How sports could still save Netflix

It's awfully costly, but it may not be too late

I know you are probably tired of reading breakdowns of how Netflix stumbled, and that streaming has hit an unexpected slowdown (though I personally can’t get enough of pieces like this one). I’m not going to write one of those, mostly because I don’t know anything.

I’ve also already told you that I don’t think Netflix get into advertising. That is, except advertising during live sports.

Netflix has long said it doesn’t anticipate going after sports rights. As with news, sports don’t really fit its on-demand vibe. Plus broadcasting sports remains outrageously expensive.

Of course, what’s expensive to a company that has spent $17 billion a year on content?

So why am I bringing up sports rights now, when Netflix is reeling, firing people and looking to reign in costs?

Well, one of the more shocking results of Netflix’s stunningly bad quarter isn’t that it is losing subscribers and feeling the effects of having too many mediocre shows just as a zillion other streaming services are coming after the company. It’s the idea the Netflix and investors may have wildly underestimated streaming’s ceiling - i.e. that the Total Addressable Market for Netflix may be much smaller than they were betting on.

Here’s where sports could have come in.

If one of Netflix’s problems is that in mature markets like the US, it’s running out of people who are willing to continue Netflix on their short list of TV subscriptions they’ll justify paying for - then maybe Netflix needs to make the market bigger. Theoretically, sports rights could achieve that, along with a few things:

• Netflix could accelerate cord-cutting by taking away one of the primary reasons people hang onto cable. That way, you could attract sports fans, while also create more streaming-first households overall to target (the TAM gets bigger)

• Snagging sports could also blunt Netflix’s competitors, including the ascendant Discovery WarnerMedia. DWM not only has NBA and MLB rights on its US cable networks, but pre-merger Discovery had become a major player internationally - sometimes likened to ESPN overseas. Netflix could dent their growth while adding subs across the globe at the same time.

• Sports could ease Netflix into ads. Look at how Apple and Amazon have been able to acquire small bits of sports rights without having to build massive sales teams and tech right off the bat. You can partner with local broadcasters to get started . And even if you go big by snagging exclusive rights, how hard is it to sell ads in NFL games (just call Budweiser, right?) Netflix wouldn’t need to master addressable TV and programmatic and all that - just run broad, high-priced sponsorships.

Ah, there is that pesky rights issue. Not only are sports rights exorbitantly priced - they get locked up quickly and for years at a time. Truthfully, Netflix should have done this along time ago. Instead of letting Peacock and Paramount+ grab rights to the Premiere League, for example Netflix could have locked. up access to this truly international sport half a decade ago.

What’s available now? Well again, it may be too late, but Apple and Amazon are said to be going hard after NFL Sunday Ticket. Netflix could make a huge play here - which would instantly make it indispensable to legions of fans. However, Sunday Ticket is also reportedly retailing for $3 billion -and Netflix is suddenly running out of money.

Still, Reed & company have debt financed before. Why not call the bank again? Along with NFL Sunday Ticket, suddenly regional sports networks are up for grabs. The economics seem pretty messy, but wouldn’t locking up rights to teams like the Milwaukee Brewers make a big difference in local markets? Would the suddenly frugal Yankees ever sell the Yes Network? It’s playing small ball, but you’d be able to add some of the stickiest viewers out there.

Internationally, I can’t say I’m an expert on who’s got the ongoing rights to luge in Norway, but surely there are deals to be had. It would seem to make sense to go after Formula One - since Netflix has attracted new fans to the sport through its reality series. Could Netflix convince Comcast to part with Sky (which has loads of soccer rights in the UK)?

Like I said, the timing probably isn’t right, and Netflix is much more likely to play it safe. Still, the NBA’s TV deal is up in just a few years. According to CNBC, talks start at just $75 million.