In Amazon’s earnings report Tuesday, the web giant reported that its Amazon Web Services generated $19.7 billion during the company’s second quarter. However while AWS accounted for 16.24% of overall revenue, one analyst says he thinks another area of the business is set to dwarf that in the future.
Nick Jones, an equity research analyst at JMP Securities said in an interview, “When you see some of the bids around, some of the NFL, some of the other ad-based connected TV content they’re going after, there’s a long runway to grow their advertising business. That could be very, very profitable, potentially more than the AWS business longer term.”
Amazon is already beating Wall Street estimates with its advertising revenue, generating $8.76 billion in the second quarter.
Jones says he is basing his estimates on an assumption that Amazon Prime Video will successfully transition into broadcasting live sporting events. Amazon already inked a deal to broadcast the NFL’s Thursday Night Football this season for the first time. The company’s $1 billion bet on the NFL will first air on Sept 15, and will involve 15 regular season games.
Dave Fildes, Amazon’s director of investor relations, said during an earnings call Thursday, “We’re obviously excited about Thursday Night Football and Amazon streaming TV ads, capabilities that we’re going to continue to work with these partners and work with our own kind of technology capabilities to keep building out.”
Jones says the potential for growth in advertising is immense, adding, “We see advertising as a real opportunity for the business long-term. It doesn’t get a lot of attention when you see some of the bids around some of the NFL nights, some of the other free TV and ad-based connected TV content they’re going after.”
Amazons NFL deal is for 11 years, but viewed overall, it appears just a single move in a much broader plan to get into the streaming of live sporting events. The company has also inked a deal for Champions League soccer streaming in the UK, and is looking at more football streaming rights.
Amazon has also thrown its hat into the ring with other tech giants like Apple (APPL) and Google (GOOG) seeking to gain NFL Sunday streaming rights starting in 2023. It is expected that will cost around $2.5 billion per year.
But it is not lacking in competition. Apple, which already had streaming rights to Friday Night Baseball, just bought 10 years of rights to Major League Soccer for $2.5 billion.
However if Amazon can gain enough sports viewers as Prime members, it is possible not only will advertising come to dominate revues, those sports fans may become customers of other services of Amazon as well, benefiting the company’s entire business model going forward.
