Netflix (NFLX) on Tuesday afternoon reported its first quarterly subscriber loss in a decade, and the disappointing earnings results reflect an ongoing challenge the streaming giant faces as more competitors enter the market.
While some of these competitors have increasingly diversified by streaming live sports on their platforms, Netflix executives aren’t yet convinced of the idea.
“I’m not saying we would never play sports, but we would have to find a way to make a big revenue stream and a big profit stream out of it,” the company’s co-CEO and COO, Ted Sarandos, said on the earnings call. adding that Netflix has had success with “sports-related programs” like “Formula 1: Drive To Survive.”
According to Santosh Rao, head of research at Manhattan Venture Partners, content is “important” for Netflix, but there are also “some other thorny things that need to be achieved like more games, maybe sports. Of course, ad revenue can go into all these extra levers that they have to pull because that’s not working.”
The company announced on Tuesday that it would add lower-priced, ad-supported products. Netflix shares fell as much as 38% on Wednesday.
“We believe that sport is a natural lever to pull over time”
Some of Netflix’s biggest competitors are already in the sports space.
Amazon (AMZN) paid around $1 billion a year to stream the NFL’s Thursday Night Football as of the 2022 season. Apple (AAPL) also got into the live sports streaming action with Major League Baseball broadcasts and could make a bid for the NFL Sunday ticket.
Disney (DIS) acquired the NHL broadcasting rights for the next seven years for $400 million per year, and the company still holds NBA broadcasting rights through 2024. And ESPN+, Disney’s sports-specific streaming service, has proven that advertising during live games can be a robust revenue stream.
According to Matthew Thornton, equity research director at Truist Securities, the investments these streaming companies are making in live sports could help retain subscribers on their platforms — something Netflix didn’t do in the previous quarter.
“We believe exercise is a natural lever to pull over time,” Thornton said on Yahoo Finance Live. “I agree that the profit, the value, goes to the leagues, to the content owners, rather than to the distributors. But even as a loss leader, we believe it’s something they will eventually look at to encourage product stickiness.”
Josh is a producer for Yahoo Finance.
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