Incoming CEO Andy Jassy Could Extend Amazon’s Sports Reach
Last week, Amazon founder Jeff Bezos announced in a letter to employees that he will be stepping down as CEO at the end of the second quarter (he will transition into the role of executive chairman). Replacing him will be Andy Jassy, a long-time lieutenant who has run Amazon Web Services (the company’s cloud computing division) since its inception.
It has long been speculated—due to cord-cutting and the more than $40 billion in cash and marketable securities Amazon has on its balance sheet—that the company would become a serious challenger for live sports rights. But to date, Amazon has done little more than dabble in non-exclusive (see: TNF) and/or limited packages with little competition (think: EPL games on bank holidays). With a sports-minded chief executive set to take over, it’s reasonable to wonder if the e-commerce giant is finally on the precipice of acquiring a full slate of exclusive, elite, tier-one rights.
Our Take: Despite rumored interest in acquiring an NFL team, Bezos has never been known to be a big sports fan. By contrast, Jassy is a minority owner in the NHL’s Seattle Kraken and is said to be an “avid sports fan.” While it’s anything but certain the incoming CEO will be more aggressive on media rights acquisitions (Amazon declined to share details of his plans), Hedgeye global retail analyst Jeremy McLean says, “On the margin, it definitely makes sense” that they would be under his leadership. Jassy recently told NFL Commissioner Roger Goodell on a 1st and Future panel that he views sports as a tremendous platform for storytelling.
The toughest challenge Jassy will encounter should he wish to pursue exclusive, elite, tier-one rights is turning a positive ROI on the deal (forget the leagues’ reach concerns for a second). The packages are costly (think: billions of dollars) and remain difficult to monetize over-the-top. Remember, Amazon doesn’t operate as a traditional broadcaster. The company uses sports rights as a means of attracting Prime members.
None of the three analysts/consultants we spoke to felt Jassy would quickly shift gears on the exclusive tier-one rights front. Amazon has never confirmed that it’s video efforts to date have successfully helped the company acquire or retain Prime customers. McLean says, “It makes more sense to continue making smaller [less costly acquisitions] that can bring people into their ecosystem.” Once in the ecosystem, Amazon can begin to capture a share of the consumer’s wallet.
While McLean doesn’t envision Amazon involved in a bidding war for exclusive big four rights, he does believe Jassy could be the “change that amplifies Amazon’s involvement in sports” and predicts the company will increasingly use sports as a marketing vehicle moving forward (think: AWS Next-Gen Stats within games).
He also suggested the company could boost its sports sponsorship spend. “Regulatory action would be the biggest growth impediment [the company faces],” McLean said. “So, the more the company can connect with the general public and look like a good corporate citizen, rather than just a big tech company making a ton of money, [the better].” One of the ways Amazon may be able to “sports-wash” its image—and connect with the consumer on a more personal level–is to put its name on a sports venue (and associate the brand with the local team). It should be noted the company bought the naming rights to the hockey venue in Seattle as part of an effort to promote climate change awareness.
Sportico’s Eben Novy-Williams recently wrote that Amazon’s first-of-its-kind retail partnership with Tottenham represents a “new level of interest from [the company] in licensed sports merchandise.” While it’s possible –if not likely– the company will continue building out its sports licensing and distribution business under Jassy, McLean reminds that it’s not a particularly large opportunity for Amazon. “Even if they took 50% of [Fanatics’] business, it’s not going to be a big needle mover for them.” Fanatics did “just” $2.5 billion in revenue in 2019. Amazon reported $36.3 billion in 2019 EBITDA.
Amazon has been clear that the company’s goal is to maximize absolute long-term cash flow. Assuming that remains the focus under Jassy (as expected), it’s not unreasonable to suggest the e-commerce giant could also at some point look to take ownership in an upstart sports league. “There’s definitely some big potential money there,” McLean said. Of course, that doesn’t necessarily mean traditional sports. “The spot where they have a leg up is in esports.” Remember, the company owns the live streaming platform Twitch, he added, a company with a “huge following and [one that] drives huge engagement amongst viewers or consumers in the gaming world.”
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