TBI Tech & Analysis: Is Netflix gearing up for live sports?

With Netflix’s recent move into live streaming, Omdia’s Matthew Evenson explores whether the time is right for the streamer to add sports to its offering – and what barriers stand in its way.

In March 2023, Netflix produced Chris Rock’s live comedy special Selective Outrage, which was the company’s first-ever live programming event. This introduction of live stream technology could be seen as the first step toward launching live sports on the platform, but I envisage that the journey there would not be straightforward.

Netflix’s subscriber blip at the start of 2022 triggered many of its competitors to reevaluate their long-term streaming plans, which has curtailed the era of seemingly bottomless spending on content across the market. As more markets have approached saturation, a simplistic “more spend, more subscribers” approach no longer produces the results it perhaps once did.

Adding live sports would open Netflix up to some diehard sports fans who are not already subscribers, which could help to increase its top-line total.

Omdia’s consumer research shows that sports “super fans” are more likely to churn and resubscribe to a video service than non-sports fans, partly because of the seasonal nature of sports events. However, if these super fans were to join Netflix, they may see value in much of Netflix’s other content and retain a subscription during the offseason periods of their favorite sports.

Ted Sarandos

Spending redistribution

Any venture into live sports would require purchasing expensive broadcasting rights and deploying live-streaming technology that could handle millions of concurrent stream requests.

Netflix has said that its annual content spend would average roughly $17bn between 2022 and 2024, which means it would have to redistribute spend from other programming to fund any live sports venture. However, this would risk damaging one of the key pillars of Netflix’s continuing success at a time when its crackdown on password sharing is forcing many of its users to decide whether they now want to pay for it.

So lucrative are the rewards of live sports that new online video players have been making deals to get a slice of the pie over the next decade. Amazon stepped up its US NFL programming by acquiring exclusive streaming rights to Thursday Night Football NFL games for 11 years from 2022 onward. Similarly, Apple entered a deal to exclusively broadcast every match from Major League Soccer (MLS) worldwide for 10 years from 2023.

Deals such as these might appeal to Netflix, with its global subscriber base of over 230m, but even it does not have the financial prowess of Amazon and Apple. And where Amazon and Apple perhaps still depend more on the US and thus are prepared to spend billions of dollars on sports rights focused on that market, Netflix would be looking for a more global approach.

Pro-profit

Domestic sports rights in any of Netflix’s largest territories would command a high price, and it is questionable whether it is worth the effort for Netflix to pick up a smaller sport without a significant audience. Although rights deals for popular sports in smaller markets might be cheaper, these rights are only likely to appeal to a small subset of Netflix’s subscriber base.

As such, a move into live sports streaming in the next few years seems unlikely for Netflix. “We’re not anti-sports; we’re just pro-profit,” said Netflix’s co-CEO Ted Sarandos at the UBS Global TMT conference in December 2022, which is a concise summation of the company’s current position. But having reversed its once steadfast refusal to carry advertising on its platform within the last year, Netflix’s potential venture into live sports will likely remain in conversation as the market evolves further in the coming years.

This piece was taken from Omdia’s Media & Technology Digest – June 2023, which is available to read in full here.