Why Netflix spent billions for WWE

0:01NPR

0:11This is The Indicator from Planet Money. I'm Adrian Ma. And I'm Darian Woods. Darian, have you ever watched pro wrestling before? I had a friend who was into it, so yes. Okay, so you've seen it before. How would you describe it to somebody who's never seen it? I would say it's kind of like scripted acrobatics that mostly has an audience of teenage boys. But a lot of teenage girls, and let's be honest, a lot of adult men and women too. Right, that's true. Here's how Kazim Famuyide describes pro wrestling. It's, in essence, a TV show. It's a violent soap opera. Kazim is a co-host of The Masked Man Show, which is a podcast about pro wrestling.

0:52Like, it's combat sports, it's all that, but it's also entertainment. It's also storylines, also the big personalities that bring you in. For a long time, Kazim says admitting you liked pro wrestling could be a little embarrassing and earn you some judgmental looks for people who just didn't get the appeal of muscle-bound dudes in spandex pretending to body slam each other. But in recent years, Kazeem says it feels like that's changing. It's very much entrenched in pop culture everywhere. And it doesn't seem like a weird thing to like anymore. It just sort of feels like one of the other major sports.

1:27And this week, pro wrestling took another big step into the mainstream as world wrestling entertainment, WWE, which for years ran on cable TV, debuted on the world's largest streaming platform, Netflix. It is the latest punch thrown in the ongoing fight for sports content between streamers and the old school cable and broadcast networks. Today on the show, what Netflix's investment in live sports programming says about the war for viewers' eyeballs. And does it signal the end of cable TV?

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2:56That's the Zendesk AI effect. Find out more at Zendesk.com. You may have heard in recent years about a trend called cord cutting. That's where customers increasingly abandon their cable TV subscriptions in favor of getting their content in other places like streaming. According to the market research firm Ibisworld, a decade ago there were over 100 million cable subscribers in the US. And today it's only 66 million. That is a huge drop. And in a sense, cord cutting is what World Wrestling Entertainment, WWE, is doing with one of its longest running programs called Monday Night Raw. Now, if you haven't seen this, Monday Night Raw is sort of like a traveling carnival of carnage.

3:40Every week, a different city. And every Monday, an evening medley of head bashing and chair smashing and high-flying drop kicks ensues. And it all airs live on cable TV. But yesterday's Monday Night Raw was different from these others because for the first time, it went live on Netflix. WWE and Netflix promoted the heck out of it. Welcome to Raw on Netflix.

4:08This is part of a$5 billion deal where Netflix agreed to pay WWE for exclusive rights to the show for the next decade. And it's not the only live sports deal Netflix has struck. It's also secured rights to stream National Football League games and the Women's World Cup. So why would Netflix pay billions of dollars for this content when it already has its own massive machine for generating movies and TV series? We put that question to Paolo Pescatori, eTracks Media and Telecom Companies for an analyst firm called PP Foresight. I think for Netflix, they need to diversify. They can't just solely rely on one genre, say, or just on-demand programming.

4:52Paolo says Netflix is the global leader in streaming right now. And according to the company's third quarter earnings report, it has about 282 million subscribers around the globe. But there are plenty of competitors nipping at its heels like Amazon, Apple, Hulu, plus lots of smaller niche streaming companies. For Netflix, getting rights to stream live sports is about keeping its competitive edge. Thing is, Paolo says that this is easier said than done. You know, it's not just about acquiring those rights. Perhaps more important is ensuring that you have a robust and reliable infrastructure to deliver those streams at scale to millions of users worldwide.

5:35The difficulty of streaming a live event around the world became clear when Netflix ran a boxing match between Jake Paul and Mike Tyson in November. Many of the tens of millions of people who tuned in were hit with lots and lots of buffering. This one aggrieved TikToker had a lot to say about the production. Let me ask you something. What's wrong with Netflix's stream? First off, this looks like it's running in 360p. The audio's low. The crowd sounds loud. What's going on, Netflix? Have you not had any run at this at all? Still, Netflix's early forays into live sports seem to be successful at attracting viewers.

6:12For example, last month, Netflix for the first time streamed two NFL games live on Christmas Day. And each of those games drew about 14 million viewers, making it the most watched English language programs on Netflix that week. Those kind of numbers also explain why, from a sports league's perspective, they're also interested in getting their games on streaming, especially as a lot of TV watchers increasingly cut the cord. With the users now flocking towards services like Netflix and the like, the sports associations, the leagues and the franchises now want to be better connected with where the viewers are.

6:51They want to kind of broaden their customer base beyond the core following. They obviously want to move into other countries and they want to have a better understanding and attitudes of the sports fan than they currently do today. The way things are shaping up, Paolo predicts this content war between streamers and old-school cable and broadcast networks will continue. And in the future, some may look very different, changing business models or merging with other companies. One thing for sure, he says, is that the ones who survive will be looking for ways to offer their content online. And in fact, we're already seeing some old school cable and broadcast providers distributing their content over the internet.

7:34Will we ever see the Super Bowl being streamed over a streamer over the next five years? Most likely not, but certainly in the 2030s, we will get to see a big global sporting event being exclusively available over the internet. That's actually more pessimistic than I would have thought. I mean, I think it'll probably come sooner than we think. And next will be like the Westminster dog show. Well, WWE isn't the Super Bowl. Well, to be frank, nothing is the Super Bowl. for folks like Kazeem Famuyide, it doesn't really matter. I'd say pro wrestling fans are some of the most diehard loyal fans I've seen in any form of entertainment.

8:20If you build it, they will come. Darian, if you could see any big sports competition on Netflix, what would you want to see? Competitive game theory, maybe? That would be on brand, yeah. Netflix, you know who to call. I'll be waiting.

8:38This episode was produced by Corey Bridges with engineering by Jimmy Keely. It was fact-checked by Sierra Juarez. Cake & Cannon edits the show in the indicators of production of NPR.