What Does Amazon's $50 Million "Thursday Night Football" Deal Mean for the Streaming Wars?

By Keith Noonan Markets Fool.com

Amazon.com (NASDAQ: AMZN) has secured streaming rights for 10 NFL Thursday Night Football games next season, beating out competing bids from Twitter and Alphabet. The company secured the valuable sports content for a $50 million price, substantially more than the $10 million Twitter paid for last season's Thursday night games, but still a steal in comparison with the prices that CBS and Comcast's NBC networks shell out for the same content.

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The deal could have big implications for the streaming competition and highlights ways in which Amazon is gaining advantages over Netflix(NASDAQ: NFLX) and other competitors by building both narrative-based programming and live content.

Image source: Getty Images.

Why TNF on Amazon Prime is a big deal

Sports broadcasts have long been viewed as something of a holy grail for streaming services. Live sports is the most valuable content category, and it's perhaps the single biggest variable in the cord-cutting revolution.Accordingly, the inclusion of channels that broadcast NFL, MLB, NBA, and NHL games have become core parts of "skinny bundles" from DISH Network and Sonyand will also be a key component of Alphabet's recently launched YouTube TV subscription service.

Even in a year that saw NFL ratings dip roughly 8%, the league's programming accounted for 28 of the top 100 best-rated broadcasts in 2016. That's even more impressive because last year played host to the Summer Olympics, record ratings for the MLB World Series, very strong ratings for the NBA Finals, and hugely popular presidential debates.

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Taking a broader view, live sports accounted for nine of 2016's 10 top-rated prime time broadcasts. If commentary programs and award ceremonies are included, 67 of the top 100 best-rated television shows last year were sports broadcasts.

Securing 10Thursday Night Footballgames probably won't be enough for the die-hard football fan to cut the cord and subsist only on the content offerings provided by Prime membership, but it's still a big content win for Amazon and one that could open up additional opportunities for the company after 2022 -- when broadcast deals between the NFL and Twenty-First Century Fox, CBS, Comcast, and AT&T'sDirecTV are set to expire.

Amazon lags in storytelling but leads in other areas

Netflix has enjoyed a head start in the narrative content push, and between its Oscar and Emmy wins and the huge popularity of shows including Stranger ThingsandOrange Is the New Black, it's fair to say that the platform has a significant edge on that front. Still, Amazon has been making significant investments in original content and scoring wins with programs such asThe Grand Tourand films such asManchester by the Sea, and it has a couple of significant advantages over its main streaming rival that could be difference makers over the long term.

In addition to beating Netflix to the live-sports punch, Amazon has an advantage in a fast-growing category that its competitor isn't present in: esports. The company's Twitch platform, a social network for streaming video games and other content, ranks fourth in peak U.S. internet traffic and is used by half of millennial-age males. Amazon includes a premium version of Twitch with Prime membership and seems to be lined up to benefit from its leading position in the rapidly expanding video game-streaming category.

The company also gives Prime members the option to add premium channels including HBO, Showtime, Cinemax, and Starz to their subscription packages. So while Netflix is a stronger brand than Prime for streaming video, Amazon is building a more diversified offering and has the potential to benefit from its association with other premium content brands.

How Amazon benefits from streaming strength

Bringing people into the Prime ecosystem has big payoffs for Amazon. With a subscription coming in at $100 annually and including non-video features such as two-day shipping, music streaming, and access to a library of e-books, the service itself is a big loss leader for the company, but it's one that aids its overall retail strategy and has the potential to create substantial advantages.According to a study from Morgan Stanley, Prime members spend 4.6 times more than non-members on the company's online shopping platform, and membership tends to greatly improve customer loyalty.

It's probably unlikely that one single company will emerge as the winner of the so-called streaming wars, and Amazon doesn't need to topple Netflix to score big wins with Prime Video. Another recent survey from Morgan Stanley found that just under half of Netflix subscribers also have an Amazon Prime subscription, while somewhere around 60% of Amazon Prime members subscribe to the rival platform.

Looking at the competition as strictly a battle between competing video services obscures the reality of two companies that are operating with largely different models. Amazon is building a broad ecosystem, and the addition of content such asThursday Night Footballisn't just a streaming asset; it's another step toward becoming the "everything" company.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Netflix, and Twitter. The Motley Fool has a disclosure policy.