Netflix Approach to Live Sports Rights: Balancing Engagement and Economic Justification

Netflix continues to explore a strategy regarding live sports rights, reaffirming that while sports content holds a place within its offerings, it remains a minor segment of the overall business.

During its Q2 earnings call, co-CEO Ted Sarandos reiterated this position, even amidst heightened competition in the media rights landscape, exemplified by reports of Apple’s leading bid for Formula 1 rights at an estimated USD150 million (AUD230 million) per annum.

Despite the availability of properties like UFC and MLB, and the potential entry of NFL rights into the market, Netflix’s strategic focus appears firm.

Netflix Strategy on Live Sports Acquisition

Commenting on Neetflix’s perspective on live sports, Co-CEO, Sarandos said: “Sports are a subcomponent of our live strategy, but our live strategy goes beyond sports alone.”

He explained that the streaming platform is primarily inclined towards securing “ownable, big breakthrough events” that resonate significantly with audiences.

Sarandos further emphasised that any investment in sports must also be practical, indicating a disciplined financial approach to rights acquisition.

The platform previously broadcast the Jake Paul-Mike Tyson fight, an event designed for broad appeal and viewership.

Furthermore, it holds a substantial 10-year, USD5 billion (AUD7 billion) agreement for the rights to WWE’s “Raw,” which offers consistent weekly live programming with a dedicated global fanbase.

Looking ahead, Netflix is positioned to exclusively host the FIFA Women’s World Cup in 2027 and 2031, aligning with big global sports moments that offer significant, contained viewership opportunities.

Expanding Global Footprint and Production Strategy

While the bulk of Netflix’s live sporting events has historically been U.S.-centric, Sarandos signalled the company’s intention to enhance its live event capabilities globally. This indicates a potential expansion of its “breakthrough events” strategy into international markets.

Regarding production, there are plans to bolster in-house capabilities, though co-CEO Greg Peters expressed a pragmatic view, noting that leveraging existing production partners remains advantageous.

Peters cited collaborations with renowned producers like CBS, responsible for Netflix’s NFL games, saying: “We’re just as likely to continue to use partners with existing production infrastructure and work to make sure that those productions are bespoke and they feel like they could only be on Netflix.”

Financial Performance and Fan Engagement

During this quarter, Netflix reported that out of 200 billion hours of total viewership, live events represented only a “relatively small” portion.

However, Sarandos highlighted the significant impact that live programming has on audience engagement, acquisition, and, potentially, retention, remarking: “Not all view hours are equal.”

while live sports may not contribute a large volume of total viewing hours, their strategic value in generating discussion, driving sign-ups, and fostering platform stickiness is considerable.

In conclusion, Netflix surpassed Q2 projections, reporting a 17.3% increase in year-over-year revenue to USD 11.08 billion (AUD17.09 billion).

The company revised its full-year revenue guidance upward, now anticipating earnings between $44.8 billion (AUD68.8 billion) and $45.2 billion (AUD69.9 billion), an increase from earlier forecasts.

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