Andy Wang of Runnymede Capital Management and Stephen Kent of Consumer Choice Center discuss Netflix's venture into sports, Disney's proxy battle, and the evolution of the streaming space with Nicole Petallides:

Andy's notes:

  • Netflix’s first major deal in sports: WWE content is unique in being a hybrid entertainment/sports property
  • In addition to advertising and potential tiered subscriptions, sports can drive value in different ways for Netflix, Disney, and Amazon
  • DIS shareholders watching proxy fight for potential management changes

Streaming services have dominated the world of television series and movies, but cable and satellite TV have held on to sports and news. Viewers primarily watching sports via ad-supported connected TV or social media is starting to match the numbers watching on cable.

Netflix's WWE deal is its first major deal in sports, but WWE content is unique as a hybrid entertainment/sports property. The 10 year $5 Billion dollar deal to stream WWE’s Raw series is small in the context of Netflix's overall annual content spending of $17 billion. So far, Netflix has stayed away from live sports and stayed with sports documentaries. It’s tested the waters with Netflix Cup Golf with pro golfers and Forumla One drivers. Sports could provide new tiering dimensions over time, with recent examples like a Major League Soccer subscription on Apple TV+ and UFC PPV on ESPN+.

For Netflix, sports could be an important lever to drive down subscriber acquisition costs while driving up potential pricing power and share of engagement.

If Netflix does get more involved with live sports, investors should keep an eye on a potential near-term slowdown in the pace of margin growth as revenue growth may not scale immediately. The WWE isn’t likely to have much of an impact because it is quite cheap on a per-hour basis, but mainstream rights (NFL playoffs, NBA) are more expensive.