Netflix killed Blockbuster by renting DVDs by mail, then pivoted into movie and TV show streaming.
Traditional players are now scrambling to amalgamate due to Netflix' strategy of buying lesser known parts and then adding customer-friendly features. Now, Netflix' service is indispensable. Its worth more comparatively speaking than the 10% it costs compared to cable. Granted, this is just opinion, but I think most customer feel Netflix is either 100% as valuable, or somewhere near that number. And the result is fewer cable subscribers.
Netflix has a track record of reacting to the needs of their consumers. Originally, Netflix shipped actual DVDs to consumers through snail-mail. As Netflix became popular, they drove video rental giant Blockbuster into the ground. After killing Blockbuster, it became clear that consumers preferred to watch movies online, Netflix switched gears in a big way to online streaming of all of their content. Once they came to dominate online streaming, Netflix pivoted into original content creation. Unfortunately, despite these amazing corporate transformations, Netflix still has financial challenges.
With negative $4 billion in cash flow in 2018, $6.54 billion in long term debt, $17.9 billion in content obligations coupled with just $2.6 billion in cash, Netflix may be challenged if interest rates increase. If the solution ends up being to issue new stock, that’s a bit of a cop-out and may signal to investors that Netflix is out of options.
The question for Netflix is: how to pull another rabbit out of the hat? There are a lot of risks for the company. It seems unlikely Netflix will ever give up streaming on the net. The only possible way to improve their existing service would be to forecast content people might someday want, and pre-download it onto their device. That way, no matter where they are, the content will be local and not disruptable from either a WIFI issue, or a net neutrality battle. Maybe they would call that service Pushflix.
But a pivot from on demand streaming to AI driven content pushing is – while technically clever – not much of a pivot. Users would still fire up the Netflix app, and still watch videos on their devices.
Instead, the next meaningful pivot for Netflix will be in the content they present. Netflix will need to start to think about streaming live content in order to get consumers to cough up more than 10% of their cable bill. By eliminating the competition, or weakening their ability to bid on live sports, this result may be Netflix' long term plan anyhow. But wouldn’t it be very Netflix-esque to locate a lesser known sport and begin its live broadcast? Once consumers became hooked, Netflix could broaden their approach to other sports, eventually snagging the big fish like NFL, NBA, MLB and NASCAR.
Netflix has even gone so far as to state that they would follow this exact strategy if they could locate sports they could own and present as original content to Netflix subscribers. To help Netflix get the ball rolling, here are 5 sports they should consider.
1. NXFL - The Netflix Football League
Football in the United Sports is popular, to say the least. The National Football League enjoys television revenues of $12 billion annually. For a while, World Wrestling Entertainment CEO Vince McMahon launched the XFL in an attempt to capitalize on the seemingly never ending thirst for football in America. The XFL did not pan out, although McMahon has indicated it may be returning. The idea itself, however, was brilliant. The XFL began its season just as the NFL season wrapped up. Because the NFL season runs from just September to early February, a rival league could definitely fire up and exist during March through August. Although there are serious health concerns with playing football during the blazing summer heat, many venues now are indoor, and perhaps that would be a consideration for teams considered for inclusion in such a league.
Granted, by referring to themselves as the NXFL, Netflix would likely need to fend off lawsuits from both the National Football League and Vince McMahon. But owning a football league and streaming live games on Netflix would be a sure thing for bolstering their bottom line.
2. NXLL - The Netflix Lacrosse League
Netflix historically added movie titles to their catalog that the big guys didn't mind giving away for next to nothing. Netflix took the opportunity with lesser loved movies and pivoted those assets into a juggernaut of a business. In taking that approach to sports, Netflix might be wise to look for sports with the potential to draw fans, while not currently having a significant professional sports presence.
Lacrosse is a sport that may be the perfect fit. Canada's national sport, contrary to the belief of those who think it must be hockey, Lacrosse is a fast moving, rough and tumble sport that could be a blast for fans to watch. Lacrosse shares venue requirements with hockey as well as basketball. Scoring venue contracts with arenas - particularly in a lacrosse league that ran during off months, such as from April through October, Netflix would have a tremendous opportunity to groom a new sport with ancient roots.
3. NXCL - The Netflix Cricket League
Throughout the world, fans will flock to watch the sport of Cricket; however, they seem determined to do the opposite in America. Netflix could bring Cricket to the United States in a big way, providing a live streaming alternative to America's version of cricket, baseball. This strategy would be fairly high risk, given Americans seem to love baseball. However, there is a precedent of bringing a sport popular globally to America to compete with an American equivalent.
Major League Soccer
began its first season in the U.S. in 1996.An American interpretation of soccer is American Football. Although the MLS did not start off with a bang, the league did bring in David Beckham to Los Angeles in an attempt to reuse a strategy first employed by the National Hockey League when Wayne Gretzky made hockey trendy in the southern United States while playing for the Kings. The Beckham gimmick seemed to do the trick, as MLS games now enjoy average attendance figures of 21,692 fans per game, a number exceeding both National Basketball League games as well as those of the National Hockey League.
By bringing in Cricket and streaming games live on Netflix, fans might be drawn away from baseball and spend their entertainment dollars on cricket instead.
4. NXRL - The Netflix Rugby League
Rugby is another sport whose popularity is high globally and virtually absent in America. Rugby is very similar to American Football, and thus might be a low risk option for Netflix to build around. Were Americans drawn to rugby with even a fraction of the enthusiasm with which they are drawn to American Football, Rugby would be a huge success in America.
Rugby even has potential greater than American Football. Rugby is played without equipment, and from a television perspective, the ability to see players' faces clearly is a huge advantage a rugby league would enjoy overall virtually all other sports leagues, except basketball. Fans watching over Netflix would be able to more clearly form an affinity for players they can see clearly.
5. NXSL - The Netflix Squash League
Squash is a lightning fast racket sport that blends power and skill into a deeply engaging game. Squash requires a tiny venue, and thus commands only a small investment to get going. There is little standing before Netflix in terms of professional sport competition.
The downside to squash is that it would likely never be possible to offer squash as a sport capable of drawing a huge number of live fans. But from a Netflix perspective, that drawback may actually be a strength. If Netflix could find a way to present squash in a streaming-friendly way for viewers to watch, perhaps in a fashion similar to how poker is presented with updates shown from various games in progress, the result might be a winner.
Summary
Netflix is burning through cash and may need to return to its roots and pivot into new and exciting areas to command higher fees from its subscriber base. Live sports is very likely the key, and with Netflix' stated requirement to own the live content they broadcast, under-served sports may be the way to get going. 5 under-served sports that may just fit the bill are Football, Lacrosse, Cricket, Rugby and Squash. By bringing live content onto the devices of millions of subscribers, Netflix could enjoy benefits of higher fees as well as revenues generated by fans drawn to the sports themselves.
Do you think Netflix will ever stream live sports? How much more would you pay for Netflix if they had live sports? What other sports do you think make sense for Netflix to stream?