Live Sports Is Strategically Important To Streaming
Live sports captures large audiences, even in today’s social media-driven world of short attention spans. It’s why Amazon broadcasts NFL games on Thursday nights. It’s why YouTube paid $14 billion for exclusive rights to NFL Sunday Ticket. It’s why Apple struck a 10-year, $2.5 billion deal with MLS back in 2022 and why Netflix struck its WWE/Endeavor deal yesterday. Live sports carries a large enough audience to where it can serve as an anchor tenant for a large streaming platform.
I expect content producers to continue to acquire sports leagues opportunistically in the pursuit of audience / subscribers. It’s why Endeavor (EDR) pursued and won competitive bidding processes for its 2016 UFC acquisition and its 2023 WWE acquisition and why it pursued a deal with the PGA Tour last year. It’s why Liberty Media (LSXMA) acquired Formula One Group in 2017 and pursued the WWE acquisition last year.
When acquisitions are not practical, you will see the large streaming platforms pay for broadcasting rights. For example, it would not be practical for a streaming company to try to acquire all 32 individually owned NFL teams. However, it would make sense for one company to work to acquire the UFL if that spring football league owned by Dwayne Johnson has success this season (Endeavor has the inside track given Johnson and EDR CEO Ari Emanuel are in business together with multiple business relationships).
I would expect Netflix (NFLX) to try to acquire Endeavor should the WWE deal bring significant new subscriber growth and/or minimize churn to the platform’s ad-driven subscription product. Netflix won’t have to wait 10-years (the duration of the WWE deal), to know if the WWE is working.
Disney would be wise to acquire a sports league (we have floated Endeavor in the past given that ESPN is the exclusive broadcaster of UFC PPVs, which single-handedly built ESPN+), as ESPN needs grist for the broadcasting mill. Absent content, ESPN is near worthless. Further, owned-content is the way for ESPN to go as before long ESPN - particularly as a standalone company - won’t have the balance sheet to compete for rights deals when pitted against Apple, Amazon, Comcast (CMCSA), Google and Warner Brothers Discovery (WBD).
Sports leagues with single ownership structures are the most attractive acquisition candidates.