Netflix plans to add some distinctive flair to its live coverage of two NFL games on Christmas Day, but remains cautious about shelling out billions of dollars for major sports rights.
That was the view of co-CEO Greg Peters, who appeared for 25 minutes at the FT Business of Entertainment Summit on Friday, where he spoke about sports, advertising and several other topics.
“We’re looking at the two NFL games on Christmas Day as kind of a one-day Netflix football event,” Peters said. “We’re hoping it’s going to be a great game and people will be talking about what’s going on, and we’re going to make it a little bit ‘Netflix-y,’ so we’re going to have some of our talent and some stuff tied to the game that will hopefully make it a really fun game.”
Though the company is big on sports (as evidenced by its continued investments in unscripted programming like Drive to Survive and Full Swing), executives worry about whether the math will work. “If they have Thursday Night Football or the NBA or whatever, we’d love to do that. That’d be great,” Peters said. “And we want to do it in a way that’s good for the business. Doing it in a way that’s good for the business is usually a tough deal.”
With a three-year Christmas deal with the NFL, the acquisition of WWE Raw and an in-house produced live golf event set to premiere in 2023, “we’re slowly getting into some serious live sports stuff,” Peters acknowledged. “Maybe we can find a way, but we haven’t found it yet.” With most major rights locked up for the next few years, he noted, “we’re not going to have a real opportunity anytime soon.” Still, “we’ve learned that you shouldn’t completely eliminate that stuff because of advertising and other things. There may come a time, but there are no plans right now.”
Speaking of advertising, Peters recounted how Netflix began to push into the advertising market after years of “struggling” internally. When subscriber growth “hit a wall” in 2021 and early 2022, the sentiment within the company shifted, and a “desperation” prompted immediate action, Peters recalled. Co-founder and board chairman Reed Hastings and other executives have maintained that Netflix would never run ads, citing factors such as privacy issues and customer experience.
Peters said there were lasting benefits from the “stressful but also very fun” six months of work to launch the ad-supported basic tier.
One key aspect was that the team of employees working on the project was lean and focused: Peters estimates that there were only about six staff members when they first embarked on the ad mission, but that over time the group has expanded to more than 40.
“This was an opportunity to go back to our startup DNA and our startup roots,” Peters said. The “core” of people in charge of advertising said, “Don’t add anyone to this team unless we absolutely have to deliver on our first launch. Keep it as lean as possible. And it worked amazingly well. … What I learned from that is this is a way of operating that we need to keep doing as a company.”
Nearly two years after it launched advertising, Netflix reported that its ad tier had reached 40 million monthly active users. Its cheaper tier offerings have helped drive better-than-expected subscriber growth, with the company adding 8 million subscribers in the quarter that ended June 30. At the same time, the company warned in July that advertising won’t be its primary revenue driver until 2026.
“Our advertising business is growing well and is a growing contributor to our business,” Netflix said in its quarterly investor letter, “however, building a business from the ground up takes time, and combined with the size of our subscription revenue, we do not expect advertising to be the primary driver of revenue growth in 2024 or 2025.”