Netflix (NASDAQ: NFLX) brought in roughly 60 million viewers for the Mike Tyson-Jake Paul fight on Nov. 15.
For a streaming service that has religiously avoided live events for essentially its entire history, the Tyson-Paul event is the clearest sign yet that Netflix is ready to reverse course.
Thousands of viewers complained about buffering issues during the broadcast according to DownDetector, which is a problem. But it's a good problem for Netflix to have as it shows that the fight is in such high demand that it was stressing Netflix's technical infrastructure.
For years, analysts have been asking if the company would get into live sports, and Netflix has consistently batted away those questions, saying it was committed to entertainment with a long shelf life that viewers could watch when they wanted. However, one quote from Jerry Jones, the billionaire owner of the Dallas Cowboys, shows why live sports is a no-brainer business idea for Netflix.
Jones was interviewed as part of the broadcast as the event was held at the AT&T Stadium in Dallas where the Cowboys play. He said:
Worldwide coverage with Netflix. We're all being introduced to Netflix. We're so excited in the NFL about Netflix becoming a huge part of our future. This tonight gives a chance to go to 40, 50 million people and do it from right here.
Jones is referring to Netflix streaming two NFL games on Christmas this year, and it will stream at least one game on Christmas in 2025 and 2026. That deal could lead to a closer partnership between the NFL and Netflix, and Jones is clearly excited about the opportunity as that would likely be valuable to the Cowboys.
Image source: Netflix.
The global game
There are a number of reasons why streaming live sports makes sense for Netflix, but perhaps the biggest one is that sports leagues have gone global in a way they weren't a generation ago.
Leagues like the NBA and the English Premier League in soccer have a global audience, and no platform is better equipped to connect viewers with those games and related content than Netflix, which now has nearly 300 million subscribing households around the world.
What's particularly appealing about Netflix's subscriber base, especially for American leagues, is that most of its subscribers are outside of the U.S. The company finished the third quarter with 85 million subscribers in North America and nearly 200 million subscribers in the rest of the world.
The NFL, NBA, and MLB are all eager to reach audiences outside of North America. That's why they've started hosting games in far-flung locations like London and Brazil. But teaming up with Netflix seems like a better strategy as it would give millions of subscribers a chance to watch those games and introduce them to potential fans who aren't familiar with them. No other streaming platform can offer that kind of value or worldwide exposure to sports leagues.
A simple comparison
Getting into live sports is also a no-brainer for Netflix because its argument about focusing on its core product of long shelf life, mostly scripted content, no longer seems valid.
One popular complaint about Netflix is that its content gets lost in the shuffle. The company may have thousands of shows and movies to watch, but its menu is only designed to offer a handful of options.
What that means is that the marginal benefit of Netflix adding another true-crime drama or a rom-com is negligible. On the other hand, adding a new category like live sports is bound to tap into a new audience that may have not been previously interested in Netflix and get existing users to spend more time on the service, which is Netflix's stated goal.
Netflix's next move
Netflix's tailwinds from its password-sharing crackdown are starting to fade, and management has said that it will take time for the advertising tier to move the needle.
Now is the right time for the business to take a new step and move into live sports. It will give the company a new way to grow and excite investors at a time when the stock is at all-time highs, but its subscriber growth is slowing down and the stock is at risk of a pullback if that continues.
There are a number of ways that Netflix can build on the momentum from the Tyson-Paul fight and the NFL games on Christmas, and I suspect the company will want to add more sports content based on the publicity and the audience response it's getting.
Striking deals that make sense for its business model might be tricky, but the opportunity is huge, and as the cable ecosystem fades, audiences are eager to see more sports on streaming services.
It's time for Netflix to seize the opportunity.
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Jeremy Bowman has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
