Netflix CEO Reed Hastings has said on several occasions Netflix will not enter the live sports content space. However, what we know about Netflix is that it is a powerhouse for content and its customers always want more content. While Hastings does not want to follow the broader business model of Amazon and sports-specific companies and streamers that broker sports distribution deals, will a time come when Netflix enters the live sports space or will the company let its competitors continue to take the lead and profits?
Netflix would be wise to compete in the sports space for three very important reasons.
First, entertainment content and talent are expensive and hard to create. As consumers continue to demand more content now and instantaneously available, the price goes up and gets pushed to the customer. That is a hard business model to sustain because ultimately, the price per customer rises to the level of cable. Without change, new business leaders will find a more efficient and cheaper way to reach consumers and consumers will follow those leaders. That means lost revenues for Netflix. Having live and “classic” replays on their platform provides for relief from creating and/or purchasing new film and television content with additional revenue opportunities (i.e., pre and post-game commercials and in-game sponsorships, essential where live sports is one of the few remaining types of content consumed in real time). Netflix should want those customers.
Second, ignoring live sports content ignores the opportunity to obtain pre-developed content Netflix only has to purchase and stream on its current or new “NetflixSPORTS” or “NetflixGAMES” platform. There is literally no development, production, etc., just purchase and stream. Netflix is also used to this model since the company purchases film and television content to stream on its platform that it does not develop as an original series or film.
Third, Netflix wants its customers to stay on its platform, so why risk having customers leave their platform to watch sports on a competitor’s over-the-top (OTT) streamer, etc. Having sports content keeps Netflix customers engaged and binging.
Assuming Netflix takes the plunge in sports content, here is how it might play out in the market place:
NetflixSPORTS/NetflixGAMES: “All Sports, No Commercials” ™
Netflix could either have live content on its existing platform or add a second, sports-specific OTT, direct-to-consumer (DTC) distribution option, while keeping its customers engaged with its products. Netflix prides itself on having no commercials, and while baseball and other sports fans are tired of long commercial breaks, especially during nationally televised games, why not offer a “no-commercial,” NetflixSPORTS/NetflixGAMES-exclusive option that charges more for live sports without commercials? This would solve the length issues, plus consumers would pay more for no commercials.
OTT DTC streamers like Amazon, Hulu, YouTube TV and soon-to-be Apple and Disney already do this for film and television content, while subscription video on demand (SVOD) and advertising video on demand (AVOD) services offer premium and advertising content options for consumers. Sports are the obvious next choice to add to those platforms. Remember, it was not long ago that cable providers missed the boat by continuing in commercial-led business models for film and television content before being mowed over by the tech giants. Now, these same cable providers, along with studios and telecom giants, cannot buy each other fast enough to compete with the tech companies who started the industry disruption.
NetflixSPORTS could be the next best thing.
Hosting Other’s Sports Content
As mentioned previously, sports content is expensive, but there are no development costs. Honestly, Netflix and other streamers would be wise to jump on sports content before the professional sports franchises (e.g., the New York Yankees/YES Network) and the NCAA to some extent, get wise and start streaming content on their own platforms, thus cutting out the middle man. Netflix has already shown a willingness to jump into the games space with some industry confusion on where that might lead, so again, why not sports?
For costs, consider this; in Hollywood it takes about $100 million to make one movie, with some reaching into the billions. That is for one movie. Amazon just paid $65 million for an entire season of Thursday Night Football (TNF) games. As part of its two-year, $130 million deal, it receives 30 games. Now, the obvious argument against sports content is Netflix prefers to own original content versus licensing it and movies that last forever versus live sports content. However, this argument is shortsighted because sports are replayed constantly and of course, the viewing audiences are so large for live content, especially in the NFL; there is significant value Netflix is not tapping into.
For example, Hulu hosted the NHL playoffs and Google’s YouTube has the NBA Finals. In Major League Soccer, LAFC and the Seattle Sounders partnered with YouTube, too. Netflix would have the financial resources to purchase content and chose how to distribute it, monetize it and determine whether to develop it beyond a typical streaming deal. Amazon rolled the cost for its NFL TNF purchase into existing Prime accounts, while it was free to its Twitch members. Hulu was charging $40 per month for a multitude of sports content, including the NHL playoff games. YouTube TV is $35 a month. If Netflix purchased sports content and excluded commercials for a premium price, it would also increase viewership because again, sports fans will pay more to skip commercials.
Replays on NetflixSPORTS / NetflixGAMES is the Answer to YouTube without the Commercials and IP Infringement
As previously noted, Netflix could offer both commercial and non-commercial live sports options. Live sports are also a huge draw. No current provider anywhere offers commercial- free live sports. The same offer could apply to replays, think ESPN Classic. Furthermore, since Netflix is a closed subscription platform, no one posts content to the Netflix platform except Netflix. This means Netflix limits its liability by controlling its platform for distribution. Imagine being able to watch infringement and commercial-free live sports content on Netflix. Viewers have also shown an interest in watching their favorite team games when they want via a record-and-watch feature. Netflix could just as well have that feature and currently does with its library of entertainment content.
As the debate regarding net neutrality continues, Netflix can jump into that debate by offering consumers options for commercial and infringement-free live and replay sports content (albeit expensive) for the purpose of offering new and different material. Continuing to charge more for expensive-to-produce film and television content is risky. It makes more sense for them to diversify their assets.
Jonathan Perelman, Head of Digital Ventures at ICM Partners and former Vice President of Motion Pictures at BuzzFeed, famously said, “Content is king, but distribution is queen and she wears the pants. It’s not nearly enough to create a good piece of content. You have to understand how content spreads across the web.” Netflix and all streamers need to take the next plunge in distribution by competing for live and replay sports content that has the opportunity to be both commercial and infringement-free.
It is also possible to envision a traditional cable provider that owns or licenses sports content to partner with a sports team or league that distributes either exclusively, or as an add-on through a steamer, to drive down costs and mitigate risk while reaching more viewers.
Will NetflixSPORTS/NetflixGAMES, in both premium/exclusive and advertising options, be available soon? Netflix CEO Reed Hastings has said no to date, but it is never a good idea to let competitors dominate a space or be at the head of change and disruption.
Like studios wanting to skip traditional distribution windows, schedules and models by going DTC for a premium price while fighting movie theaters and the Academy who argue the more traditional route is best, Netflix and streamers would be wise to buck tradition and give Queen Distribution the opportunity she has been looking for; All Sports, No Commercials streamed at your convenience for a lesser price than traditional cable.