Kickoff time for Netflix? What are Netflix's live sports aspirations after the NFL deal?

Countless professional sports leagues are hoping to profit from the burgeoning streaming market and deep-pocketed tech companies.

Testballon für Live-Sport-Content: Netflix hat sich erstmals NFL-Rechte gekauft. (Foto: Netflix)
Testballon für Live-Sport-Content: Netflix hat sich erstmals NFL-Rechte gekauft. (Foto: Netflix)
Table of contents
  1. "We aren’t anti-sports, we’re pro-profit"
  2. Drive to Survive, Netflix Cup, Tyson vs. Paul
  3. It might be scripted, but it’s not fake
  4. Netflix’s “bombshell” NFL Deal
  5. Irrelevant for 99 percent of sports leagues
  6. Amazon strikes first
  7. Boom time for the Bundesliga?
  8. Tearing down territorial marketing
  9. A matter of global logistics potentially worth billions
  10. Apple’s MLS Deal: a sign of things to come?
  11. NFL rights drive ad sales
  12. Peacock notches close to 3 million subscribers with a single NFL game
  13. Summary

Over the years, Netflix repeatedly went out of its way to stress how it harbored zero ambitions of entering the live sports game. In the wake of hit sports documentaries "Drive to Survive" and "Full Swing", that is clearly no longer the case. A multi-billion-dollar, ten-year contract with the WWE in 2023 was recently topped by the announcement that Netflix will air live, regular season NFL games live for the first time at Christmas 2024. How serious should we rate Netflix’s ambition as a live sports broadcaster? And what does the strategic shift mean for other international sports leagues? OMR got stuck in to get some answers from renowned international experts.

"We aren’t anti-sports, we’re pro-profit"

Netflix Co-CEO Ted Sarandos had a clear message to those thinking the paradigm streaming platform would become a relevant player in the battle for live sports rights. "We aren't anti-sports, we're pro-profit," said Sarandos at the UBS Global TMT Conference in December 2022, before adding: "I'm very confident we can get twice as big without sports."

Fast forward 18 months, the message is still clear—and exactly the opposite: On May 16, 2024, Netflix CCO Bela Bajaria released an official statement saying, "Last year, we decided to take a big bet on live — tapping into massive fandoms across comedy, reality TV, sports, and more.” That stems from the announcement of none other than the purchase of global live broadcasting rights for the NFL. "There are no live annual events, sports or otherwise, that compare with the audiences NFL football attracts. We’re so excited that the NFL’s Christmas Day games will be only on Netflix," Bajaria continued.

Specifically, Netflix will broadcast two NFL games live—and exclusively—on Christmas Day this year and one Christmas game each in 2025 and 2026. This is the first time Netflix has partnered with one of the four major US sports leagues. According to media reports, the streaming giant is paying USD 75m per game.

Drive to Survive, Netflix Cup, Tyson vs. Paul

The NFL deal is a clear signal that Netflix means business—no matter what Sarandos would have us believe. However, the sea change has been in the works for some time. The Formula 1 documentary "Drive to Survive," released in 2019, got things moving and was followed by forays into tennis ("Break Point"), golf ("Full Swing"), American football ("Quarterback") and cycling ("Unchained") in 2023, among many others. An NBA documentary with stars such as LeBron James is currently in the works.

On November 14, 2023, Netflix cut its teeth in live sports with the "Netflix Cup," a celebrity golf tournament pairing PGA professionals with Formula 1 drivers in head-to-head matchups—it’s also a continuation of its two biggest documentary successes in Drive to Survive and Full Swing. Less than six months later, in March 2024, 22-time Grand Slam winner Rafael Nadal and reigning Wimbledon champion Carlos Alcaraz faced off in the Netflix Slam, a night-time tennis tournament in Las Vegas. This summer, Netflix will broadcast a much-ballyhooed tilt between Mike Tyson and influencer-turned-athlete Jake Paul, which will take place in July in front of 80,000 spectators at AT&T Stadium in Dallas.

It might be scripted, but it’s not fake

And then there is a ten-year contract worth USD 5b with the WWE. From 2025, Netflix will take over global broadcast rights to "Monday Night Raw" as well as the rights to all WWE programs, including premium live events, outside the USA.

The WWE deal is causing a real stir in the sports media world for the first time. It is by far Netflix's biggest investment in live content and is seen by many as a clear sign that the company is finally recognizing the value of live sports as part of its programming mix. While the WWE may be more sports entertainment than actual sport, Netflix’s interest and the WWE itself are anything but contrived. In fact, the WWE has all the hallmarks of a “real” professional sports organization with weekly recurring events that offer subscribers attractive live content over a longer period of time

Netflix’s “bombshell” NFL Deal

Netflix’s stake in the WWE brings us back to the crux of the piece: How serious should we be taking Netflix’s sport aspirations? "The fact that Netflix is going after the biggest sports asset of all in the USA and, within that, the most important partial right outside of the Super Bowl and play-offs, is first and foremost a very loud announcement to the competition and, in my view, a real bombshell," Thomas Klingebiel, President Media of global sports rights marketer Sportfive, told OMR.

In his view, it is "no surprise that a streaming provider has secured the games" given the general market development. "But it is certainly a surprise that it's Netflix," says Klingebiel. However, it is also important for him to put the deal into its proper context. "The bottom line is that it's only about two games. To be precise, Netflix will be showing around eight hours of NFL during Christmas 2024 and then not again until 2025. That's why this selective rights purchase is not necessarily an indication that Netflix will bid for larger live sports rights in or outside the USA in the future," he says.

In addition, the "NFL, with its market position, is one of the very few sports properties that can parcel off live games in this way and even run its own direct-to-consumer media products at the same time." "I think you generally have to be careful about drawing big conclusions from NFL or NBA deals for the rest of the sports world," says Klingebiel.

Irrelevant for 99 percent of sports leagues

Jochen Lösch took that sentiment a step further in an interview with OMR: "Anyone who really believes that Netflix will rescue sports rights holders is mistaked. Because that's not going to happen." The Netflix deal with the NFL has "with the exception of a few top rights such as the English Premier League or the UEFA Champions League, no significance at all" for the European sports market.

Lösch has been an expert in the sports media market for over two decades. The German based in London is known for seeing things realistically and without sugar coating them. What makes him so pessimistic about Netflix? "99% of sports leagues and organizations simply don't have the kind of top content that would be relevant for Netflix," says Lösch.

Of course, Lösch does not deny that Netflix has "finally arrived in the circle of live sports broadcasters" with the latest rights acquisitions, despite all assurances to the contrary. At the same time, however, he is certain that Netflix will only be active on a "very limited playing field" - "exclusively in large and important markets, and there with absolute top rights". This means, for example, that Netflix will only ever be interested in selected games on very specific dates, as in the case of the NFL Christmas Games. "Netflix will cultivate 'cherry-picking' even more than Amazon," says Lösch.

Amazon strikes first

In 2021, Amazon bought live rights for "Thursday Night Football" for USD 11b, making it the first tech company ever to secure exclusive NFL games—before YouTube with its USD 14b contract for "Sunday Ticket." According to the Wall Street Journal, Amazon will also invest in live NBA rights alongside ESPN and NBC as part of a USD 76b package for eleven years. Amazon's annual share is expected to be USD 1.8b.

In Germany, Amazon has been showing exclusive live UEFA Champions League matches via its Prime Video service since the 2021/22 season. Meanwhile, Amazon has been broadcasting 20 live Premier League matches per season in England since 2019, paying the equivalent of around EUR 35m per year according to English media reports.

"Amazon's selective but increasing rights purchases in territories within and outside its home market of the USA imply that live sport can serve very well as an acquisition channel for new customers," says Yannick Manuel Ramcke, author of the blog "Offthefieldbusiness." According to Ramcke, the situation differs from the rest of the video entertainment sector, as there are "few substitute products for a specific live sports program that would satisfy the same consumer need. This is a major unique selling point in the battle for the limited resources of those end consumers: Time and money."

Boom time for the Bundesliga?

The only real premium sports rights holder in our home market of Germany is the German Football League (DFL). Does this mean that professional soccer in Germany will be of interest to tech companies and streaming giants in the future? Yes and no.

From Klingebiel's point of view, it is clear that "sports clubs, leagues and associations will inevitably have to deal more closely with big tech companies and their needs in the future". "Because on the one hand, they are gaining market power. And on the other hand, free TV, whether public or private, has been weakening for some time due to a still subdued advertising market," he says.

"However, big tech companies will only want to play by their own rules in the live sports rights market. In the medium term, a top rights holder like the Bundesliga could consider attracting companies like Netflix and Amazon with customized packages. However, such packages would have to be put out to tender for global exploitation and not just for Germany in order to generate the necessary interest," says Jochen Lösch. And Sascha Kojic from SN1 Consulting adds in an interview with OMR: "If the rights holders apply intelligent strategies, I am confident that we will also see more investment in premium live sports rights from platforms such as Netflix on the German market," says Sascha Kojic and adds: "The rights holders will have to renew their commercial strategies in order to become attractive investment targets instead of playing the same game as in the past two decades."

According to Kojic, the NFL has been offering Amazon, Netflix, YouTube & Co. "customized live packages for several years in order to initially introduce them to live sport and, in the best case scenario, to build them up into competitors in the battle for larger live packages." The bad news from the consumer's perspective: With the sale of additional live rights to Netflix, fans will need one more service to watch all NFL games in the future. These include a cable or YouTube TV subscription as well as Amazon Prime Video, Peacock, ESPN+ and NFL+. The increasing fragmentation is also costing fans money: based on last season's prices and Netflix's current cheapest offer, all NFL games would cost a whopping USD 1600 per year, according to The Guardian.

Tearing down territorial marketing

Meanwhile, it is common practice in European sports to sell live rights market by market or bundled in geographically defined territories to different companies with different contract terms. In the USA, for example, ESPN is paying the Bundesliga around EUR 35m per year through the 2025/26 season, according to "SPOBIS," while the Viaplay Group is paying an average of EUR 62.5 million per year until the 2028/29 season for a total of nine European markets such as Scandinavia and the Baltic countries.

The Bundesliga will generate slightly more than EUR 210m this season from the sale of media rights for all international territories combined. The European market outside Germany is by far the most important for the Bundesliga with a share of around 50 percent, followed by North America (20 percent) and Asia (15 percent).

Meanwhile, the media rights agreement with Viaplay is not the only one for the Bundesliga internationally that runs until the end of the 2028/29 season. The DFL recently concluded contracts with the same term in various European and Eurasian countries. Some of the Bundesliga's international media rights agreements could therefore be synchronized for the 2029/30 season. Incidentally, the upcoming four-year cycle for national media rights will also come to an end at that time, the awarding of which is still on hold following a dispute between streaming platform DAZN and the DFL.

A matter of global logistics potentially worth billions

Synching up contracts on international media rights could well tip the scales in favor of global deals for streaming giants or big tech companies. "There is no doubt that sports leagues, especially in premium soccer, will aim to have international broadcast contracts expire at the same time to enable a global package at some time in the future," says Sascha Kojic.

Market observer Yannick Manuel Ramcke adds that hardly any sports league can afford such "stop-gap deals" that do not maximize revenue in the short term and end after just one or two years due to "less flexible budgets and cost bases." "For economic and sporting reasons, maximizing revenue and avoiding revenue declines are currently at the top of the agenda for many sports rights holders as representatives of the interests of the individual teams. Many sports leagues, especially the European soccer leagues, with the exception of the English Premier League, are not currently in a favorable bargaining position and are simply not able to make strategic, long-term investments in the future. Due to the short-term pressure to succeed, it is therefore unrealistic for one of the major leagues to offer such a proposition to Apple, for example."

And it remains to be seen whether the big wallets of Apple & Co. would actually open if the worst came to the worst. Media rights experts such as Kojic agree that, from Apple's point of view, it makes no sense to buy the entire national live rights of the Bundesliga limited to Germany for just under one billion euros per season. As a reminder: the Bundesliga currently earns around 210 million euros from all international media rights.

Apple’s MLS Deal: a sign of things to come?

Regardless of the Bundesliga's rights situation, the MLS rights deal with Apple, worth billions, could point the way forward in terms of its global validity. "The MLS offers a great distribution model—all the games from one league worldwide. And I expect Apple to be looking at similar global deals as they do case studies on what works for their platforms," international sports media expert Peter Hutton told OMR.

NFL rights drive ad sales

Just like Hutton, Sascha Kojic "absolutely expects" that Apple will buy further sports rights after the MLS contract. Netflix's NFL rights purchase, on the other hand, is nothing more than an "experimental investment" in the live sports segment for the time being. "In my view, Netflix primarily wants to test two things. Firstly, if live sports can significantly enhance the cheapest, advertising-supported level of the streaming provider. Secondly, if they are able to effectively advertise around live sporting events." says Kojic.

Advertising has played a major role for Netflix since its launch in 2023, but it’s an area they continue to struggle with. Nevertheless, the ad-financed offering is growing comparatively quickly - from 23 million users (*not subscribers*) in January to around 40 million in May 2024. In total, Netflix had almost 270 million subscribers at the end of the first quarter of 2024. Around 82.7 million of these come from the USA and Canada. Disney subsidiary ESPN now only reaches around 74 million households. However, Ramcke believes that the mere comparison is a bit of apples and oranges. "ESPN brings a very strongly pre-selected sports-affine target group to the table, which in turn is crucial for generating the ultimate audience for live sports programs. In contrast, the average Netflix user is much less likely to be a die-hard sports fan. From the NFL's perspective, however, they are all the more attractive for expanding or diversifying the audience," says the industry expert. Incidentally, the largest Netflix customer base is in the EMEA business region with 91.7 million subscribers and a share of 34%.

Live sports content, especially from the NFL, could further boost Netflix’s ad business. "From a marketing perspective, there is no better content and no better timing for a platform like Netflix to monetize, develop and test its own content via advertising than with NFL football on a holiday like Christmas," says Klingebiel. Ramcke agrees. "Every advertiser stateside wants to be present in the broader context of the NFL. Netflix will come into contact with completely new brands as a result and thus also create a certain halo effect within the advertising industry, so that the first-time bookings could also result in advertising budgets for the rest of the program mix in the future," he says.

Of course, Netflix will not be able to charge anywhere near the USD 7m that brands have to fork over for a Super Bowl spot for the Christmas games. However, experts assume that Netflix will charge six-figure sums for numerous 30-second spots and is therefore likely to generate a significant eight-figure revenue. The purchase price of USD 75m per game seems comparatively affordable in this context, so Netflix does not have too much to lose financially from the deal. The purchase price is roughly equivalent to what Netflix would spend on a medium-sized movie. It is also around 25 million dollars less than the 100 million dollars that Amazon paid to the NFL for the 2023 Black Friday game. Incidentally, only around 9.6 million viewers watched the Prime game. This year's Netflix Christmas games between the Kansas City Chiefs and the Pittsburgh Steelers and the Baltimore Ravens and the Houston Texans are expected to attract 20 to 30 million viewers.

"The NFL rights will help Netflix further reduce its already low churn rate of around two percent, attract new subscribers and offer advertisers an attractive inventory that indirectly promotes the new ad-supported subscription," says Lösch. In all likelihood, "Netflix will be able to refinance the deal with advertising revenue alone, i.e. without selling new subscriptions and without reducing churn," he believes.

Peacock notches close to 3 million subscribers with a single NFL game

In January 2024, "Peacock" demonstrated how a streaming provider can acquire new customers via live broadcasting rights for the NFL. In the three-day time slot surrounding the exclusive broadcast of the wild card game between the Miami Dolphins and the Kansas City Chiefs alone, the offer from NBC Universal and Comcast gained 2.8 million new subscribers. On average, around 23 million viewers watched the game on Peacock. Peacock had previously spent around USD 100m on the rights purchase.

"Netflix will certainly generate new subscriptions from the two NFL games, but such selective rights have no lasting impact on customer lifetime value, which is largely determined by the ability to retain customers in the long term. However, customer loyalty must be achieved via other channels than live sport, as this would be far too expensive to purchase and therefore unsound businesswise," says Ramcke about the "diminishing marginal utility" of further rights acquisitions on a large scale as a driving force for new customer acquisition. Netflix might therefore be better advised to "invest any incremental budget differently than buying even more NFL games" in order to increase retention."

Summary

At present, Netflix actually has no need to invest in live sports thanks to its growth rates. In Q1 2024, the company reported new record revenue of around USD 9.37b (+14.8% compared to Q1 2023). In the 2023 financial year, Netflix generated revenue of USD 33.7b (+6.3% compared to 2022). In other words: Netflix would be investing from an absolute position of strength. This could therefore be an ideal time to test out the mechanisms in professional sports, including the lucrative advertising market around it.

At the same time, Netflix, just like Amazon Prime and Apple, is "neither dependent on a critical mass of live sports content" nor does "the core business depend on the successful acquisition of sports rights, unlike many traditional licensees," says Ramcke. "New rights buyers will always come and go in the sports rights market. But I definitely don't see everything being bought by big tech companies now."

In fact, prevailing wisdom across the industry for the past decade plus has been that established sports media are on the ropes and are no longer sustainable. "That hypothesis has been disproven repeatedly," says Ramcke. Especially as the new players mentioned will always negotiate the best deals for themselves and be able to significantly leverage those deals. "Both Netflix and all big tech companies have enough alternatives to really big live sports packages. They have no problem getting up from the negotiating table," says Ramcke, describing the challenging situation for sports organizations. In an increasingly saturated market, selective sports rights purchases are nevertheless "undoubtedly effective growth drivers for big tech companies."

Ultimately, the path to a further uptick in live sports rights would at least partially revamp Netflix's previous strategy. Up to now, the streaming provider's recipe for success has primarily consisted of creating exclusive "originals" and consequently being their owner. The purchase of live sports rights for a limited contract period would bring exclusivity, depending on the packaging, but would turn Netflix from an owner into a tenant. In the coming years, Co-CEO Ted Sarandos is likely to publicly question whether Netflix will really get involved in this on a larger scale than before.

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Scott Peterson
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