Is there a huge gap in Netflix’s content strategy?

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Sports fans have a growing number of streaming options available, but Netflix (Nflx -0.09%) Live sports aren’t going to be home anytime soon.

Big tech companies love it the amazon, appleAnd the alphabet (via YouTube) Everyone is spending big on sports rights. Meanwhile, like legacy media companies Walt Disney, A Warner Bros. inventionAnd Comcast Televisions have sports broadcasts they can offer to streaming customers. But Netflix, despite investing in live streaming technology, has yet to sign a deal with a sports league.

Does that leave it with a big gap in its content strategy?

Sports rights are really, really expensive

Sports costs have never been higher, and Netflix may not have room in the budget.

Sports leagues will take in an estimated $29.3 billion in broadcast rights in 2023, up from $15.2 billion in 2015, according to Variety Intelligence.

The last bastion of linear TV programming is sports, resulting in price hikes. Sporting events consistently make up the vast majority of the top 100 broadcasts in a year, forcing Disney, Warner Bros. and Comcast to pay for the rights. Advance advertising is guaranteed to meet linear networks and sports help them get eyeballs Additionally, having the most-watched content on TV gives networks the leverage to negotiate carriage fees with distributors

Meanwhile, Amazon, Apple and YouTube see sports as a gateway to attract subscribers to their streaming services. For example, Amazon said its exclusive Thursday Night Football broadcast premiere saw the highest number of Prime signups of any three hours earlier this season. YouTube said it expects its new NFL Sunday Ticket package to attract subscribers to its subscription services next season.

But Netflix hasn’t played much part in the shopping spree. It reportedly offered a bid for the Formula 1 rights last year, but was outbid by Disney’s ESPN. The streaming service still finds itself sports-less.

Why can Netflix run without games?

While sports can be an effective way to bring in new subscribers for some streamers, Netflix is ​​focused on generating maximum engagement per dollar spent on content.

Sports can draw big audiences, but many Netflix series can generate even bigger numbers. Sunday Night Football can attract 20 million people to their TV sets for three hours per week for a total of 60 million engagement hours. Amazon’s Thursday Night Football deal gets nearly 10 million viewers per week for 30 million engagements. Netflix regularly has a series that generates over 100 million hours of engagement in a week.

The value of a series is also much more permanent than sports. Most people never watch sports again. If they miss it live, they’re less likely to go back and watch the replay. But people often come late to a series because it builds momentum through word of mouth, and they rewatch previous seasons before the new season debuts.

Sports are great for attracting an audience to a service. They also demand ESPN and TNT as part of their cable bundles and force people to sign up for Amazon Prime to watch their favorite teams or leagues. YouTube will likely find its $2 billion Sunday ticket deal more of a loss leader than a profit center.

For a profitable company with an already massive audience, Netflix doesn’t need sports — at least not right now.

However, if more sports rights go to streaming services, it could force consumers to sacrifice their Netflix subscriptions to afford competing services that grab the rights to a few out-of-market NBA games each week. And if that happens, it could prove worthwhile for Netflix to win some sports rights, both to prevent churn and attract more subscribers.

Netflix is ​​dipping its toes around the sports fringe for now, and it wouldn’t be surprising if it eventually won the rights to stream some second- or third-tier sports leagues. But the fact that it’s out of the sport shouldn’t be a big concern for investors when the competition is spending heavily on the rights.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Adam Levy has positions at Alphabet, Amazon.com, Apple, Netflix and Walt Disney. The Motley Fool has positions and recommends Alphabet, Amazon.com, Apple, Netflix and Walt Disney. The Motley Fool Comcast and Warner Bros. Discovery recommends and recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney and short March 2023 $130 calls on Apple. Motley Fool has a revealing policy.


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