Netflix avoided sports for 20 years - Here’s what finally changed

23:28Nick Meacham:We've teased it. We've talked about it. Why now after all these stories, does the gold cup story stick out to you about what you wrote about on LinkedIn?

23:37Chris Stone:Well, look, the thing that you picked up on is those different examples you shared. They were almost all massive exclusive deals and also global deals, right? Big global reach visibility across all of Netflix's platforms, all included in the subscription product, which was a nice deal, but global. This is not the first because they've done some stuff in Japan, which we'll talk about in a bit, but this is really one of the first moves that we've seen. And well, the second step outside of the US for single market deals, where they are focusing on single territory premium live rights in that market, particularly around sports.

24:15Chris Stone:And so that feels significant Because if this is just the, it looks like just a starting point for them, it's logical that they would continue to expand their localized approach market by market, wherever makes sense. Otherwise, I don't really see them just focus on North America and Japan. It feels a bit of a limited approach. And Mexico is interesting to me because we've talked about the strength of competition that exists in that market when we had David Samlin from Tubi on talking about their moves in particularly around sports rights in that market. um so it became inevitable to me that this is just a stepping stone or it's not it it feels a bit inevitable basically that this is just the starting point and you're going to continue to see them looking at maybe not necessarily the alpha alpha a1 rights packages just yet but they're certainly looking at rights that move the needle enough to gain in either cultural value, but and definitely advertising revenue, let alone the acquisition piece, which is always at play.

25:20Nick Meacham:Well, for example, no one ever picked up the Christmas games in the UK from Amazon after they left, you know, maybe those sorts of things. Or we've talked about could La Liga ever carve something out where they could have a global deal for El Clasico between, you know, Real and Barcelona, where the rest of the games go to their normal broadcasters, but that is a one-off game. Could that be that big moment for Netflix where maybe that is the thing to potentially help some of these European leagues that are struggling to drive more money for broadcast? Could they potentially carve out packages like that, Nick?

25:52Chris Stone:Well, that was the Champions League we're looking at that model with. I think it was the opening match of the season as well. There was rumors that Amazon or a major streamer was going to pick that up. But I don't think that specific event-style offering a rights package which clearly looked like it was targeted towards a Netflix basically got picked up by Netflix I think it basically stayed with what um was sold and distributed through those other means you're always going to have this tension between you know Apple was adamant about global only deals at the beginning um Netflix historically were until historically I say but like yeah within two years um and now there's a shift to the single market I think you're going to see more and more from here and who's happy about that who's happy about well i'll tell you the rights owners are definitely happy about it because it makes that means that there's one serious competitor where money isn't the problem it's just whether or not the value is there that's quite a significant situation instantly means that there is a player in every market that can be leveraged in some way, shape, or form, whether that is them just saying that Netflix is up for it or whether they actually are bidding and pushing up the rights values in the respective markets for some of the content.

27:08Chris Stone:I'm sure I'm going to hear from some rights owner in the next 12 months telling me they're hearing that Netflix is in for some sort of rights because they want to try and drive up interest and attention. And I wouldn't blame them either. I think there's also some value for fans, consumers. Again, it all depends on market dynamics, But if given the maturity of Netflix, I'm not going to call it free to air, but it's the next tier underneath. It has so mature an audience set in a lot of main Western markets that being on Netflix is a bit of a win, a drawcard. It means you've got access instantly to a huge audience set and it's not hidden behind a supplementary package premium like you do see on most of the major pay TV providers.

27:52Chris Stone:So I could see that being a win in certain markets. I could also see it being a massive problem in a lot of others.

27:59Nick Meacham:Yeah. Well, like I said, off the back of that post you made, Nick, Joe commented with some stuff that she said would be interesting to look at from the World Baseball Classic that took place in Japan. And that was exclusively broadcast on Netflix. Now, she put some really great analysis and statistics on this. So again, this is the World Baseball Classic that just occurred last month. No free-to-air broadcaster, no simulcasting or secondary platform. Some of the statistics in terms of performance had 31 million viewers across the tournament. Japan versus Australia became the most watched ever title on Netflix Japan.

28:32Nick Meacham:Impressive statistics. Netflix share of total streaming hours jumped from roughly 60 % to 80 % during the World Cup. So to Joe's point, when you remove fragmentation, it actually sort of absorbed consumption as opposed to letting things spread out. and daily viewership increased more than 400 % in terms of how many hours people spent on the platform during those periods. So some really, really big numbers in terms of all the different metrics you'd wanna see from engagement rates to concurrent viewers to overall share of market. And again, Nick, it seems like a fairly good success story for Netflix on the face of it in terms of what they were able to drive through those metrics, having that exclusive specific market-led approach for something because it's worth noting the world baseball classic the way english people love english football japanese people love baseball and you've got shote ohane like it's a massive thing for them to be able to really dive into this very specific big major event play definitely uh i think it was an

29:39Chris Stone:interesting move for a few reasons but one uh is uh is basically because a um japan's an interesting market. It's a really big market in scale. We've seen DAZN try heavily in that market to stamp their flag in the ground, which was their first major move for those that were following was into the J-League in Japan out of nowhere. That was their very first move. And what I didn't know, I haven't really followed that story too closely in the last couple of years I did earlier on. And what has been interesting to see is a bit of the reaction that I've stumbled across on platforms like twitter where i think i posted the the stuff that we that i wrote and uh people were saying that basically norm of the wbc has historically been in a free-to-air product and i haven't looked into the numbers of like what how streaming adoption is in general terms um in japan but it was not met so positively for it to go into the netflix ecosystem which perhaps suggests that Netflix isn't as strong in Japan as it maybe is in other markets.

30:41Chris Stone:And maybe that's one of the reasons why they decided to make this move and try and create a bit of inertia behind themselves in that market, basically using sports as an acquisition tool. And naturally, these things, if it's a disruption in the way people are consuming, will always be met with a negative reaction if it is a disruption to the way they're used to. And it seems to be the case a bit of that case but but people forget that stuff quickly if it ultimately sticks and makes and is something that they are comfortable with in the longer term i so i think one of the

31:15Nick Meacham:thesis that joe came up with and i hope i'm not putting words in her mouth was around the idea of when you remove fragmentation the way people can then take ownership at that moment because one of the other things netflix did is they for the first time ever had a creator program to build shoulder content around that and really build the experience around the world baseball classic to really kind of be this all-encompassing thing and i guess nick when we're talking about this case of fragmentation is this something you think holds weight or do you think this is something that only someone like a netflix would have the ability to perhaps be able to achieve um you know how unique you know could this strategy work because you just mentioned like it didn't quite work for the zone very well is just what how much of this is down to the strategy in netflix versus Netflix is just such a unique business that they could pull this off that maybe someone else couldn't?

32:05Chris Stone:I think everyone, I think others could as well. Netflix is just so much capital behind them, resource. They can do what they like and they can make it a success to a certain extent, I think. So I don't think there was ever a concern about that. But I think when you're disrupting the traditional ways that content is consumed, we've seen it in other markets, it will be met negatively by by certain audiences i don't know if the zone and the j league has not worked i do know they had to renegotiate the deal after a number of years i heard that maybe that's because it wasn't doing doing as well but i've not looked into i have no knowledge of this the marketplace which is probably something i should look into actually just to see what is the latest and maybe see if there's anyone who's if anyone's listening japan wants to give us a bit of an update on this give us some more insight if you can.

32:57Chris Stone:But look, I think Netflix can, I guess looking at what Netflix did here and that creative stuff that you mentioned, it's making them act more like a traditional, I use an inverted commas, traditional streamer or broadcaster rather than what they were trying to do with sports earlier on, which is being an events business. And that just makes a lot more sense, really. They're trying to ultimately funnel people to one destination alone rather than trying to drive revenue from a whole host of different areas that isn't as easy as it sounds. So they're never going to be able to own the WBC because it's something that is owned by the federation.

33:33Chris Stone:But this is a nice step for them to, I guess, just widen the net and the visibility because they were definitely trying to push acquisition is clearly the focus when you lean into the creators. That's obviously what they're trying to do is funnel people into the main platform.

33:47Nick Meacham:Well, one of the things Joe tried to wrap this up in was a conversation around fragmentation, which is where we'll kind of wrap things up ourselves, kind of talking about fragmentation is ultimately good for the seller because more packages, more bidders equals higher rights fees. But ultimately, fans are the ones that have to pay the cost for that. And what she, at least my interpretation of it, she can correct me if I'm wrong, was kind of talking about when you have a single home for something, you can build a unique experience that's built for the fans. And essentially, the current model is designed for the sellers.

34:20Nick Meacham:it's not designed for the fans on the other end and basically netflix sort of demonstrated there is a way that you could build something that's more fan specific with that um less fragmented approach now nick i'm gonna go on a little soliloquy here i think the industry yeah yeah i think the industry needs to stop using the word fragmentation so much i believe that it is a red herring the example that gets used quite a bit joe uses in hers it's a little outdated because some of those companies have changed names aren't involved anymore the example is always the premier league has a fragmentation problem you have to pay a subscription to sky tnt and amazon what the what the issue is is how much it costs i don't think the issue is that you have to go to three different channels i think if you replace those names with the bbc itv channel four and you made it free to air nobody would complain that that's a fragmentation issue because there's three products i think the real question or the real word we should be using is accessibility not fragmentation and i think fragmentation is kind of used as a shield to maybe not want to discuss that there's less of an appetite for fans to pay for the content and that it's becoming really expensive i like i said i just think fragmentation is not the word we should be using instead we should be

35:42Chris Stone:talking about accessibility interesting yeah i would uh i'd say i would agree with that i think there's a bit of nuance in there so the way when when i look at fragmentation uh and the examples that you shared i think the tricky part of that is fragmentation would mean that you have to go into different apps and platforms right to consume the content when it's on the bbc or in linear channels you literally just press a button and scroll down to the next channel and you might stumble across that content so in some ways you could say it's fragmented across channels but it's It's aggregated into one distribution mechanism, which is free-to-air TV.

36:18Chris Stone:That I don't think is quite the same thing versus also not only the fragmentation between different platforms like Sky and the like, but also the fact you've got to sign up three different times. It's a very friction-heavy experience, whereas I would love the model to just blow up. um in sweden and this is a bit of a weird weird example but in sweden when you uh drive on toll roads or where you um we have our kids at school we get charged for like after school care and school care and things like that we just get invoiced and get a bill that we just press accept to pay every month we don't have to sign up to anything just automatically comes because the government regulates and organizes it all i haven't had to think about what package i want i just get I just charge for what we use.

37:08Chris Stone:And I just think, what if sports had that approach in place? And basically, live sports, you just get, you get invoiced every month, auto debit or direct debit, if you want, whatever you want to call it. You just get charged for how much you've consumed for the month. I would be way more interested in that. In fact, I would happily pay way more as a premium because things like the Masters, right? Yes. Like this last month, I wanted to watch it. but the only option to watch it particularly here and particularly illegally was to sign up to via play for like i think for a six-month package worth equivalent of like you know 60 us dollars a month like i just want to watch the masters can you just make it one click and i'm in and i'd pay more i did this in the uk i paid a stupid amount through now tv but i did it because i just wanted to get access to what i wanted that is what i think to bringing down the friction becoming driving an Amazon-like experience to either buy with one click, which I know others have tried, like OneFootball on Amazon, or just invoice me at the end.

38:11Chris Stone:That would, I think, change the dynamic. But I have found, I noticed this fragmentation thing is, we still need to have a standardized universal operating system where everything is aggregated universally. So I can find sports on a whim. At the moment, I don't have that on my TV, and that's creating, I get lost in the abyss of all these platforms. So I do think fragmentation is an issue. availability is also an issue i think that there's a lot of crossover but i think there's a bit of

38:38Nick Meacham:differences between them there is some difference i think one of the the things that's popped up in my mind was thinking about the ufc the ufc's not necessarily had a fragmentation issue it's a little annoying to your point you had to have an espn plus subscription then go download it but you only had to do the one thing and then i think i mentioned you there's some really funny memes when the ufc finally switched over to paramount plus of people being like you know pretending to get wine from a Somali and being really fancy and be like, Oh, it's nice to legally watch UFC for the first time because all of a sudden instead of paying$80 for a fight, you only had to pay for a seven 99 a month subscription, which is sort of where I'm coming from in the sense of that, that accessibility thing that, you know, the cost of things is, I think possibly in my opinion, more detrimental than the number of channels.

39:26Nick Meacham:And I agree with you, Nick, I would love to just have one experience where it would just charge me at the end. And I think sometimes it's the, I think we like to use fragmentation because sometimes we're a little bit scared to talk about how expensive things are for the fans.

39:39Chris Stone:Well, there's a couple of things there. I agree with you. I'd say the couple of things are there's nuance, which is, there's always nuances in there.

39:45Nick Meacham:I would say the couple of things are,

39:49Chris Stone:yeah, a dirty little secret with the subscription industry. No one knows this, but basically these businesses and these businesses and these business models are basically built on being funded by people that aren't going back to the platforms as well. You'll never hear them talk about it, but there is a strong percentage of people that have subscribed and just don't consume the content much anymore and just get charged and don't think about it. And the thought of stepping away from that revenue is probably a little bit frightening for some organizations as well. So that is a little bit of a challenge around the subs business world is you have this sort of passive income coming in that may or may not be connected with what service you're providing.

40:30Chris Stone:And you can just kind of get away with getting free money in the bank. So I can't remember what my other point was. We were talking about the UFC. Yeah, the UFC. Well, that one's a natural journey, right? Like, okay, I've been paying$80 a month. You're now telling me I can get this for$8. It's a nice, easy thing to articulate. But most of the examples that we will look at have gone the other way around. Like going from pay-per-view to a monthly subscription model is nearly non-existent across the industry. It's all been for free on free to wear. Now we've got to pay something which I wasn't paying before to get access to it.

41:05Chris Stone:And that's a trickier thing to digest. But I do think like the ViPlay example I gave, there was just now so many examples where I am seeing that they have premium content. I'm almost ready to buy a subscription. Almost. but I'm still holding out because like, well, I've got access to, you know, Prime, Netflix, SVT, TV4, my Samsung TVs, fast channels. And like, I've just got so much content that I don't really, I struggle to justify that investment. And to your point about the cost of content, that's the conundrum again. It's like, yeah, I know I can get premium stuff over there, But I could get a lot of other stuff here that I'm already getting either for free or already paying for.

41:49Chris Stone:Why do I want to pay even more? And that is that tricky conundrum of it all. But one day we're going to fix it, Chris. One day.

41:57Nick Meacham:One day. One day. But just speaking of fragmentation, some of the counterpoints, the arguments, you know, some would say fragmentation helps increase reach, Nick. Although discoverability makes things easier, you know, sometimes that means only the people that really are looking for you are going to find you. Whereas if you have a bit more of a fragmented approach, you have a better chance of people discovering your content. So that's it's always we've talked about this before, sort of discoverability versus fragmentation, those kind of back and forth. It's like, yes, it's really great that the MLS has an exclusive deal on Apple.

42:27Nick Meacham:But that means only people that are really looking for it are going to go find it. And the argument that fragmentation helps, do you buy that? How much, you know, how much weight do you put on that argument that, you know, fragmentation helps reach? Or is that just something people say to to make it sound better to justify?

42:44Chris Stone:well you know our favorite word stumbleability which is definitely not a word um i think there's two audience segments there right one is the the people that do just stumble across it um like basically looking around trying to see what else to watch and oh that looks interesting i might put that on for a few minutes the other day i put on paddle and uh oh what is that racing on

43:07Nick Meacham:the water e1 it's called i think with like tom brady owns a team oh fair that was on like i think

43:12Chris Stone:I was on DAZN or something. So I was like, oh, right, well, I'll have a look and check it out. But, I mean, again, it's this whole conundrum of like it quickly went to my second screen experience where I was on my phone within a couple of minutes and having it in the background or I was doing some work on my laptop and then I had just in the background to have half an ear out for something interesting to happen. I definitely just feel like the way sports is getting consumed now is very eclectic in that way. So, yeah, I don't know. I think there's people that look for this stuff actively. They know where to go.

43:45Chris Stone:And there's people that just stumble across it. I would love to get some numbers on the dynamic there.

43:49Nick Meacham:Yeah, I agree with you. I think most people are probably looking for it. But again, one of the other arguments, Nick, if we're going to try to talk about the fragmentation, is that it keeps prices sustainable in the sense of, you know, from a market perspective. We've talked about one of the problems in Europe, perhaps, is there are no multiple competitors, Nick. they could probably do with a little bit more fragmentation competition helps you know drive revenues and as revenues go up the more you can potentially offer fans or potentially you know go more free to air you know the nfl you know like i said nick not saying that's the argument for me i'm just simply saying there are people out there that would say fragmentation is good for business because competition is healthy in a marketplace again yeah from from the rights owners perspective

44:34Chris Stone:there's no doubt that fragmentation is good for business. I still think there is a model, there is a formula where fragmentation can be really good for you. But I think if it's equal fragmentation, so you have equally fragmented rights across a few different platforms, that's where you can lose people. I think you need to have one, at least one flagship where people go, if I buy that, then I definitely have access to enough that I need. But if I really want more, then I can sign up to those other services. I think I'm much more likely to do that at least to know that you take that first step I suppose whereas if you if equal rights are split across different partners I'd probably just like where do I start you know what I'm just going to give up and move on and that's the tricky conundrum because that decision is not always on the rights owner obviously it's also on the streamers what they're willing to buy what they're willing to spend the interest levels the the needle moving nature of the sport there's a lot of x factors to go into what ultimately the the approach that's been taken by rights owners to sell their rights and look for rights partners and how much they can turn that visibility into direct income through sponsorship sales.

45:39Chris Stone:This platform is like Formula E that have been built on reach over revenue from rights and then double down on that partnership visibility and storytelling for companies that want to position themselves alongside the motorsport or sustainability stories or electrical technology. that is a very different playbook also can be successful again depending on what your north star and what your ultimate goal and objective is so it's it's it's tricky well it's interesting

46:06Nick Meacham:because sponsorship is one of the other things that says is a positive for fragmentation sponsors want as many eyeballs as possible if you are exclusive you are i think nick we would say in general i mean this is my personal opinion typically the more fragmented you are yes it could be more of a headache but you could have a larger scale of reach sponsorship is one of the the arguments for fragmentation is it actually becomes more attractive for advertisers because there's more potential eyeballs to be seen as opposed to being with an exclusive sponsor as you say i think some events will be different someone like the masters where it's really short burst you know having that might be different than someone that's a full-length season but sponsorship was one of the counter arguments where fragmentation is a positive well i've seen

46:47Chris Stone:a lot of decks in my time and you'll see what they'll put in they put in those decks that they'll say that, oh, we reached 50 million people for this content because they had it in three different platforms. And they're talking about potential household reach rather than actual numbers. People like to tell little stories with their numbers and we see that constantly or every day with data points you see coming out. And that's inevitably why fragmentation works because they can basically aggregate those numbers and make it a much bigger number because there's so much crossover of audience. They can just say that they've aggregated a lot bigger number than you know the sum of all of its parts is worth a lot more than the actual the actual reach itself that they've they've achieved um so i'm not surprised it definitely would help and i think there is some successful cases but just not from the sponsorship lens not at the pre the top tier of sports it's always the tiers underneath that have prospered best with that now the last thing

47:44Nick Meacham:i'll wrap up with nick is one of the points that came up in joe's analysis and curious to know where you fall on this because I probably fall a little bit different to her is when you have a fragmented experience fans then have a fragmented viewing experience because every platform is going to be a little different no two experiences are the same it's hard to build sort of that maybe community vibe because you're always jumping around a little bit and if you had more exclusive deals all the other pros that you talked about would be true but also now you could build really more of a fan first led experience where the platform is really built around them I suppose where I fall a little bit different on this nick is i don't know how much fans actually care i think fans just want to watch sports and while how dare you i know and i and i appreciate when there's cool interactive features you know i'm a fantasy nerd i like having data you know presented to me and things like that i think the thing is nick like i'm gonna go back to piracy you know much love piracy you go to twitter at 3 p.m on a saturday you can pretty easily find people saying hey where's a link for such and such games like i don't think people act would it be nice to have a good experience yeah i'm sure but i think for most people they really just want the content and they might say that they prefer the itv commentators for the world cup over the channel four commentators the bbc commentators i just don't know how much fans really ultimately care about some of that stuff maybe that maybe that's just me my personal viewing experience nick but i I don't know if the idea of exclusivity allows you to build a user first experience.

49:19Nick Meacham:I don't, for me, Nick, I don't know if it's quite that big of a deal. That's just my, that's just my take on it.

49:26Chris Stone:Yeah. Maybe I'm old. I'm trying to think. Well, you are aging yourself quickly by that. You're talking about the way you consume sports.

49:33Nick Meacham:Well, my birthday is tomorrow, so I'm one year older, you know?

49:36Chris Stone:Yeah, that's true. Look, I think there's inevitable legs in this, but I think we've seen this over the years. is how much value can be created from this type of increased experience. And I think that's the bit I struggle with. I'm sure you can provide immense value for a segment of your target audience, but it won't be universal. And I think that's the tricky bit is you can spend a lot of time creating these personalized experiences that might just fall short on some people. But the cost will continue to go down. The technology will continue to get better. And maybe that will make a different experience.

50:09Chris Stone:But yeah, I mean, anecdotally, when I watch stuff on different streaming platforms, I don't actively have the remote in hand ready to try and look at some data points and so forth. I even have it on and I'm more likely to be on my phone in hand looking at second screening that way or whatever, again, you define as a second screen. Sometimes it's sometimes the second screen is the TV and sometimes it's the phone. It depends on what is on. and I've got those traditional, my go-to platforms that I use on a day-to-day that I might engage with. So I think if you want to usurp them and you want to try and take more of that real estate and you can add something that is really going to grab yours and my attention whilst watching something that I enjoy and really want to engage with, that is really exciting if someone can pull it off.

50:58Chris Stone:But I just think it's more difficult than it sounds.

51:00Nick Meacham:Yeah, I agree. It makes me almost think of aura do you remember our friend yeah of course the platform they were building i mean i probably would have dived into that a little bit but again you know that that's not necessarily worked out specifically in the sports space i don't think it has anything to do with the technology the technology looked great but i think uh to your point just how much value

51:17Chris Stone:can extract from those things yeah completely i think like if i built a man cave at my house where i could just put on the tv black black blacked out walls no one interrupting me and maybe the internet connection didn't work then i might start getting a bit more twitchy with my uh like what's on the screen and maybe engaging with it more but uh yeah i loved what aura was trying to do in terms of making more of a engaged personalized experience um you're building the platform in a video game engine to try and make it much more interactive but again i just think there's there's obviously different audiences that i want lean back versus leaning experiences you're not going to serve everyone and that's the conundrum media has is how do you provide a product that is good, at least good enough to all people to pay what is quite a low cost in general for content access.

52:04Chris Stone:That's again, the tricky conundrum, but hopefully we're going to solve it over the coming years, Chris, and everyone's going to love more engagement with pro platforms rather than those big tech bullies that keep eating the streamers and other content players lunch.

52:17Nick Meacham:Absolutely. Well, everyone, I hope you enjoyed this episode. Nick, it was a pleasure to go down memory lane with Netflix and remembering the blockbuster days. and like I said, I'll give you that deck on good to great.

52:29Chris Stone:Good stuff. Great to talk with you always, Chris. Thanks everyone.