Netflix co-CEO Ted Sarandos offered a glimpse into Netflix’s live sports strategy during the company’s second-quarter earnings call on Thursday.
Rather than buying up the rights to entire basketball, football and baseball seasons, Netflix wants to broadcast some of the best games “without acquiring a ton of broadcast rights from any one league,” he explained.
This year, Netflix will broadcast two NFL games on Christmas Day, a decision that reflects what Sarandos called Netflix’s “event model,” which allows it to focus subscribers’ attention on specific games.
“This service creates a lot of excitement and brings football day to life,” he said on the earnings conference call.
The NFL will be Netflix’s first foray into regular-season sports. So far, the company’s other live events have been exhibition matches. That said, some high-profile events include the Netflix Slam match between Spanish tennis players Rafael Nadal and Carlos Alcaraz and the Netflix Cup celebrity golf tournament, which also featured professional golfers. In November, Netflix will air a long-delayed celebrity boxing match between former heavyweight champion Mike Tyson and YouTuber Jake Paul.
Netflix also has a number of sports documentaries it sees as part of its overall sports strategy, including “Formula 1: Drive to Survive,” “The Redeem Team” about the 2008 Olympic basketball team and “Beckham” about British soccer legend David Beckham.
Netflix’s targeted approach stands out in an era when broadcast rights for sports leagues are soaring, as they remain one of the few surefire ways to drive viewers to live (or streaming) broadcasts. Sports leagues are well aware of their negotiating power vis-à-vis both cable companies and streamers, squeezing broadcast partners and demanding fewer games and higher fees.
The NBA is in the final stages of negotiations on an 11-year, $76 billion media deal with Disney, Comcast and Amazon, not including longtime partner Warner Bros. Discovery, up from the previous $24 billion pact signed in 2014.
Previously, the NBA only had two broadcasters, Disney and Warner Bros. Discovery. Now, however, the league has announced its intention to sell three packages, meaning each media company will broadcast fewer games. Warner Bros. Discovery reportedly initially balked at the cost, but then rushed to settle with the NBA when it became clear that competitors were willing to pay what they were asking. The NFL also began streaming for the first time in its latest 11-year, $110 billion deal, broadcasting games on Amazon Prime Video and Peacock.
Netflix likely wanted to avoid getting caught up in such a bidding war with other media companies.
“It’s very hard to offer an entire season of major league sports profitably, but we’re really excited about the opportunity to do that with this event model that we’re building without the risk of being locked into a sports league at renewal time,” Sarandos said in response to a question about the league’s negotiating power.
Netflix signed a 10-year, $5 billion deal with World Wrestling Entertainment in January to cover the entire league, and Sarandos said Netflix bought those rights because the price was favorable and it was part of a long-term deal that could last up to 20 years with options in the contract.
This isn’t the first time Netflix and Sarandos have expressed wariness about entering into long-term, and in their opinion, expensive, standard live sports deals. As recently as October 2023, Sarandos called such deals rentals that don’t lead to profits. “We’re not against sports,” he said on a Netflix earnings call at the time. “We’re just profit-driven. We just don’t know how to do that yet.”
Beyond sports, Netflix has been expanding its live entertainment programming, including stand-up comedy and talk shows, over the past year. Comedians Kat Williams and Chris Rock have aired live comedy specials, and John Mulaney hosted a week’s worth of live talk shows on the streamer. One of Netflix’s live hits was “The Roast of Tom Brady,” which ranked in Netflix’s U.S. top 10 on its first day of airing. Sarandos said the common thread across all of Netflix’s live entertainment is that it’s what viewers and advertisers want.
“It generates a lot of engagement and a lot of excitement, and those are two very valuable things,” he said Thursday. “The good thing is, advertisers love it, and they love it for the same reasons: the excitement and the engagement.”
Netflix’s move into live entertainment and sports goes hand in hand with the launch of its ad-supported plans. Live entertainment, especially exclusives, can sometimes feel better streamed with ads, and sports are especially prone to commercials during timeouts and halftime breaks.
Early evidence from Netflix competitors suggests that viewers are less likely to change channels during commercials when watching live sports via streaming, as they previously did on cable: The NFL found that viewers watching Thursday night games on Amazon stayed with the broadcast for 12% longer than those watching on traditional TV, according to Nielsen data.
Still, at least one industry analyst was cool to Netflix’s foray into live sports: “We believe Netflix should avoid going down a path that could put it in a similar position to traditional media companies that feel forced to hold onto sports rights at a cost that is a big part of their content budget,” Morningstar analyst Matthew Doglin told The Hollywood Reporter in May.