As competition in the streaming industry continues to heat up, companies are looking at new ways to grow their business and attract subscribers. Live sports is one way several streaming services intend to stay competitive. However, while almost every platform would benefit from adding live sports to its service, here's why the athletic entertainment genre is best suited for Netflix (NFLX 0.39%).
Making new fans
Netflix added the documentary series Formula 1: Drive to Survive to its library in March 2019 and has released new seasons of the show every year since. Each season consists of 10 episodes detailing the highs and lows of the racing season.
Although Formula 1 (F1) has never been as popular in the U.S. as it is in the rest of the world, Drive to Survive has been a hit for Netflix. The show's fourth season debuted on March 11 as the platform's fifth-most-watched show for the week of March 7 to March 13, racking up more than 28 million viewing hours. The series then rose to fourth with over 29 million hours the following week.
Drive to Survive's success has not only been positive for Netflix, but has also changed the entire perception of Formula 1 in the U.S. ESPN recorded a 54% increase in the average number of U.S. viewers per race in 2021, a total of 934,000. The figure is also a 39% increase from the 672,000 average viewers ESPN recorded in 2019. Last year's F1 season set a new record for U.S. viewership, previously being held in 1995 when the average number of U.S. viewers per race was 748,000.
The immense popularity of Drive to Survive proves Netflix has the unique ability to create new fans for a sport that consumers previously showed little interest in. If it could harness this power with other sports, the streaming giant could pair its content with live sports and boost subscriber growth.
A match made in heaven
Netflix's Drive to Survive has made it much more expensive for other U.S. networks to broadcast F1. In 2019, ESPN penned a three-year deal for the rights to the racing sport that amounted to $5 million a year. Renewing the agreement in 2022 raised the price by about 16 times, reportedly costing between $75 million and $90 million annually for the next three years.
Netflix has essentially boosted the value of an entire sport in the U.S. If the company could use a similar method with another untapped market, such as soccer stateside, it could pay for the right to broadcast a sport now and bet on its content to build a viewership.
As with F1, soccer has never been as popular in the U.S. as abroad. On July 1, Amazon made a deal that secured live U.K. rights to the Champions League, the world's biggest soccer club competition -- a deal worth about $606 million. When compared with U.S. sports, the Champions League final tends to garner over 380 million viewers a year, while the Super Bowl attracts an average of just under 100 million spectators each year.
Netflix could use its experience with Drive to Survive and get the live U.S. rights to another major sport while the price is still low. The company could bet on its content, create a quality docuseries to premiere in the run-up to the sport's season and retain subscribers by offering the live sport during the actual season. Additionally, running weekly episodes of the documentary series rather than Netflix's popular binge model would help retain subscribers. Netflix could run episodes of a sports docuseries week to week in the off-season, creating hype for when the next season starts and leaving little time for sports fans to drop their subscription between seasons.
Netflix is up against major competition when it comes to streaming live sports. In addition to Amazon's move into the industry, Disney's ESPN+ already has a fairly decent library of live sports. Because of this, Netflix's ability to create new fans of a sport is key. If the company can create a captivating series such as Drive to Survive about a currently underrepresented sport, Netflix will be in an excellent position to attract and retain subscribers by pairing it with a live sports offering.
Additionally, an investment in producing additional sports content leaves little risk for Netflix with its global push. The company saw over 90% of its 2021 membership additions from abroad; if a sport doesn't resonate with U.S. audiences, there's still plenty of room for a new show to pay off overseas.
Netflix has already shown interest in live sports with an unsuccessful bid on the U.S. rights to stream F1, so investors should continue to watch for any further attempts the company makes to enter the market. If it gains the rights to a live sport, it has the tools to create a fan base and attract subscribers.