Amazon Prime's Sports Rights Strategy

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What are the numbers and differences between acquiring live sports rights versus movies and TV shows?

We look at it in a similar way; it’s just a different scale. I guess the biggest difference is that live sport has a timeline. If we want to acquire Boxing Day fixtures now, no one's going to care that it's Boxing Day fixtures two weeks after it's there, whereas if you go and acquire The Grand Tour or Lord of the Rings, then that's going to be there for years, and people are still going to enjoy it. There isn't a long tail element to sports, but there is an instant influx of people who want to watch it, and that's probably the biggest difference. Therefore, you have to treat it quite separately and look at the business case more harshly, as these rights we're talking about cost an awful lot of money. You have to be crystal clear on where your returns will come from. When you're talking about movies and TV series, you can take a bit more of a relaxed approach because you can still earn money from those in two to five years, and with live sport, it's there or nothing. That’s the biggest difference between the two. Also, in SVOD, you can have advertising within live sport, whereas in SVOD, for movies and TV series, you can't do that.

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What was the churn like? If 100 people sign up on average, how many churned out and canceled?

Around 20% or 30%, on average; it was less for Premier League. The logic here is that people often come into the Prime base, enjoy the benefit, and then bounce because one-day shipping is not a necessity. During Christmas, it's a necessity, so there was less churn during that time. We then learned, as a business, that sports fans want more sports content, so you start to go down that slope of what else you can acquire. And as I said, these things are on three-year cycles. You buy two years in advance of actually broadcasting, so a long-term strategy comes into play.

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You'll get that granular to work out the lifetime value of, if I'm buying Champions League rights in Italy, I might acquire three million subs on Prime; I'm just making numbers up. Two million are male, and one million are female. Females normally buy 50 parcels a year, and males buy 10, and then you work out the lifetime value estimates of each.

Correct. And it's a hugely collaborative effort because each country has its own P&L, so Prime Video says, we want to acquire Champions League football in Italy, for example. With Prime Video, we can drive this much acquisition engagement and advertising revenue, and then Prime Italy, in retail, will say, we think there’s this benefit to it, which equals X. That totals how we evaluate revenue and what we're willing to bid for.

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