Netflix’s NFL deal highlights ‘natural evolution’ for streamers as sports rights take center stage

Netflix (NFLX)’s surprise three-season deal with the NFL represents a major shift for the streaming giant, which has historically eschewed traditional live sports investments.

As part of the deal, the platform will stream two games on Christmas Day: a Pittsburgh Steelers vs. Kansas City Chiefs game, followed by a game between the Baltimore Ravens and the Houston Texans.

The move is viewed by some on Wall Street as simply an experiment for Netflix, with pressure on streaming platforms to expand their offerings, especially amid the recent introduction of ad tiers.

“I think it’s much more about testing the waters, learning how to do advertising within the sport,” Citi analyst Jason Bazinet told Yahoo Finance, arguing that the NFL would not necessarily help a streamer retain subscribers in the long term.

“Down the road, [Netflix will] We’re supposed to offer more sports rights and do more advertising. I think this is 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 Prime Video (AMZN) and Comcast’s Peacock (CMCSA). Google’s YouTube TV (GOOG, GOOGL) has the exclusive rights to NFL Sunday Ticket, which 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 advertising level and enable 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 – It will also provide significant global distribution to the NFL, according to Anmuth.

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“Last year’s three NFL Christmas Day games ranked among the top 25 most-watched TV shows of 2023. With the 3-year partnership extension, we believe NFLX can deepen its relationship with the NFL, especially as the league looks to further diversify its distribution strategy “We expect more live sports over time,” he wrote.

Jeffries agreed, writing in a research note following the news, “We are bullish on the NFL deal, which we believe will create a compelling value proposition for NFLX’s emerging advertising business.”

“This will represent NFLX’s largest foray into fully unscripted live sports content,” the bank said, calling the terms of the deal “very attractive” given the company had previously spent similar amounts on original films like “The Gray Man” and “Red Notice.” “

Sports rights have become increasingly important to media giants as more consumers cut the cord. Content is viewed as “sticky,” meaning loyal audiences are more willing to forego monthly cable or streaming service fees to access sports via other types of content.

“Netflix’s foray into live sports will be a game-changer for the company,” said Paul Dergarabedian, senior media analyst at Comscore. “The speed of live events is what makes them attract audiences. … Many people have already crossed the line and cut the cord and watched all kinds of content on live streaming. Sports is the next natural step in this evolution.”

Netflix had previously confirmed that it wanted to focus on “sports entertainment” rather than paying for the rights to stream sports, which could be costly for media companies.

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In the past, the company has released docuseries and sports content such as “The Quarterback,” “Formula 1: Drive to Survive,” “Full Swing,” and “Break Point,” as well as live sports events like Netflix. Cup” celebrity golf tournament, which aired late last year.

One recently announced partnership appears to deviate from this status quo. In January, Netflix announced a 10-year deal with TKO Group Holding subsidiary WWE (TKO), which will bring WWE’s flagship show Raw, a live wrestling production, to the streaming service starting in 2025.

It also announced a live boxing event in July between YouTuber Jake Paul and heavyweight champion Mike Tyson.

FILE - Kansas City Chiefs quarterback Patrick Mahomes, 15, throws a pass during the first half of an NFL playoff football game against the Pittsburgh Steelers, Sunday, Jan. 16, 2022, in Kansas City, Missouri.  Netflix and the NFL announced a three-year deal on Wednesday, May 15, 2024, to stream games on Christmas Day, which includes the Chiefs taking on the Steelers on Dec. 25, 2024. (AP Photo/Travis Heying, File)

Kansas City Chiefs quarterback Patrick Mahomes, 15, throws a pass during the first half of an NFL playoff game against the Pittsburgh Steelers, Sunday, Jan. 16, 2022, in Kansas City, Missouri (AP Photo/Travis Heying), file) (News agency)

Alexandra Canal He is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, And email it to [email protected].

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