Three leading industry figures are bullish on media rights values, believing that Netflix is likely to enter into European sports acquisitions to continue its growth, thereby significantly boosting competition in the market.
Gerry Cardinale, founder and managing partner of RedBird Capital Partners, and Jeff Shell, RedBird’s chairman of sports and media, made their comments in conversation at the IMG x RedBird Summit at the Soho Farmhouse in Oxfordshire, which concluded yesterday (Thursday).
Shell, the former chief executive of NBCUniversal who is due to lead the new Paramount, said that the primary affliction for media rights in Europe was simply that there were “not a lot of buyers”.
He believes that the more affluent “HBO or Sky Cinema” audience will keep paying Netflix’s subscription fees but this was now approaching saturation point. Netflix targeting growth through advertising-funded services, he said, is “difficult unless you have live sports.” This, he added, would lead to a “whole new ball game in Europe”.
Ari Emanuel, chief executive officer of Endeavor and TKO, speaking on day two, was also of this view: “I think every [media company], as they’re building streaming service[s], their SVOD and now their AVOD services are going to need sports. Whether Netflix goes in or not, they’ll figure that out.
“But there’s other players that need it and want it because they’re building their AVOD services, as we’ve seen with Amazon, etc. The greatest content for the AVOD services is sports. So, I think that’s going to drive pricing across the globe.
“And whether Netflix is in or out, that’ll be their strategy. The rest of them will play, and that will be good value creation for rights holders.”
Cardinale added: “As long as there’s this competition that’s been unleashed by streaming and the supply-demand imbalance, and content, you’re going to have major rights trajectory continuing the way it is.”
AC Milan was sold to RedBird in 2022 and, in deals struck last year, Serie A has seen a drop in its domestic rights value of about nine per cent.
Netflix has not yet acquired any marquee European sports rights, but did previously bid for exclusive rights to the ATP and WTA tours across most or all of Europe’s big five markets, as analysed in this SportBusiness Media feature.
In May, it made its first move into live American football and struck its first agreement with a major sports league, announcing a three-season deal with the NFL. Beginning this December 25, Netflix will be the global home of the NFL’s two marquee Christmas Day games.
Earlier in the year, Netflix had made its biggest foray into live event streaming, announcing a stunning $5bn (€4.5bn), 10-year global media-rights deal with World Wrestling Entertainment, which falls under TKO.
These deals marked a departure from Netflix’s previous reluctance to put down rights fees to show live sports. The streamer began to pivot late last year, albeit to live sports with Netflix as the creator of the likes of matchplay golf’s ‘The Netflix Cup’.
Speaking at the end of 2022, Netflix co-CEO Ted Sarandos said that the media company failed to see a “profit path” for major sports rights.
Asked if there was something of a bubble in media rights, Emanuel said there was but only “for sports that don’t command the ratings”, suggesting the bifurcation between the “haves and the have nots” in terms of media rights revenues would continue.
Cardinale said: “You’re seeing it everywhere. You’re seeing it in America, in baseball, you’re seeing it in Europe between the Premier League and the continent, and that’s why you saw the phenomenon of the Super League effort. What the NFL has done is really the model, because they put that all together. College football is the second most popular sport in America, but it’s highly fragmented. They haven’t had the ability to go to market for their intellectual property monetization as one continuous whole.”
Linear ‘will endure’
Cardinale was keen to emphasise that linear broadcast television would continue alongside streaming for the foreseeable future. “The demise of broadcasting is greatly exaggerated,” he said, adding that “more people tonight will watch CBS than Netflix, and that is going to continue for the next 20 years”.
The NFL was cited as the pioneer for this strategy that combined over-the-air broadcast with streaming, an ideal way of mitigating against long-term pay-television churn while also ensuring reach and revenues.
For Cardinale, the old-fashioned ‘bundle’ was likely going to see a comeback, due to the unviability of consumers continuing to pay for multiple streaming services.
He said: “The reality is that most people aren’t going to subscribe to 18 different streaming services. That’s why there’s a value proposition in the bundle. There will be some that will, so the whole point is to have linear rights alongside streaming and offer a menu of opportunities to economically get the IP holders what they need, it gets the distributors what they need.”
At another session, NBC Sports’ president of acquisitions and partnerships, Jon Miller, and George Cheeks, president and chief executive of CBS, also talked up the linear broadcast and streaming combination.
Miller said that advertisers “realise the value of broadcast television. When Comcast acquired NBC Universal in 2011, NBC as a broadcaster and CBS were in 115 million homes, and cable was up to 105 million homes. As of September 1, [over-the air] broadcast is in 126 million homes, and cable is down to 65 million homes. So, it’s almost a doubling of the audience. And that’s why broadcast television is so valuable and so powerful, and that’s what these leagues recognise.”
For Cheeks, the value proposition “to drive unduplicated reach is reinforced by the stats”.
He remarked: “If you just take last season, CBS’s [coverage of the] NFL regular season was up 5 per cent. It was the highest rated regular season since ’98 when CBS reacquired the NFL, and it was up more than 50 per cent on [streaming platform] Paramount+. So again, we’re meeting the audiences where they want to be and we’re not cannibalising.”