What the Netflix and WWE deal means for the future of the media industry

Netflix is finally diving into live sports. It could completely change media.

Jan 24, 2024 - 04:30

0 8

What the Netflix and WWE deal means for the future of the media industry

There's no question that the deal between Netflix and TKO Group, the parent company of WWE, is the biggest news in sports today.

The 10-year, $5 billion deal marks Netflix's first major foray into live sports, while also marking the first time that WWE's flagship Raw program will be aired via streaming.

Netflix had been rejecting the notion that it would enter live sports for years, instead focusing on sports documentary series while dabbling a little bit in live sports only recently through exhibition games like "The Netflix Cup."

But it has seen Amazon garner huge ratings boosts with "Thursday Night Football" this year. Apple TV+ had a very successful first year for Major League Soccer. Most recently, Peacock checked in with a more than 23 million viewership average for the first exclusively streamed NFL playoff game.

Netflix has turned back on its word before — saying it wouldn't deliver ads to consumers, but it recently added an ad-based tier. That's been a positive development for the company whose stock is up 36.5% over the last year, and live sports is looking like its next big move.

The streaming giant's Q4 earnings later today should provide more insight on the company's decision-making process. But ahead of that call, TheStreet spoke with Steve Herbst, Vice President of Client Engagement, Sports, Media, and Entertainment at K2 Integrity and Joe Favorito, sports management professor at Columbia University, to get their thoughts on the deal and what it means for the parties involved, and also what it could mean for the industry at large.

What does this deal mean for Netflix?

Live sports media rights always come with a hefty price tag, but Netflix is starting much smaller than Amazon's annual billion-dollar payment to the NFL. Herbst thinks that it's a good move because it allows Netflix to use it as "a launching point" into live sports.

"It allows them the some flexibility to see how this works," Herbst said. "It gives them a really good view of what that world looks like without jumping into the much higher tier stuff yet."

The deal grants Netflix the ability to gauge its options after five years. The streamer can exit the deal in five years, keep it at the original ten years, or even extend the deal to up to 20 years.

Favorito is looking forward to how Netflix leverages this deal to create more content around wrestling. With the success of shows like "Formula 1: Drive to Survive" and "Quarterback," the streaming giant can leverage this deal with WWE to create more content.

"The scripted content that will probably find its way to Netflix around WWE will also follow which is no surprise," Favorito said.

While the WWE may not have as much of a following as live sports leagues like the NFL, it certainly has found strong engagement from audiences, especially on digital platforms. The WWE YouTube channel has nearly 100 million subscribers, making it the 10th most subscribed channel on the platform and the most among sports channels.

What's next for Netflix after the WWE remains to be seen. WWE Raw will only begin airing on Netflix in January 2025, so there's a lot of time for the streamer to prepare — and perhaps add on to its line-up of live sports.

What does this mean for the WWE?

Herbst called this "a great deal all the way around," and while the WWE provides Netflix with content, the wrestling promotion gets to leverage the tremendous reach of the streamer.

Netflix is the largest streamer with 250 million subscribers worldwide, and while Raw will only begin airing in the U.S., Canada, U.K., and Latin America, starting next year, the deal is expected to give the WWE global reach on the popular streaming service.

Favorito also believes that the WWE's ability to create this deal is proof that it has built a strong reputation that streamers can believe in.

"The WWE has proven itself to have a global footprint that not every sports or entertainment property can say they definitely have," Favorito said.

WWE has performed well since moving its pay-per-view events to Peacock and definitely carries weight when showing that it can drive results to streaming.

What does this mean for other streamers?

Popular sports business voice Darren Rovell tweeted earlier today that this deal "should scare the hell out of Disney."

His reasoning is that ESPN might begin to be priced out of live rights if the big pockets of Amazon, Apple, and now Netflix are hunting down the WorldWide Leader for sports rights.

ESPN's interest in selling a stake of the company to improve content and distribution is well-documented, and a sign that the company is looking for more creative ways to stave off the competition.

But Herbst isn't too worried about ESPN.

"[ESPN is] a very sophisticated group that's done an incredible amount of research on where this is all headed and how they're going to approach it," Herbst said. "Everyone has their own game plan and own way they view the world, so I don't look too differently at ESPN than I do the other platforms, streamers, and networks."

For Favorito though, what this deal does mean for all broadcasters is simple: Sports rights are expensive, and will continue to be.

"[The deal] sets another bar for live events including sports that will be factored into upcoming rights deals as well," Favorito said."

Original Post