A billion dollars gets you one of the most popular programs on television. It also signals your ambitions in the future of the medium.
As part of the new media rights deals that the National Football League revealed Thursday, Amazon. com Inc. will make its Prime Video service the new home of “Thursday Night Football” and its coveted commercial time, taking over from Fox Corp. by 2023.
The pact is by far Amazon’s biggest play to date in streaming TV, with the company paying an average annual fee of around $1 billion for the rights to the games.
But having worked its way to third place in the digital advertising business, chasing only Google and Facebook, it is a move that could help Amazon secure a commanding position in the future of TV ad sales.
Amazon said adding exclusive NFL games will encourage people to sample its original content. But as pandemic lockdowns turbocharge the growth of streaming TV, the heir apparent to traditional TV’s $70 billion ad market, Amazon also has been striving to expand its streaming offerings for marketers.
It has struck deals to put IMDb TV, its free and ad-supported streaming service, into more homes; ordered a spinoff of one of its most popular Amazon Prime series, the detective drama “Bosch,” for IMDb TV, along with commissioning other original content for the service; and is testing retargeting Amazon.com shoppers with display ads reinforcing the commercials it showed them in streaming TV.
Its moves have helped expand Amazon’s U.S. ad-supported streaming footprint to more than 55 million monthly active viewers as of January, up from 20 million a year earlier, said an Amazon executive, who was provided by the company on the condition that the executive wouldn’t be named.
Amazon still lags well behind the streaming-advertising leader, Walt Disney Co. ’s Hulu, and a more direct distribution rival, Roku Inc. But the vast consumer data it owns as a result of its e-commerce business could boost its ambitions in streaming TV.
Amazon’s streaming-TV ad sales grew faster in 2020 than its more-established ad segments such as search and display, albeit from a much smaller base, according to a person familiar with the company’s ad business. Streaming TV now comprises roughly 15% to 20% of two top ad-buying agencies’ spending with Amazon, executives at the firms said.
The business includes ads Amazon sells on its own streaming services, such as IMDb TV; ad inventory it sells in other apps it carries on its Fire TV platform; and ad sales rights for live sports it already carries. That includes simulcasts of “Thursday Night Football” that are part of an arrangement that precedes the new deal between Amazon and the NFL.
Advertisers, meanwhile, are buying more in streaming TV, especially on internet-connected sets, where U.S. ad spending will total nearly $13.41 billion this year, up from nearly $9.03 billion in 2020, according to research firm eMarketer.
“Marketers who are selling products on Amazon now have a different avenue to reach consumers outside of Amazon.com’s e-commerce platform,” said Sal Candela, president of U.S. investment at Omnicom Media Group, the media services division of Omnicom Group Inc. “It’s generally more advantageous that they have an opportunity through video, and the big piece of glass in their living rooms.”
One of Amazon’s biggest challenges is offering enough high-quality programming to capture more ad spend.
It is trying to turn its Prime Video, its mostly ad-free subscription service, to its advantage in the ad wars. Beyond expanding its previous, more limited rights to simulcast “Thursday Night Football,” in which Amazon sold some of the ad time, and the announced spinoff of “Bosch” for IMDb TV, it is considering other IMDb TV offshoots of Prime shows.
It also has explored bringing to IMDb TV past seasons of original Prime series like “The Marvelous Mrs. Maisel.” There are no immediate plans for that to occur, the Amazon executive said.
Last year, Amazon also established a dedicated team within its Amazon Studios unit to produce original programming for IMDb TV, with plans to release about a dozen titles this year, according to the Amazon executive.
“IMDb TV right now is mostly aggregating other people’s content—in terms of what’s unique, there is very little at the moment,” said Susan Schiekofer, chief digital investment officer for the ad-buying giant GroupM, part of WPP PLC. “Should they add more originals and other high-quality content, that would give them a bigger inventory pool to offer.”
It has other assets as well. Amazon has told ad buyers that they would be able to bundle inventory from its Twitch video service with other streaming-TV ad inventory within Amazon’s ad-buying tool later in 2021, people familiar with the matter said. Currently, Twitch inventory is available separately from other supply sources.
Amazon has been building its streaming business in other ways. Its 2019 streaming carriage pact with Disney, for example, let it package and sell some Hulu ad inventory for the first time, people familiar with the matter said.
And in recent months, Amazon has expanded IMDb TV’s distribution to Roku, Google Chromecast and Android TV devices. IMDb TV will be available on all major streaming devices by the end of the first quarter, the Amazon executive said.
“ ‘Amazon went from nothing to something pretty quickly.’ ”
Amazon doesn’t break out its streaming-TV ad revenue, which makes it difficult to compare the tech giant with others.
In streaming TV, Amazon’s most direct point of comparison is Roku. Amazon has become the second-biggest streaming-TV hardware provider in the U.S., accounting for 33% of devices in households in the third quarter of 2020, behind Roku at 38%, according to research firm Parks Associates.
But the gap is greater when it comes to streaming-TV ad revenue: In 2020, three top ad-buying firms spent twice as much on Roku than Amazon in streaming TV, according to senior executives at those firms. And Hulu is far ahead of both, receiving 10 times as much in ad spend as Amazon in the category, the senior executives said.
“Amazon went from nothing to something pretty quickly,” said David Campanelli, chief investment officer at ad agency Horizon Media Inc., referring to Amazon’s arrival as an ad seller in streaming TV. “Spending takes a little while to catch up.”
Midway through 2019, Amazon was on pace to book $100 million in streaming-TV ad sales for that year, the person familiar with the company’s ad business said, a number that likely grew by a substantial amount in 2020 as its inventory grew and overall streaming-video viewing rose during the pandemic.
Amazon is working on ways to use its more established ad businesses in its favor. It is testing a so-called retargeting program that would let marketers put follow-up display ads in front of Amazon.com audiences who previously saw their ads on IMDb TV, for example, the Amazon executive said.
It is even trying to turn its streaming inventory into an asset, framing the chance to buy it as a reward.
Another ad agency executive, who spent about $20 million on Amazon ads in 2020, said last year was the first time he included streaming TV in his Amazon buys. Amazon pitched it as a new option available to his clients if they spent more in total.
“The partnership with them includes, as part of our overall spend targets, what ‘cool’ things we get if we do,” he said.
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