Tech: Amazon has ambitious advertising plans for its NFL streams (AMZN)

Amazon aims to charge $2.8 million for ad packages during the NFL games it will stream in the coming season

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Amazon aims to charge $2.8 million for ad packages during the NFL games it will stream in the coming season, according to Reuters, citing people familiar with the matter.

Amazon initially paid $50 million in April to the NFL for the rights to stream the 10 Thursday night games.

Amazon will be able to sell up to 10 30-second ad spots for each streamed game. Ads will run on the live stream, while local ads will appear on network TV. As a part of its ad package, Amazon has offered to run ads for buyers on its e-commerce website. Live-streamed games will be available to Amazon Prime subscribers.

As consumers continue to cut the cord, live sports are moving to digital platforms, which could bode well for Amazon’s aim to sell its ad packages. Here's how the e-commerce giant could see success:

• The price of Amazon’s ad packages is relatively in the middle of the pack, when compared with Twitter and TV ad prices. Twitter, which streamed NFL games in the 2016 season, charged advertisers roughly $2 million to $8 million for ad packages. TV networks NBC and CBS charge roughly $550,000 to $590,000. Assuming Amazon can sell at $2.8 million, the company would be able to recoup its $50 million investment with roughly 18 ad packages.
• Amazon’s Prime subscriber base could yield a sizable audience. Amazon has 80 million Prime subscribers in the US, according to Consumer Intelligence Research Partners. Though Twitter has over 300 million monthly active users (MAU), it averaged 265,800 viewers per minute across its 10 NFL games streamed. NBC and CBS averaged 17 million and 14.7 million viewers for Thursday night NFL games last season. Amazon would need roughly 30% of its estimated 80 million US Prime subscriber base to tune into games to have a comparable audience size to NBC and CBS.
• It could help Amazon become a dominant ad platform. Advertising is becoming a larger percentage of Amazon’s overall revenue — it generated over $1.4 billion in ad revenue in 2016, up seven-fold in four years, according to analyst estimates cited by Reuters. Though this is promising growth, it still faces strong competition from incumbents Facebook and Google, which accounted for nearly 69% of US digital ad revenue in Q1 2017.

Amazon’s offer to run ads on its website, as well as NFL streams, could justify its NFL ad package price tag. Amazon accounted for 43% of US online purchases in 2016 and is projected to account for half of all e-commerce sales by 2021. This translates to a sizeable audience for prospective ad campaigns. Leveraging this fact may help Amazon’s bid to secure more ad dollars, while ultimately helping its potential to disrupt the advertising duopoly of Google and Facebook. Moreover, the company's e-commerce expertise and user shopping data could help it attract advertisers that might otherwise choose Google or Facebook.

Robert Elder, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on the digital disruption of live sports that:

• Assesses the evolving live sports landscape.
• Examines how ESPN's business model is threatened by the decline of live sports.
• Profiles the promising new players in the space.
• Looks at what's next for legacy broadcasters.

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