At the UBS 43rd Annual Global Media and Communications Conference held yesterday, online streaming giant Netflix, Inc. NFLX maintained its “never say never” stand on entering the sports market.
Netflix chief content officer, Ted Sarandos said that it is not that the company will never get into sports but maintained management’s earlier stance that foraying into live sports and news is not really attractive. He also added that the appeal of watching sports live couldn’t match that of its online demand viewing.
Netflix has proven a game changer for binge viewing. The traditional pay TV landscape has been widely disrupted with people giving up their cable subscription for SVOD services.
However, there is one thing in which Pay TV scores over Netflix and that is live sports. Netflix has no presence in broadcasting live sports events. It is to be noted that live sports coverage these days is more valuable than ever. Channels shell out millions of dollars to win live telecast rights of sporting events like the Super Bowl and NFL.
Live sports action has remained a weak spot for Netflix. Though the company is eager to build its presence in this territory, it has never revealed anything about the strategy, leaving everything to speculation.
Analysts have observed that it is unlikely that Netflix will spend a fortune on obtaining live telecast rights as people are unlikely to use the service for watching sporting events. Moreover, even leagues might get skeptical to partner with a streaming service that is primarily known for its shows and original movies.
We believe that Netflix might eventually enter the sports market, but in a different way than streaming live sports, quite similar to the company’s attempts of breaking into the news genre by offering high quality news oriented documentaries rather than reporting live news.
Among other highlights of the conference, Netflix said that it was planning to double the number of original shows on its platform from 16 to 31 by the end of 2016. Moreover, the company also said that it plans to make 10 original movies. This will likely increase costs by as much as $5 billion.
Apart from that mind boggling figure, Sarandos wrecked investors’ nerves by saying that global licensing deals have not been as easy to come by as expected earlier. Shares of Netflix were trading down 5% following the comments from Sarandos.
At present, Netflix carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space worth considering include AMC Networks Inc. AMCX, Entercom Sinclair Broadcast Group, Inc. SBGI and Salem Media Group, Inc. SALM. While AMC Networks and Entercom carry a Zacks Rank #1 (Strong Buy), Salem Media has a Zacks Rank #2 (Buy).
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