Indepth Part 1: After live comedy, will Netflix foray into live sports streaming?

The conventional notion that live sports should be consumed on big TV screens has changed. All records broke when digital viewership surpassed that of TV after JioCinema streamed the FIFA World Cup for free. It indeed was a watershed moment as far as live sports streaming is concerned, a testament to the fact that people are not averse to consuming live sports on their hand-held devices.

Live sports is the golden goose. A recent report (‘Sports Broadcasting on TV: A match made in heaven’) put revenues for sports from digital streaming at Rs 4,360 crore by 2026, growing at a CAGR of 22%.

Disney+ Hotstar has been the bellwether in live streaming sports in India with IPL. Realising that the ground is fertile, streaming platforms are already dabbling in live streaming of sports events. We have seen homegrown streamer SonyLIV (Europa League India, UEFA’s Champions League, Bangladesh series, etc.) and Prime Video (live streaming of the India–New Zealand series) doing it.
Analysts are now keenly watching if Netflix will foray into live streaming of sports events. Last year, the streaming giant live streamed Chris Rock stand-up comedy, and it was a clear indication that the streamer, faced with twin challenges of dwindling subscriber growth and increasing competition, is not averse to diversification.

Will Netflix follow the lines of Prime Video, which has inked deals worth billions of dollars to stream live sports after the success of Thursday Night Football? It was in 2017 that Amazon struck a $50-million deal with the National Football League (NFL) to stream Thursday Night Football, beating legacy players as well as tech giants like Facebook, Twitter, and Yahoo. Prime Video is also mulling over the possibility of a sports-only standalone app.

Netflix has been dabbling with sports content for a while now with the launch of Drive to Survive, a docu-series on Formula One, in 2019, which helped the racing league attain huge popularity in the US. But live sports is an entirely new frontier given the economies involved; the streamer got to justify spending top dollars in acquiring huge sports properties.

Netflix’s move into live comedy shows could be a sign of the company’s interest in diversifying its offerings beyond TV and movies.

As Netflix’s original output has grown in recent years, so has the range of genres commissioned by the streamer, says Jack Genovese, Research Manager, Ampere Sports. “Looking at its US catalogue, for instance, unscripted titles (primarily pre-taped stand-up comedy, documentaries, and – increasingly – reality shows) account for roughly one third of Netflix’s original content slate. Live programming will undoubtedly allow it to diversify its original content offering even further, for example, by introducing talent contests or game shows, as well as leaning more on live comedy and talk shows,” Genovese adds.

This is not the first and it won’t be the last move as a company further diversifies its offerings, says Paolo Pescatore, Tech, Media & Telco Analyst, PP Foresight. “Netflix’s huge subscriber base is an attractive shop window for all key stakeholders including other content, media owners as well as developers, advertisers, brands and more. We need to think of Netflix as a platform, a single destination for users entertainment needs,” he adds.

On top of offering greater content diversification, and possibly most importantly, Netflix will be able to use live programming to generate the kind of appointment viewing that live television, despite its progressive decline, is still able to deliver, says Jack Genovese.

Even in a world where on-demand viewing has become a mainstream way of consuming content, live programming can attract sizable, even unparalleled viewership, says Genovese. Furthermore, he adds, live programmes can leverage on audiences’ desire to share their viewing experience simultaneously with their friends and family – being ‘part of the moment’ – to market and promote the content and the wider service," he adds.

Jyoti Tiwari, Group Solutions Manager, Django Digital, feels that Netflix’s move into live comedy shows can be seen as a sign of the company’s interest in diversifying its offerings beyond TV and movies. The company, she adds, has been experimenting with different types of content over the years, from documentaries and reality shows to animated series and interactive shows. According to her, live comedy shows offer another avenue for Netflix to expand its content library and appeal to a broader audience.

“By diversifying its offerings, Netflix can attract new subscribers and retain existing ones by providing more value and variety. This move could also help the company differentiate itself from competitors in the streaming space, such as Amazon Prime Video, Hulu, and Disney+, all of which primarily offer TV shows and movies. By adding live comedy shows, Netflix can tap into a different type of content that appeals to viewers looking for more diverse entertainment options,” Tiwari adds.

She feels that the move into live comedy shows also has broader implications for Netflix’s future strategy. “By diversifying its content, Netflix is positioning itself as a comprehensive entertainment platform, rather than just a streaming service for movies and TV shows. Additionally, Netflix’s move into live comedy shows could lead to new opportunities for partnerships and collaborations with comedians and other content creators. This could help the company attract top talent and produce more exclusive content that is not available on other platforms,” she adds.

Rahul Gupta, Founder & Chief Creative Officer, By Design (formerly IBD), also feels that Netflix’s move into live comedy shows could be indicative of the company’s efforts to diversify its offerings beyond just TV and movies. This could have implications for Netflix’s future strategy as it could potentially expand its offerings into new areas to attract and retain subscribers.

Netflix has never shied away from trying new things – from documentaries to short films to animation and now live comedy, says Hayden Scott, Creative Head at Virtue Worldwide.

"This move certainly signals the company’s choice to move beyond shows and movies. With live comedy Netflix has a clear opportunity to grab a slice of the pie from live TV. The difference over here is that the live event after it streams is available to consume at your convenience. Something TV can’t do. But the real question is: Should Netflix be trying to steal live TV’s market or fight other OTT players who have been nipping at its heels in the last few years," says Scott.

"Hotstar owns this space. Sony Liv and Prime have entered it as well. Should Netflix follow suit because the competition is doing it? Personally, I say no. Netflix has a niche for itself that it has worked very hard at building in this country. To do what every other player is doing would not be a “Netflix move”. If they do get there I would be curious to see how they do it differently. Can they innovate in a way that makes sports live streaming a richer and more immersive experience? Remember these are the guys who gave us Black Mirror Bandersnatch (not a like for like comparison but definitely an example of innovation within a stagnant format) – they have their own high benchmark to beat," says Scott.

A viable strategy?

What does it mean for Netflix to enter the sports streaming market? Is it a viable strategy for the company?

Acquiring major sports rights would almost inevitably contribute significantly to Netflix’s content spend, which would make long-term profitability more challenging, asserts Jack Genovese. “Inevitably, as Netflix expands into live content, one can’t help but wonder what that means for sports. Netflix’s leadership team has been adamant to say that live sports is not a content category that Netflix is planning to expand to yet. Ted Sarandos and Reed Hastings have both commented on the difficulty, under Netflix’s model, to make live sports profitable,” adds Genovese.

This is almost certainly the case when we talk about major sports leagues – the likes of the NFL and the NBA in the United States, the Premier League in the UK, and the IPL in India, says Genovese. “These properties command huge fees; the value of the NFL live rights in the US alone for the next season ($11.8 billion) is equivalent to 76% of Netflix’s global content spend in 2022 ($15.6 billion). While Netflix’s content spend has grown rapidly in recent years, as it reaches maturity in many of its core markets, and as investors’ focus turns away from subscriber growth and towards profitability, we expect Netflix’s content spend to stay essentially flat in 2023 (+1%), and to grow at a CAGR of 3.5% in the next few years,” he says.

Jyoti Tiwari feels that Netflix entering the sports streaming market could be a viable strategy, as it would allow the company to expand its offerings and attract new subscribers. However, she adds, it would require significant investment and expertise in sports broadcasting, which Netflix currently lacks. Netflix would need to carefully evaluate the potential risks and benefits of entering the market before making any decisions.

Paolo Pescatore, however, does not think it as a viable strategy. For now it does not make sense for Netflix to go down this path, he says, adding, “It is not a viable strategy given the sheer cost of securing lucrative sports rights across different countries. This could change further down the line, subject to the way sports rights are made available with greater long-term certainty.”

Rahul Gupta thinks that Netflix’s potential entry into the sports streaming market is an interesting move. “While it may be a viable strategy, the company would need to carefully consider how it will differentiate itself from other sports streaming platforms and assess whether it can generate enough revenue to justify the investment,” he adds.

(Tomorrow: Part 2 of the Indepth report will analyse the Risks and Rewards of Netflix’s foray into live sports streaming, the impact on financials and subscriber base, and more.)