Netflix payout of $150 million for this pair of NFL games is a 'prestige' play, expert says

MW Netflix payout of $150 million for this pair of NFL games is a 'prestige' play, expert says

By Weston Blasi

Christmas Day football games will be streamed exclusively on Netflix. Here's what you should know.

Typically the only major live sporting events on Christmas Day are NBA games. But not this year.

The National Football League is showcasing a special Christmas Day slate of games - and putting them behind Netflix's $(NFLX)$ paywall after the streamer shelled out an reported $150 million for rights to the games. It's the first time one of the four sports considered the U.S.'s most popular will be aired live on Netflix.

The Christmas Day matchups pit the two-time defending Super Bowl champion, the Kansas City Chiefs, against the Pittsburgh Steelers, and the Baltimore Ravens against the Houston Texans. The games will be available to all Netflix subscribers, regardless of their subscription type.

While attending watch parties or grabbing a stool at a sports bar are go-to workarounds when must-see games are restricted to pay channels, the latter might be off the table in this case.

Even if an establishment is open for business on Christmas, the Netflix games might not be available due to a DirecTV $(T)$ licensing issue, according to a report by CNBC's Alex Sherman.

Streaming in

"Pursuing rights to live sports events is not a particularly unique strategy anymore - we're seeing it all across the major streaming players now," Jacqueline Corbelli, chief executive of BrightLine, a technology company that specializes in television advertising, told MarketWatch. "It will continue to get more and more expensive to secure these rights, and it's just the beginning."

Streamers like Netflix, Comcast-operated $(CMCSA)$ Peacock and Amazon.com's $(AMZN)$ Prime service , to name a few, have displayed eagerness to pay up to get involved in sports because games can be marquee events that draw enormous interest across demographics - and that can motivate people who have resisted previously to become subscribers.

"The fight to minimize churn and maximize the potential for generating ad revenue is real and well underway, but we are definitely in the early innings at this point," Corbelli said. "The NFL is the ultimate in sports prestige in the U.S. - it knows its value."

Netflix, which reached a deal to broadcast the 2027 and 2031 FIFA Women's World Cup last week, now has the NFL, soccer, WWE and boxing in its sports-streaming portfolio. Some analysts have said premier programming like live sports could offer a pathway for streamers to raise prices.

Netflix's Mike Tyson-Jake Paul fight in November drew 108 million viewers.

While that was a strong viewership number for Netflix, the streamer did experience a series of technical difficulties that night, including bandwidth issues. But analyst are not concerned that the problem will recur on Christmas.

"Our guess is that viewing was likely [approximately two times] internal expectations - a high-quality problem that can easily be fixed by Christmas Day," Oppenheimer analyst Jason Helfstein's wrote in a note to clients, concerning the gimmicky boxing match.

Many of Netflix's technical woes on the Tyson-Paul fight night subsided as the event carried on.

See also: Apple to see strong Christmas iPhone sales that launch a 'renaissance of growth'

The NFL has continued to sell off pieces of its game schedule to individual streaming partners. The league now has some of its games on platforms including Google's $(GOOG)$ $(GOOGL)$ YouTubeTV, Amazon Prime Video, Peacock, Wal Disney's $(DIS)$ ESPN+, NFL+ and Netflix. The total cost to watch every single NFL game this season without cable has hit $2,500, excluding the cost of ongoing internet service.

Netflix's deal with the NFL allows it to put Christmas Day games on the schedule in 2025 and 2026, as well, so the advent of exclusively streamed NFL games appears to be a longer-term play.

Value proposition

Investors may be wondering: Can Netflix extract $150 million in value for these NFL games? The answer may not be known in the near term.

"These initial investments will pay off, because of the advertising revenue they will generate, and the leverage they provide Netflix for reducing net churn and continue growing its global subscriber base," Corbelli said.

"Given the prestige of streaming NFL games, Netflix's move is the ultimate 'flex' of its streaming superiority," she said.

Shares of Netflix are up 87.7% to date in 2024, compared with a 24.9% gain for the S&P SPX 500.

Read on: NBA superstar Giannis Antetokounmpo on the 'life-changing money' he just helped some of his teammates make

-Weston Blasi

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December 23, 2024 15:10 ET (20:10 GMT)

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