Sportico’s Eben Novy-Williams reported on Friday that Amazon was finalizing a ‘first-of-its-kind’ partnership with Tottenham Hotspur Football Club that will see the English Premier League side build out a store on the e-commerce platform. The launch of the digital storefront was scheduled to coincide with yesterday’s (8/31) release of a new Prime Video documentary series focused on the club’s 2019-2020 season (All of Nothing: Tottenham Hotspur). Tying e-commerce to media content is nothing new for Amazon (see: TNF and the NFL Fan Shop). In fact, Lee Berke (President, LHB Sports, Entertainment & Media) said the two arms of the business “are inexplicably linked; content drives retail sales, and retail sales drives content usage and stickiness on the site.” But the sports media consultant suggested that the decision to do so at the team level indicates the company is “getting more serious about buying both live [broadcast] rights and retail rights.”
Our Take: Despite Amazon’s omnipresence in the e-commerce arena, the Seattle-based retail giant has never been a significant player within the sports vertical. As one high-profile venture capitalist with a portfolio heavy in consumer and commerce companies said, “They have no presence in the premium sneaker business that you are seeing exploding, on the likes of StockX and GOAT. They have no direct [team or league] licensing deal,s and Nike and Lululemon don’t sell directly on their platform” (Nike no longer sells products on Zappos, either). But that seems to be changing. “If you just connect the dots (think: naming rights for Climate Pledge Arena, stake in YES Network, TNF rights), they’re starting to build a rather robust sports portfolio [in the U.S.], signaling they’re much more interested in the space than they were just a couple of years ago,” he said.
Amazon’s rising interest in sports is about gaining access to a sizable audience of passionate consumers. “If you’re a supporter of a team or a fan of a league, you’re going to watch the content and buy the merchandise,” Berke said. It’s also about driving Prime subscriptions. The VC explained, “If Amazon can increase wallet share by linking content to commerce and use those profits to increase their Prime memberships, [sports rights become] a low-cost acquisition tool.”
Amazon has taken a cautious approach to sports rights acquisition thus far. In fact, the company’s most extensive broadcast pact to date (at least with a U.S. sports league) is their recently announced three-year deal for the regional broadcast rights to all non-nationally televised Seattle Sounders games. But Berke said not to interpret recent deals with Seattle and Tottenham as an indication their focus is limited to team-specific and/or regional deals. “You look at the upcoming NFL [rights] deals and Sunday Ticket is [going to be] available,” he said. “It sure seems like Sunday Ticket is the type of product that would thrive on a streaming platform.”
As Novy-Williams mentioned, Amazon’s move into licensed sports merchandise could have ramifications for Fanatics. With unparalleled data-capture abilities and reach, Bezos and Co. certainly have the capability to cut into Fanatics’ market share—particularly if the plan is to increase spending on retail licensing rights. However, it seems premature to suggest that is their end goal. Fanatics generates +/- $2.5 billion per year in revenue. By comparison, Amazon is raking in +/- $280 billion per year. The VC we spoke to explained: “There’s no way that Amazon is only looking at [the team-branded site model] as a GMV for sports merchandise. It has to be part of a broader strategy to grow the company’s presence in and around sports”—which would lead one to believe that broadcast rights acquisition is where the company is headed.
Of course, if Amazon did decide to pursue licensed sports merchandising, they are large enough and have enough diversified revenue streams to take the gross margin out of Fanatics’ business (by increasing the cost of licensing rights). Doing so would make it difficult for Fanatics to compete and in the process cap the value of a company they might someday like to acquire. That’s certainly in the Amazon playbook (see: Zappos and Quidsi). While Fanatics’ low-margin licensed sports merchandising business may not be particularly exciting to Amazon, their robust consumer database would certainly be a valuable tool in determining which media rights the company should bid on. Remember, their approach is “proprietary. They’re looking for the teams and properties that drive usage, stickiness and sales,” Berke said.
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