Even while spending billions of dollars on content, Netflix (NASDAQ:NFLX) has yet to enter one key area of programming.
The popular streaming service, which finished 2014 with 54.48 million paid members, has never paid for the right to televise live sporting events. In fact, Netflix has not only passed on bidding for football, basketball, hockey and other major sports, it carries no live events at all. Even Chelsea Handler's new talk show, scheduled to debut in 2016, won't be live or even necessarily taped on the same day it is released for streaming.
Netflix is not alone in eschewing going after sports rights. A new white paper from Juniper Research, "Digital Content -- An Over the Top Reaction," says no major over-the-top-service has ever bid for a major sporting event.
While several of the major OTTs (Over-The-Top) are moving into the field of delivering original content, one key battleground on which they have yet to marshal their forces is that of sporting video/audio rights," Juniper wrote. "For more than two decades this has increasingly been the preserve of premium (subscription and pay per view) broadcasters and cable networks, such as BSkyB in the UK, Canal+ in France, Sky in Germany, Mediaset Premium in Italy and ESPN in the U.S.
While this has always been the case, that does not mean it's going to be that way going forward.
Sports rights are expensive
Despite the rising costs of sports rights, Juniper believes OTT services will inevitably throw their hats into the ring.
"None of the major OTTs has participated in a bidding round for major sporting events. We believe that this state of affairs is unlikely to continue, particularly in markets where the OTTs have already seen substantial adoption through their film/TV offerings," the white paper says.
Streaming of live sports is still in its infancy. Juniper cited some successes including NBC's February 2014 digital stream of the Olympic men's ice hockey semifinal between the United States and Canada, which reached 2.1 million unique viewers.
Positive results like that will ultimately encourage OTT services to pursue the rights to sports events, according to Jupiter.
Given the immense cost of major sporting rights, we believe that the various OTTs will not enter the sports bidding wars until the established broadcasters show more willingness for sports viewers to watch streamed services regularly, whether via mobile, TV, desktop or connected TV. Furthermore, in many key markets the broadcasting rights are already locked down for several years, with renewals not due until the end of the decade.
So it might not happen soon, but in all likelihood the appeal of the various sports leagues and their loyal customers will be too hard for the streaming services to resist.
Netflix did not respond to a request for comment for this story but did tell me via email in February 2014 that the company had no immediate plans for live sports content.
"We don't carry any live content on Netflix, so we have not bid on any sports and do not plan to carry live programming right now," wrote spokeswoman Jenny McCabe.
Why sports rights?
While the price of sports packages has risen dramatically over the last few years, their value has increased as well. Rights to National Football League games especially can bring in huge audiences to justify their huge price tags.
NBC's Sunday Night Football was the third-highest-rated regularly televised program of the 2013-14 TV season, according to TV Guide, and ESPN's Monday Night Football was not far behind at No. 15.
The TV Guide ratings account for DVR viewing, If you remove that, Entertainment Weekly shows Sunday Night Football in the top ratings spot, with various other football-related programming holding down three other places in the top 10. The numbers get even better when considering single telecasts, Nielsen, which has not released its 2014 data, showed that in 2013 sports dominated the single telecast chart, with NFL-related shows holding nine of the top 10 viewership spots (the Oscars grabbed No. 7).
It's not just the NFL that can attract an audience. The recent NCAA men's college basketball championship game between Duke and Wisconsin pulled in 28.3 million viewers after a tournament that averaged over 11 million viewers per game, according to Nielsen. Even less-popular sports such as Major League Baseball can bring in big numbers, with the recent MLB opening night game on ESPN2 attracting 3.3 million viewers (the most since 2008).
The numbers vary, but the National Hockey League and National Basketball Association also have devoted audiences that watch mostly in real time. The same is true of niche sports such as golf and tennis, and even college football, basketball, and more.
Is it inevitable?
Creating original programming has helped build Netflix, and it's working to a lesser extent for other OTT services. The problem with creating episodic television, though, is that you have to make an expensive bet on a show before knowing if the audience will have any interest in it.
Netflix has done that extraordinarily well so far, but creating content that way has its risks. Sports -- if viewers show they will watch when games are streamed -- offer a much more certain path to a specific number of viewers. People find the NCAA tournament even when games air on the obscure truTV network. Hockey fans have managed to find NBC Sports Network to watch NHL games, and college football fans can sort through the various networks that hold rights deals to find their favorite teams.
Sports bring a defined audience that would almost surely follow its favorite leagues and teams wherever they go. Netflix might not be in that game right now, but it's hard to see why the company would not get in at some point.
Daniel Kline has no position in any stocks mentioned. He knows he should watch House of Cards but hasn't. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.