Why Amazon and Netflix Made a Big Play for Sports
They're not sports
companies by any means. But the smartest companies learn fast where their
customers are heading and meet them there, with the right products to sell
them.
Expert Opinion By Howard
Tullman, General managing partner, G2T3V and Chicago High Tech
Investors @howardtullman1
Aug 13, 2024
The smartest players who
are now winning in major markets are those whose primary advantage is learning
faster than their competition--learning faster about the state of their
marketplaces and swiftly reacting in real time to the changes they uncover.
You can't be it if you
can't see it. That's why learning to manage the often-overwhelming flow of new
data now available and turning that flood into useful and actionable
information is a critical skill set in the global digital economy. Two of the
most crucial things that smart entrepreneurs are incorporating into their plans
are: (a) how to better determine and define the shifting needs and desires of
their target customers; and (b) knowing who, what and where they are actually
competing against in order to attract, win and retain those customers. The idea
is that there may be incremental and sometimes even larger openings readily
available in spaces adjacent to your current verticals seems obvious, but it's
often overlooked. Companies often ignore the chance to "slide to the side".
Surprisingly, in
many cases, the losing laggards are those who don't quickly appreciate that the
scope and scale of competition has expanded beyond their traditional
competitors to include new players, new offerings, alternative consumer
choices, and adjacent markets that are readily accessible -- merely a click
away. They're also missing changes in demand that have almost nothing to do
with their current products or services. Their typical reaction as their
revenues and profits shrink is to double down and do more of the same rather
than shift their approach and strategies to adapt to the new realities and
take a much broader view of the landscape.
Often, the main barrier to an effective response is the locked-in reluctance to
change what they've always done and what has historically worked.
The changes we're seeing
these days simply aren't the kind that you can wait out or wish away.
As more and more
foundational products become commoditized or tired, often through externalities
like changing tastes or attitudes rather than any fault of the providers, the
most exciting opportunities and accompanying profits move elsewhere in the value
chain. It becomes necessary for viable competitors to identify those new
locations and quickly develop brand extensions, responsive products, enhanced
or expanded services, and new delivery channels to meet the customers' emerging
needs and to deliver the goods when and where they're now at. You've got to be
there when the buyer is ready to buy - the markets no longer wait for providers
to catch up.
Of all things, kids'
"clothing" offers a very interesting and telling example and a very
challenging look forward for the major apparel manufacturers. Right now, tens
of thousands of game-playing teenagers globally are spending more time and money
in front of their screens styling, outfitting and branding their online gaming
avatars than they are on their actual clothing. Swifties and sneaker heads are
obvious exceptions to the rule, but suffice it to say that none of the major
luxury or sports brands (including teams) can afford not to be an active
presence in these growing virtual worlds.
This is not only because
there are serious dollars to be made in the gaming space (where the New
York Times makes more money than on advertising) by
marketing and selling this digital stuff. But also because this is a powerful
and compelling way to grab mindshare and establish brand identities in the
heads of millions of future consumers who will eventually "graduate"
into the real world.
A more major and
important shift is happening as billions of dollars are rapidly moving away
from classic entertainment vehicles and network TV toward anything and
everything that has to do with sports, gaming and gambling. There's no longer
any urgency, novelty or FOMO associated with the latest mediocre sequel,
newly-cast, oldie-but-goodie, or CG-stuffed action film filled with nobodies.
For every crazy breakout like Deadpool & Wolverine, there are
several dozen films that never even make it to a theatrical release because the
studios and distributors decide not to waste the marketing dollars on films
that no one wants to see.
Sports remain a
real-time offering while consumers worldwide have become convinced (in part
because the industry itself has sold them on the idea) that there's nothing on
television or in the movie theatres that you won't be able to see on your own
device in the very near future. NBC's amazing efforts to completely slice, dice
and fractionalize the Olympics and make everything available all day, in every
way, and over every channel was a clear glimpse of the future of the on-demand
streaming world. But the Olympics only happen every couple of years. F1 racing
has become a must-have for corporate sponsors chasing tech bros and European
soccer continues to explode as well, but these will simply be additional
content generators which will further replace and displace traditional
entertainment fare.
Amazon spent more than
$1 billion to stream Thursday night NFL games. It certainly wasn't lost on them
that in a typical, three-hour NFL game, the actual playing time is around 11
minutes. While Amazon is one of the few tech companies also still spending big
on new entertainment series because of the power of the Prime package, we're
seeing other large players like Netflix also spending vast amounts to make
multi-year commitments to carry NFL games. Even fake sports are hot:
Netflix also agreed to pay about $5 billion for the rights to WWE wrestling.
It's a fairly
fundamental calculation - you've got to go where the fans, and the eyeballs,
are spending their time. As Coach Walz would surely say: fish where the fish
are.
