Netflix: Sports is the 'go-forward business,' analyst says

Netflix (NFLX) and the National Football League (NFL) have announced a new partnership to bring NFL games to the streaming platform on Christmas Day. This move marks a significant shift for Netflix as it ventures into the realm of live sports broadcasting. Citi Managing Director Jason Bazinet joins Yahoo Finance to provide his insights on this deal.

Bazinet highlights his previous concern regarding Netflix's ability to achieve global scalability with its content offerings. He notes that two avenues to attain this scalability are through sports and video games, which Netflix has been actively pursuing. While Netflix was initially hesitant to embrace sports content, Bazinet states that with the NFL deal and the existing partnership with the WWE, Netflix has now officially entered "the sports business."

"I think this is much more about testing the waters, learning how to do advertising inside of sports, and then sort of down the road presumably bidding on more sports rights and doing more advertising. I think it's a good thing, it's just a natural evolution of the business," Bazinet tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Angel Smith

Video Transcript

Well, you can't spell Netflix without NFL.

That's what Netflix said when announcing its new partnership with NFL to stream Christmas Day games for the next three years.

For more, we're bringing in city managing director, Jason Bazin Jason, it's good to see you here.

Um Netflix had been sort of resistant to this whole sports streaming idea.

Is it a good thing that they have come around?

Well, I think it is a good thing.

I mean, it, it's natural.

Uh one of the concerns that we've had over the long period of time for uh Netflix is that it's very difficult to get scalability globally on content, right?

You end up having to go into each individual market to tailor content, to appeal to different folks.

I think two ways to skin that cat is to go after sports, which does scale a little bit better globally.

And then the other vector that Netflix is pursuing of course is video games, which is also um we think scales globally more effectively than scripted content.

And Jason any uh any line of sight here or even estimates uh what you think the financial terms here might be what they could be spending per game.

Well, I'll just give you some rough numbers.

I mean, the NFL today and aggregate generates about $12 billion for their rights that covers about 272 regular season games.

So that comes out to about $45 million a game because these are, um, in the Christmas period, you're gonna get closer to the playoffs where the ratings are typically higher.

Um, so I would think something like, I don't know, 75 million, 100 million, uh, is probably the rough order of magnitude.

And then, you know, it, it's interesting the announcement because it's two Christmas Day games this year and then two holiday season games in the following years.

I mean, could we even see a Netflix Thanksgiving Day game, for example?

Yeah, I mean, I think, um, look now we started out where Netflix was against sports and then when they did the deal, um, to do the WWE it was sports entertainment, um, and then on the last earnings call they sort of opened the door to potentially doing sports.

And so now they're, they're just in the sports business.

I mean, we can quibble and say, oh, it's only sports during the holiday season or whatever, but they're in sports.

I mean, it's, I think it's just the go forward business and Jason, we talk about this NFL deal, you know, uh, and how could help build out the ad t how do you, how do you think also it might just kind of support membership growth?

Yeah, I'm not sure.

I mean, Netflix is so ubiquitous and NFL is so popular.

I'm not sure that the NFL is really integral to helping Netflix retain subs.

I think this is much more about um testing the waters, learning how to do advertising inside sports and then sort of down the road, presumably bidding on more sports rights and doing more advertising.

So I think it's a good thing.

It's just a natural evolution of the business.

But I don't think that this experiment with the NFL, I'll call it, that sort of small experiment is going to do much in terms of retaining subs or making subs even more engaged.

Um This number that we got on the ad supported users, the 40 million global monthly active users on the ads supported tier is that in line with what you expected better than worse than, yeah, the way we sort of look at this, I mean, Netflix gives us these mao numbers, you know, every couple of months.

And so we just subtract the time that elapses from the last time they gave us a mao number to this time.

And if you take that latest disclosure, it's about the same um run rate that they were on the last data point they gave us, which was in December.

So I would say this is no big deal actually got you all Right.

Well, let it's upfront week, not just for Netflix, but for all of the different networks, the stream included like a Netflix.

Um, anything else that stood out to you?

And I would ask on a broader picture, you know, is, do you have a favorite based on anything you heard or just in general?

And now what seems to be the era of bundling of these various streaming services?

Yeah.

Our preferred place is more to buy sort of sports.

That's sort of where we're more animated.

You know, Netflix itself.

I mean, the Bulls have been arguing for some time to put a 25 pe multiple on 25 earnings, which the Bulls would argue is $25 a share and they come up with $625.

I look at that and I just sort of shrug my shoulders.

I'm like, ok, let's say that they smash earnings and we get $25 of earnings, you know, a year and a half from now, out of 25 multiple you're playing for 625.

It's just not that interesting to me.

That's why we're neutral on Netflix.

Gotcha Jason.

Thank you so much.

Good to see you.

Good to see you as well.

Thanks.