Netflix needs sports to survive
Earnings news hasn’t been good coming from Netflix’s California headquarters.Images: getty
Netflix is doomed unless it starts adding live sports. That’s the view of at least two influential analysts who say the streaming service needs to come up with a sports strategy if it is to rebound from its recent spate of bad finances.
During Netflix’s quarterly earnings call last week, the co-CEO Ted Sarandos said the company wouldn’t invest in the sport until it saw “a way to develop a big revenue stream and a big profit stream with it.”
But MoffettNathanson analyst Michael Nathanson said the way Sarandos views sports rights is skewed. Nathanson called sports – especially in the US market – a “low-margin, no-margin” business for streaming companies.
“The sport will be a money loser, but it’s breaking up the clutter in an incredibly crowded world,” Nathanson said. “I think Netflix has to do it.”
Needham analyst Laura Martin expressed a similar view in a research report published earlier this month before Netflix revealed a net loss of 200,000 subscribers in the first quarter, which caused its share price to drop 35% in a single day.
Martin said Netflix won’t be a “winner of the streaming wars” unless it adds sports and news, buys an in-depth movie and TV library, and adopts a bundling strategy.
Martin: “We believe the streaming war will be won by the streaming service that offers consumers 360-degree content choices similar to the linear TV package. By implication, the historical content conglomerates that own the live sports rights and breaking news assets are best positioned to win the streaming wars.
These sports rights will certainly not come from the American market, at least not immediately. This is because the US sports rights market is already so mature and the prices for those rights are already so high.
Nathanson suggested Netflix look to global markets where it can buy sports rights more cheaply and where it needs to grow its subscriber base.
“Netflix needs to do something in some of these markets to get out of the clutter,” he said. “That’s what the sport is great at.”