Netflix (NFLX 1.73%) is reportedly in the midst of a bidding war as it tries to secure the streaming rights for Formula One racing in the United States. According to Business Insider sources, the company is actively trying to acquire the exclusive right to broadcast live Formula One Grand Prix events, starting with the 2023 season. As the report notes, Formula One is seeking at least $100 million, and it's also tending offers from Comcast's NBCUniversal and Disney (DIS -0.12%)-owned ESPN.
Netflix has yet to confirm that it is actively pursuing Formula One rights, but if the reporting is true, the company could become the dog that caught the (racing) car. Here's why it might be better for Netflix to adopt a different strategy if it wants to get into the live sports space.
Netflix has sports -- just not live sports
The streaming service's many original programs include a slew of sports-themed documentaries and docu-series, but Netflix has never shown a live sports game in its almost quarter-century history.
While Netflix has been one of the flagbearers of the cord-cutting revolution, live sports remain a huge draw for millions of cable customers. As Disney notes, at the end of last year its tentpole ESPN service had 140 million customers around the world, while its subscription video-on-demand (SVOD) offering ESPN+ grew 66% year over year to 22.3 million subscribers in the last quarter.
Netflix has more than 220 million sign-ups around the globe, but it could capture even more by offering live sports.
Formula One is a global sport
Formula One has been a huge draw across the planet for decades, with a fanbase of over 400 million tuning in to catch races that take place across dozens of nations. And while racing in the United States has typically been dominated by NASCAR, Formula One has built a loyal following over recent years. ESPN -- which holds the U.S. rights until the end of the current season -- reported an average of almost 1 million viewers for each Grand Prix during 2021.
Of course, Netflix already understands the appeal of Formula One. Since 2019, the company has financed and played host to four seasons of the behind-the-scenes documentary Formula 1: Drive to Survive. And it seems the show has also had a direct effect on Formula One's popularity in the United States. According to a Morning Consult poll, some 53 percent of respondents who identified themselves as fans of the sport said they were introduced to it by the Netflix Original.
With the sheer scale of Formula One's appeal -- and so many associating the streamer with the sport -- it seems to make sense for Netflix to make it the centerpiece of a livestreaming product. But that's the problem: Netflix doesn't livestream anything. Or, at least, it didn't.
Netflix's livestreaming future
A Deadline report recently stated that Netflix is developing livestreaming features for its comedy and reality-TV outputs. Essentially, sources say the firm plans to introduce some live specials, though the full scope of this plan is still being worked out. Reading between the lines, should Netflix acquire Formula One streaming rights, one can expect that the sport would be a major part of its new livestream offering. And that could be terrible.
Netflix has seen how popular Formula One is, and how it's benefiting rival ESPN. Despite Netflix's lack of experience, it's still filled with some of streaming's brightest technical minds. It's entirely possible that the company could get livestreaming right on its first try.
But Netflix has no experience in handling live events when they go wrong. That could be especially damaging in a sport such as Formula One, where the drivers reach speeds of close to 225 miles per hour. One blackout mid-race -- even if it were just a few moments -- could mean the difference between fans seeing Lewis Hamilton crossing the winner's line, or learning about it via Twitter. The fallout would likely tarnish Netflix's live-sports prospects from the start.
Instead, a lower-risk strategy would be to pick a less popular (but still growing) sport for its first livestream outing. Indeed, Netflix could even look at Formula One's younger cousin, Formula E, a sport with a global viewership of 315 million. Just like Formula One, the United States Formula E broadcast rights look like they'll be available for the 2023/2024 season.
If Netflix secures Formula One streaming rights, streaming service investors should watch how the company launches its live broadcast offerings. If it rolls out a livestream for one of its reality shows, it'd be worth tuning in to see whether any glitches occur, and more importantly, how Netflix handles it. Any significant troubles may suggest that the company accelerated a little too quickly.
