Amazon Prime Video, owned by e-commerce giant Amazon.com, Inc. (NASDAQ: AMZN), bagged the rights to livestream NBA games as part of an 11-year deal the NBA signed Wednesday with Disney, NBC, and Prime Video. Under this new deal, Prime Video will broadcast games on Friday nights, select Saturday afternoons, some doubleheaders on Thursdays, and the quarterfinals, semifinals, and championship game of the NBA Cup. However, ESPN and ABC retained the rights to the NBA’s top package which includes the NBA league finals. Amazon has agreed to pay $1.8 billion annually to gain access to streaming rights of these NBA games, which seems in line with the company’s strategy to gain an edge over other streaming platforms by spending big money to obtain the rights to popular live sporting events.

Why It Matters

Historically, the NBA has prioritized forming partnerships with traditional media companies such as major television networks. Empirical evidence reveals that TV networks such as ESPN, ABC, and TNT have shared broadcasting rights over the past. These TV networks, after paying billions of dollars to acquire the broadcasting rights to NBA games, monetized the games through advertising. With the global media landscape dramatically changing in favor of digital streaming, the NBA has decided to embrace OTT streaming with its new deal involving a multi-platform strategy that extends media rights to streaming platforms such as Amazon Prime Video. This decision will also allow the NBA to achieve its ambitious international growth objectives.

What Investors Need To Know

Bagging the rights to stream NBA games is a big win for Amazon as it allows the company to keep another step forward in its mission to offer a multi-faceted streaming platform with a focus on general entertainment and sports. Amazon’s deal with the NBA marks its biggest sports streaming content agreement to date. According to deal terms, Amazon Prime Video will broadcast these games not only in the U.S. but in international markets such as Mexico, Brazil, France, Italy, and the UK in 6 out of the 11 years, which should help the company emerge as a leading sports streaming platform on a global scale in the future. According to Bank of America analysts, this deal will help the company earn incremental revenue by charging more for Prime subscriptions and selling advertisements during games, which should help the streaming platform become profitable on a stand-alone basis. Amazon stock may also benefit from an expansion in valuation multiples as investors reward the company for diversifying its revenue base away from the e-commerce sector.

Dilantha DeSilva does not have positions in Amazon. Stocks.News does have positions in Amazon.