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Netflix’s NFL deal highlights streamer’s ‘natural evolution’ as sports rights take center stage
Netflix (NFLX) surprise three-season contract with the NFL marks a major shift for the streaming giant, which has historically avoided traditional investments in live sports.
As part of the deal, the platform will stream two games on Christmas Day: the Pittsburgh Steelers taking on the Kansas City Chiefs, followed by a matchup between the Baltimore Ravens and Houston Texans.
Some on Wall Street see the move as more of an experiment for Netflix, with streaming platforms under pressure to expand their offerings, especially amid the recent introduction of advertising tiers.
“I think it’s much more about testing the waters, learning how to advertise within sports,” Citi analyst Jason Bazinet told Yahoo Finance, arguing that the NFL won’t necessarily help the streamer retain subscribers in the long term.
“On the road, [Netflix will] presumably bid for more sports rights and do more publicity,” he surmised. “I think it’s a good thing. It’s just a natural evolution of the business.”
The deal comes as the NFL adds more streaming services as media partners. The list also includes Amazon’s Prime Video (AMZN) and Comcast’s Peacock (CMCSA). AND Google’s YouTube TV (GOOG, Google) has the exclusive rights to NFL Sunday Ticketwhich makes out-of-market games available to fans across the country.
JPMorgan analyst Doug Anmuth said in a note to clients that he believes the games will help boost Netflix’s level of advertising and allow the company to “actively promote” its own content during the games.
Netflix – which will reportedly pay less than $150 million per game, according to Bloomberg – will also bring major global distribution to the NFL, according to Anmuth.
“Last year’s three NFL Christmas Day games ranked among the top 25 most-watched TV shows in 2023. With the 3-year partnership, we believe NFLX could deepen its relationship with the NFL, especially as the league seeks further diversify its distribution strategy and we would expect more live sports over time,” he wrote.
Jefferies agreed, writing in a research note following the news: “We are positive about the NFL deal, which we believe will create a compelling value proposition for NFLX’s emerging advertising business.”
“This would represent NFLX’s largest foray into fully unscripted live sports content,” the bank said, calling the terms of the deal “highly attractive” given that the company has already spent similar amounts on original films like “The Gray Man” and “Red Notice”. “
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‘Live sports are a game changer’
Sports rights have become increasingly important to media giants as more consumers cut the cord. Content is seen as “sticky,” meaning loyal audiences are more willing to shell out their monthly cable or streaming service fee to access sports over other types of content.
“This foray by Netflix into live sports is a game changer for the company,” said Paul Dergarabedian, senior media analyst at Comscore. “The immediacy of live events is what makes them so appealing to audiences. Many people are already overdoing it and cutting the cord and watching all types of streaming content. “
Netflix had previously stated that it wanted to focus on “sports entertainment” instead of paying for live sports rights, which can be expensive for media companies.
In the past, the company has released documentaries and sports content such as “The Quarterback”, “Formula 1: Drive to Survive”, “Full Swing” and “Break Point”, as well as live sporting events such as the “Netflix Cup”, a celebrity golf, which aired late last year.
A recently announced partnership seemed to deviate from that status quo. In January, Netflix announced a 10-year contract with TKO Group Holding’s WWE (technical KO) that will bring WWE’s flagship program Raw, a live wrestling production, to the streaming service starting in 2025.
It also announced a live-streamed boxing event in July between YouTuber Jake Paul and heavyweight champion Mike Tyson.
Kansas City Chiefs quarterback Patrick Mahomes (15) throws a pass during the first half of an NFL wild card playoff football game against the Pittsburgh Steelers, Sunday, Jan. 16, 2022, in Kansas City, Missouri (AP Photo/Travis Heying, File) (ASSOCIATED PRESS)
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, and email her at alexandra.canal@yahoofinance.com.
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