Mega-cap tech companies enter sports arena
Some of the biggest technology companies are jumping into sports, paying billions of dollars for the rights to broadcast games on their streaming services.
The players include Amazon, (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Apple (NASDAQ: AAPL) and Meta Platforms (NASDAQ: META). Sports investments offer these companies some opportunities for profits, though not huge ones.
Sports events represent one of the few areas where broadcasters can present live content, providing bountiful ad sales possibilities. And the events are popular among video viewers. A whopping 93 of the 100 top-rated TV broadcasts in 2023 were NFL games.
But competition is fierce in sports broadcasting, with names such as Disney (NYSE: DIS), Fox (NASDAQ: FOXA) and Comcast (NASDAQ: CMCSA) also in the fray. As a result, prices for broadcasting rights run to billions of dollars per year.
Branding may be a priority
The tech companies’ move into sports broadcasting may be as much a branding play as a quest for direct profits. And given the investments’ small size compared to the companies’ cash reserves, profitability may not really matter.
Amazon is the biggest mover of the bunch. It’s paying $1.2 billion per year to provide NFL Thursday Night Football on Prime Video, and another $100 million to show a game on Black Friday, the day after Thanksgiving.
Black Friday, of course, is a key shopping day, so Amazon may be able to drive football viewers to shop on its site. Amazon said customer engagement with interactive ads rose 10% on this year’s game from the 2023 game.
The company’s NFL coverage has played a role in driving fans to pay for Prime, says Michael Galatioto, senior vice president at GAMCO Asset Management, who focuses on sports investments.
Amazon is ‘playing the long game’
Next year Amazon will start airing NBA and WNBA basketball games at a cost of $1.8 billion per year. And it has a deal to broadcast local NBA, MLB baseball and NHL hockey games.
“Amazon has pushed all its chips in: it’s playing the long game,” Galatioto says.
As for Alphabet, its subsidiary YouTube is paying $2 billion a year to broadcast NFL Sunday Ticket, which allows fans to watch games played outside their home market. The platform also shows NBA and MLB games.
Apple pays $250 million a year to offer MLS soccer and $85 million a year to show two Friday night MLB games throughout the season. Finally, Meta shells out an undisclosed amount to broadcast some NBA and WNBA contests.
Analysts expect Apple and Meta to up their game. And one day, perhaps Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA) will join the sports party. Those two companies are flush with cash, of course, and there’s a synergy between live sports and AI. Sports are a natural fit for AI because both teams and gamblers use data to try gaining a competitive edge.
