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Netflix co-founder and former chief executive Reed Hastings’ decision to step down as chairman marks the end of an era for a company which revolutionised the media and entertainment worlds.
Hastings was instrumental in the firm’s transition from a DVD-by-mail rental service into a fully-fledged streaming provider that transformed global consumption habits, upended the economic and distribution models of the film and television industry and played a major role in a ‘golden age’ of television.
For much of that two-decade streaming journey, Netflix became rich and influential by ignoring live sport. It regarded sport as too expensive, too short term, and too regional when compared to other forms of content that had a longer shelf life and that it owned in perpetuity.
Netflix once argued it didn’t need to invest in premium rights because it had no legacy business to defend, jesting it wasn’t “anti-sport, just pro-profit.”
Netflix joined MLB’s portfolio of broadcasters earlier this year (Image credit: Getty Images)
Netflix’s growing sporting ambitions
However, this stance has radically altered in recent years, with Netflix investing in one-off events likely to drive subscriptions or that straddle the lines between celebrity and entertainment. Examples include a US$5 billion deal with WWE, influencer and professional boxing bouts and, most significantly, live National Football League (NFL) matches on Christmas Day.
A more recent development has been a willingness to acquire rights in local markets, contradicting the global scalability it demands for other content. Earlier this week, Netflix snapped up the Mexican rights to the Concacaf Gold Cup and Nations League Finals international soccer tournaments for the next four years.
It also has the 2027 and 2031 Fifa Women’s World Cups in North America, airs Major League Baseball’s (MLB) season opener in the US and was the lead broadcaster for the World Baseball Classic (WBC) in Japan earlier this year.
Netflix increasingly sees sport as a powerful subscription acquisition and retention tool and as a driver of advertising revenue that helps the company diversify revenues and expand reach through a tiered subscription model.
“We are ramping up our sports events globally and local-for-local, both in volume and profile, because we bring and receive a lot of value—and, most importantly, our members receive a lot of value,” current chief executive Ted Sarandos told investors.
WBC and the value of local rights
One of the reasons Netflix has relaxed its view on local rights is because they are hugely effective at expanding subscriber bases in markets where growth has plateaued. Although there was some public discontent in Japan that the WBC was exclusive to Netflix given it was previously available on free-to-air (FTA) television and because the country doesn’t have a tradition of subscription-based sports services, Sarandos regarded the experiment as a success.
“[The WBC] was a hit,” he said. “It was the most-watched program we have ever had in Japan and the biggest global baseball streaming event of all time, with 31.4 million viewers. Events like this are important because … they drive outsized business impact and are proof that all engagement is not created equal. The WBC drove the largest single sign-up day ever in Japan, [which] led our Q1 member growth around the world and had its highest quarter of paid net adds in our history.
“It was also the first big regional live event for us outside of the US, and we got to flex a new muscle—streaming multiple games concurrently—so a big expansion of our capabilities. We were excited, the fans were thrilled, and the leagues were excited. [There is] much more to come.”
Netflix’s sporting interests would have been significantly expanded by the proposed US$86 billion takeover of Warner Bros. Discovery (WBD) given it would have included TNT Sports operations in the UK and Latin America. But acquiring an entire sports broadcaster, and a patchwork of regional and minor rights, would have been a dramatic change in strategy.
Instead, the focus will still be on major events that push the needle either locally or globally. Already flush with cash, Netflix now has an additional US$2.8 billion war chest to play with after receiving a breakup fee from Paramount, which gazumped Netflix’s offer for WBD.
Netflix looks set to acquire more sports content moving forward (Image credit: Getty Images)
More NFL and European soccer
European soccer rights are a distinct possibility. Netflix was thought to have been narrowly outbid for the Uefa Champions League in Germany, while it was interested in the global rights to the Uefa Super Cup. Reports have also suggested that it is keen on a Premier League package in the UK during the next cycle.
Less speculatively, the company has confirmed its interest in acquiring more NFL rights. The league is by far and away the most important programming on US television and just like ESPN and Fox before it, Netflix’s association with the NFL cemented its position as a sports broadcaster of note.
Netflix is considered one of the front runners for a bundle of five live games currently up for grabs, while it is said to have ambitions for both the season opener and the Thanksgiving Night game, both of which currently form part of NBC’s Sunday Night Football package.
However, with the league exercising opt-out clauses in its US$110 billion domestic broadcast deals in a bid to secure additional revenue, there is the possibility that both could be carved out for Netflix as soon as next season. With the NFL facing potential regulatory scrutiny should it move too much inventory away from broadcast television, such a compromise could be attractive.
“The NFL is a great property and delivers value as part of our total offering,” said Sarandos. “We are in discussions and think there is an opportunity to expand the relationship—within the same strategy focused on creating big events. We have learned a lot about what works and how to value the NFL and live generally over the last couple of years, and this will inform how we have those discussions and help us be even more disciplined.”
As Netflix says goodbye to a key figure from its past in Hastings, it’s clear that sport will play a crucial role in its future. But although the multi-billion-dollar hole burning in its pocket is public knowledge, Sarandos’s mention of discipline in negotiations is a reminder that Netflix has been restrained in its sporting activities in the past and won’t acquire rights – even the NFL – at any cost.
As platforms multiply, audiences fragment and media rights deals plateau, it’s time to understand what’s really going on in sports media. Join us at SportsPro London this April to learn more.