Netflix has resisted forking over the billions its competitors have for live sports. But as the frontrunners of the new television age, the streaming Goliath continues to be perilously picky when bidding for sports rights and may live to regret its patient approach.
It watched from the sidelines this month as Paramount spent billions to become a home for fight fans. Meanwhile, Disney and ESPN established themselves as a favored partner to the world’s largest sports entity through an equity deal with the NFL. These deals continued a realignment in how sports fans will spend on streaming. Outbid or overlooked, Netflix had no say.
The streamer established world dominance by flooding content to its subscribers before legacy media caught on that audiences were moving online. Scrolling Netflix became a habit, like flipping cable channels or the pages of the morning newspaper. More than 300 million subscribers later, the streamer has earned the right to operate as a frontrunner. Its approach to live programming has been to target big events, whether that be a Chris Rock comedy special, NFL games on Christmas, or a John Mulaney late-night variety show. A regular slate of live sports doesn’t fit that mold. So Netflix is choosy. Its name comes up in most sports rights rumors, but it hasn’t made a major deal since the NFL Christmas deal last year.
Depending on their size, streamers make two kinds of deals. One is best seen in Paramount, blowing away the UFC this month. Flush with new cash after a merger with Skydance, the company wanted to grow its streaming service quickly. So it acquired rights to a popular, growing league and made the service a must-have for millions. The other, newer type of deal is more focused on advertising.
Netflix said in its latest earnings call that it expects to double advertising revenue this year. Simply by migrating subscribers from the more expensive ad-free tier to the cheaper ad tier, Netflix is seeing huge gains. When that growth slows, sports provide a more valuable video product against which to sell more expensive ads.
This is how you explain Netflix’s patience. Unlike Paramount or the new ESPN service, the streaming power doesn’t need to spend billions to drive subscribers. As a more mature business, Netflix can be more selective.
But where Netflix should be concerned with growth is in total usage and time spent. According to the Nielsen Gauge, 8.3 percent of monthly TV viewing came on Netflix this past June. That number makes it by far the most-watched streaming entertainment company, but it is losing ground to YouTube and failing to create distance against legacy companies like NBCUniversal, Paramount, and Disney. Netflix makes money regardless of how much its subscribers watch, but as competitors stockpile sports inventory and likely increase watch time, Netflix risks becoming more susceptible to cancellations and “churn,” or fluctuations in subscribers based on content offerings.
Meanwhile, not every sports rightsholder wants Netflix. In a podcast episode reacting to the Paramount and ESPN deals this week, Puck’s John Ourand remarked that some leagues (like the USGA) aren’t “ready” to go to streaming and hide behind a digital paywall. This marks a shift from the early 2020s, when every league was seen as rushing to secure the big payday and future with streaming. If this holds, it adds even more pressure for Netflix to take the deals that are there.
Other services are also becoming more vital to people than Netflix. Paramount just made itself vital to UFC fans. Disney and ESPN are integral for any sports fan, given that they own championship events for the WWE, college sports, hockey and basketball. If you follow Premier League soccer, the NBA, or the Big Ten, you are likely to want Peacock. Add in Amazon for the NFL, NBA/WNBA, and NASCAR.
As Netflix cedes sports rights territory to these competitors, it could also be slowly ceding brand loyalty and familiarity. These other platforms have nowhere near the volume of content that viewers can be funneled to from sports games, but it’s dangerous for Netflix to allow people to spend so much time elsewhere.
Who is Netflix vital to? Who really needs Netflix? Sure, Wednesday, Stranger Things, and Squid Game are huge hits. It would be foolish to say that those shows don’t have as much subscriber gravity as sports. But the UFC has a big numbered card each month. The WWE has 10 “premier live events” each year. Premier League soccer lasts from August to May. Over time, more people may begin to make Paramount+, Peacock, or Disney+/ESPN a habit in the same way Netflix became one for them a decade ago.
With less time spent watching traditional television (or going out to pass the time in public spaces), audiences are willing to spend plenty of time and money on multiple streaming services. Just don’t expect Netflix to cede any ground willingly. The best way to keep its spot on the perch is to fight sports fire with sports fire.
Like the rest of the sports media world, Netflix could simply be looking ahead to 2029. That’s when the NFL can opt out of most of its broadcast rights deals, and the most valuable inventory in media will once again hit the market. If Netflix pays up to get a full, recurring package of NFL games, look out. Earlier this year, chief content officer Bela Bajaria indicated the Sunday games would be in Netflix’s crosshairs in a potential negotiation with the NFL. That’s exactly the kind of package that would not only wring even more subscribers out of the U.S. but also drive time spent and advertising revenue.
Perhaps the bet that Netflix is making, then, is that no one can catch up in the next three to four years. It certainly took Netflix longer than that to go from upstart to winner in the streaming wars. They have at least a 100 million-subscriber head start on every other service. They also have a head start in the sheer amount of content available to subscribers compared to rival platforms. It is stark to explore a smaller service compared with the seemingly never-ending scroll of Netflix.
Less predictable than that subscriber and content cushion is the attention of audiences. Even in this media environment, sports remain the best bet for attracting and retaining users. NFL Christmas GameDay and the Home Run Derby aren’t getting it done. To remain the king of streaming in an age where all media consumption happens on these platforms, Netflix needs sports. The longer they wait, the more time they give their customers to turn elsewhere.
The post Netflix can’t afford to be picky about live sports for much longer appeared first on Awful Announcing.