is also a source of revenue in its own right, although it is unclear that the sale of ads will offset the cost of acquiring the rights to stream the games.

"We are offering a range of options at various price points, depending on advertiser objectives," Amazon representative Kristin Mariani told Reuters in an email, declining to discuss specific ad prices.

Package deal
For each game, Amazon can sell 10 30-second spots, one of the sources said.

The spots run on the live-stream while local ads air on network TV. Under the terms Amazon is offering, buyers also get to run ads on Amazon.com throughout the football season, which runs from September to February. National spots run by network broadcasters will also be shown on the live-stream.

The move by Amazon to offer live sports online is just one of the Seattle-based online retailer's recent moves into new markets. Last week it struck a deal to buy Whole Foods Market Inc for $13.7 billion, its biggest deal to date.

Amazon's deal with the NFL is a potential challenge to rival Netflix Inc, the world's leading video streaming company, which has so far not ventured into live sports.

It is not clear if Amazon will be able to sell the ads at the intended price, or will be able to make a profit from them. Amazon has traditionally prioritised growth into new markets over profitability and has not shied away from pouring money into new ventures if only to learn about the area.

Its pricing appears to be lower than Twitter's, which charged advertisers $2 million to $8 million (roughly Rs. 12.9 crores to Rs. 51.6 crores) for packages of ads that included the games as well as spots on NFL highlights, according to media reports.

Amazon's ad packages are higher than the $550,000 to $590,000 that NBC and CBS typically charge for their on-air national ads, according to industry sources, although Amazon is also offering ads on its website as part of the deal.

How many viewers will watch the live-streamed games on Amazon is an open question. Amazon does not publicize its number of Prime subscribers, but analysts estimate more than 50 million.

By comparison, Twitter has more than 300 million monthly users, but only a small fraction of those watched its live-streamed games last season. NBC and CBS averaged about 17 million and 14.7 million viewers for Thursday night games last season, respectively.

Advertising is a small but growing part of Amazon's $136 billion in annual revenue last year. Although the company does not disclose figures, its sponsored listings advertising business took in $1.4 billion in revenue in 2016, up seven-fold in the past four years, according to Barclays analysts.

© Thomson Reuters 2017