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Netflix is moving into sports.

On November 14th, it broadcast “The Netflix Cup” live, which paired F1 drivers with professional golfers for a golf competition. The event promoted the two Netflix docuseries covering both sports, Formula One: Drive to Survive (for F1) and Full Swing (for Golf).

The event had its fair share of difficulties. Animal-rights protestors burst onto the screen before being chased away, and technical audio issues persisted throughout the event. Still, it was a promising crossover between F1, golf, and Netflix. And more importantly, it cements Netflix’s position in the media industry for sports.

Netflix does not stream live sports directly. At first glance, this may be puzzling. Sports streaming is extremely lucrative: amidst the trend away from cable TV, sports remains one of the biggest draw compelling cable customers to stick around. According to Nielsen, the streaming of NFL and college football season games in September propelled broadcast sports viewership up by 360%, and bumped cable TV viewership up by 25%.

However, as everyone knows how valuable the right to stream sports is, the demand for these rights is extremely high. Everyone from streamers like Warner Bros. Discovery and Disney, to tech giants like Apple and Google are rushing to get in on the action.

Accordingly, the cost is exorbitant. Apple has agreed to pay $250 million annually to stream Major League Soccer matches for 10 years. Amazon and YouTube reportedly pay $1 billion and $2 billion annually for NFL streaming rights.

Hence, Netflix has refused to stream live sports. The following statement from Co-CEO Ted Sarandos sums up Netflix’s stance quite comprehensively:

Look, I’d say in sports, our position has been the same, which is we really — we’re not anti-sports. We’re pro profits, and we’ve not been able to figure out how to deliver profits in renting big-league sports in our subscription model.

The power of docuseries

Instead of pursuing sports directly, Netflix is taking an alternative approach through sports docuseries. Dubbed by Co-CEO Sarandos as “sports-adjacent” programming, these docuseries offer a unique blend of behind-the-scenes narratives, in-depth player profiles, sporting politics and historical retrospectives that capture viewers’ interest. This method has two key benefits that Netflix is exploiting.

First, it is much cheaper than streaming live sports. As mentioned earlier, the rights to do so are extremely expensive. By airing docuseries, not live sport events, Netflix gets to sidestep the astonishing costs of live streaming while simultaneously capturing sports demand. According to one estimate, it would cost less for Netflix to make dozens of docuseries for less than to air a single season of NFL.

Second, should a sport grow in viewership, Netflix does not run the risk of paying steeper prices for broadcast rights. Similar price hikes have happened before, when F1 hiked the rights for ESPN to stream races from $5 million in the 2018 deal to a reported $75-90 million in the 2023-2025 deal.

Such a scenario pits the incentives of streamers and sports organisers against each other. Meanwhile, Netflix’s docuseries approach aligns its incentives with sports organisers. Its goal is to produce good documentaries that promote the sport and increase its following, which would simultaneously benefit Netflix as viewer engagement on Netflix increases. This brings me to the second key benefit that Netflix’s approach offers: mutual benefit for both Netflix and sport businesses.

To truly understand the potential benefit that these docuseries offer to both Netflix and sports businesses, look no further than Formula One: Drive to Survive. Arguably, this is Netflix’s most successful docuseries, and the one that catalysed Netflix’s distinctive take on sports. Drive to Survive regularly hits Netflix’s Top 10 Most Watched list, with 6.8 million people watching the show.

It has also immensely benefited F1. F1 is a sport that has historically appealed to an affluent and older demographic. This was especially true when it was led by British businessman Bernie Ecclestone, who once declared that “I don’t know why people want to get to the so-called ‘young generation’…I’d rather get to the 70-year-old guy who’s got plenty of cash.”

As a result, engagement for F1 was poor. With much technical complexity around the regulations and engineering aspects, it was a sport that many people were aware about, but not many people understood well.

Hence, by leveraging a documentary format, Netflix could solve a core problem with F1, namely its lack of appeal outside its niche audience. By providing close access to teams in an easy, accessible format, Netflix could better drive understanding of the sport, and in turn grow its fanbase.

And the results speak for themselves. The show is largely credited for F1’s resurgence in recent years. In 2021, F1’s US ratings grew 54% for ESPN, in no small part due to Drive to Survive: Nielsen reports that 34% of US viewers became an F1 fan after watching the series. Many cite the “Drive to Survive” effect as having almost single-handedly revitalised the F1 audience (especially in the US), attracting younger demographics and even crashing the website for the 2022 British Grand Prix.

Netflix has replicated this approach for the other sports it’s gone after. Apart from F1, it’s gone after sports like Golf (Full Swing), Tennis (Break Point), boxing (At Home with the Furys) and cycling (Tour de France: Unchained). These are niche sports relative to sports like football and basketball. As such, the players and narratives are less well-known, meaning that Netflix has more room to create a niche for itself as these sports’ “explainer-in-chief”. Sure, it’s gone after larger sports like football too, but its efforts here focus on specific characters like David Beckham (Beckham) and Pelé (Pelé), and are one-off documentaries that aren’t Netflix’s core focus in sports.

Hence, Netflix’s pursuit of sports docuseries (with a focus on relatively niche sports) allows it to benefit both itself and the sports brands. This mutually beneficial relationship is perhaps the key reason for why Netflix’s approach is so promising. It ensures that the sports brands are incentivised to keep their relationship with Netflix for as long as possible. With little competition present, fan bases have already grown familiar and comfortable with Netflix’s docuseries style.

Practically, this means that it is extremely difficult for sports brands to pivot to a Netflix rival to produce similar docuseries down the line. As such, Netflix can enjoy the luxury of broadcasting these wildly popular docuseries for a practically indefinite amount of time.

What this also means is that Netflix has much bargaining power over the sports brands. Hence, even as the sports’ fan bases grow in size and value, Netflix can ensure that the price it pays to broadcast these docuseries it kept to a minimum.

Separately, some may argue that the “live” sports content means that Netflix won’t drive viewership when the events are happening in real time. True, but this may be less of a concern than you think. Take it from Sarandos, who argues that this approach lets Netflix “offer this wide variety of sports programming for sports fans that’s in-season year round”.

And this suits Netflix just fine. Netflix’s business model revolves not around convincing customers to keep their subscriptions only during the sports seasons, but rather year-round. Hence, it makes much more sense for Netflix to offer documentary content that drives engagement for longer periods, rather than live sports broadcasting whose value quickly diminishes after the season ends.

Netflix’s own live sports events

Alright, so Netflix’s sports docuseries are all well and good, but how does the Netflix Cup fit into all of this? Doesn’t it refute everything I’ve said so far about Netflix not going after live sports? No. This is because it was an event hosted and owned by Netflix, not by an external party. Hence, Netflix didn’t have to pay for the extremely high costs of purchasing the broadcast rights, which is the main drawback to streaming live sports.

In my view, the Netflix Cup served three main purposes:

Promoting Netflix’s two docuseries on F1 and golf
Strengthening Netflix’s connection to the F1 and golf brands as a “core promoter” of the sports
Enriching Netflix’s range of entertainment options even further

If Netflix hosts similar events in the future, it will allow Netflix to further pursue these three goals. As such, in-house live events will supplement, not detract from, Netflix’s unique approach to sport. This will allow Netflix to reinforce its core offerings, further strengthen the value proposition it provides to customers, and above all, drive sustainable long-term engagement.

Moreover, such live events allow Netflix to hasten its push into advertising. The Netflix Cup had numerous sponsors, most significantly T-Mobile and Nespresso. Ads synergise extremely well with sport. Virtually no other media format engages audiences to the same extent, where fans’ fear of missing the action can lead them to refrain from simple actions like even getting water from the kitchen. As a result, fans are engaged even during commercial segments, due to an uncertainty over when the action will start again. Moreover, the consistently family-friendly nature of sports allows for a broad appeal to all demographics that advertisers can leverage. With Netflix pursuing ads through its recently launched ad-supported pricing models, hosting such live events will allow Netflix to further pursue ads as a source of revenue down the line.

All in all, Netflix’s distinctive approach to sport is a unique case study of leveraging a market gap in an otherwise saturated industry. By focusing on docuseries (and potentially its own live events in the future), it drives significant engagement which benefits not only itself, but also the sports brands it cooperates with. This mutually beneficial approach ensures that both parties are committed to sustaining these offerings for as long as possible, allowing Netflix to continue providing valuable entertainment for a practically indefinite period.

Simultaneously, as Netflix substantially grows the fanbase of the niche sports it collaborates with, it gains significant bargaining power over these sports brands. This means that even while the value of these brands grow, the price Netflix pays these brands to broadcast content can remain relatively low.

The sheer value proposition Netflix’s docuseries offer to sports hence allows Netflix to sustain low-cost, high-engagement shows for practically forever.

In the increasingly competitive streaming wars, that may make all the difference.