Netflix has never streamed a live event, and CEO Reed Hastings says they never will.
Now that’s a wise comment for a disruptor to put unambiguously on the record, especially since the TV networks could immediately pull their content from Netflix if they ever heard otherwise. But we all know that occasionally CEOs change their minds.That’s why I decided to imagine what would happen if Netflix took on live events. And as soon as I played out the scenario, it became obvious: Sooner or later, they will.
Live Is the Lifeline of Television
Television incumbents wouldn’t need to wave off cord cutting if they weren’t genuinely scared of it. New data show that 30 percent of U.S. Internet users would consider cutting their expensive and relatively despised cable subscription to watch TV exclusively online. But even with as much content as digital pure-plays like Netflix, iTunes and Hulu now offer, there’s one outsized variable that’s holding the whole cable bundle together: live events.
Live events are inordinately valuable. They have ultimate scarcity. They happen “right now,” they provide a focal point around which hordes of people come together and they give their viewers an “I was there!” experience beyond just the content itself. Live events are one of the few must-haves in consumers’ media diets. Personally, I can vouch that the Olympics, the Oscars and Boston Marathon news are the only television in the last year that drew this cord cutter’s rabbit ears out of the cabinet.
Live events are what cable and broadcast TV have that Netflix doesn’t: news, talk shows, and — most importantly — sports. “The biggest question we get from potential cord cutters is how to watch live sports without paying for cable,” reports GigaOm. There’s still no feasible alternative.
At least, not yet.
Netflix’s Massive Audience for Mass – and Niche – Media
With 29 million streaming subscribers in the US, Netflix has more video subscribers than Comcast. And not only does Netflix have the reach, it also commands an enviable share of viewers’ daily attention. According to BTIG analyst Richard Greenfield, if Netflix were a cable network, it would be the most-watched cable network on the air.
Even more powerful than its reach is Netflix’s legendary ability to target niche audiences with a long tail of content. Netflix won’t need to spend a billion dollars on NFL rights (though, as Peter Kafka notes, one certainly could). Instead, it could start organically, with a live stream of the White House Correspondents’ Dinner Roast served up to its political documentary fans and comedy buffs. It wouldn’t surprise anyone if Netflix found that those most likely to watch the Tony Awards are exactly those who have streamed more than their share of Les Misérables. And voracious consumers of Pelé and Beckham documentaries would certainly be an easy target for a new offering of pro soccer matches.
If live events and movie reruns sound like the Felix and Oscar of television programming, consider this: The very first two programs aired by HBO when it launched in 1972 were a Paul Newman movie and a New York Rangers game.
Just as HBO started with hockey, bowling and wrestling, Netflix could insert the thin edge of the wedge under various niche interests — and as the audience expands, so can the programming. With TV network ratings shrinking these days, at what point does Netflix surpass NBC in viewership and become a credible bidder for streaming rights to the Olympics? NBC has those rights locked down through 2020, but if the audience continues to shift online, we could be just two Summer Olympics away from the first completely cordless Games.
Premium Content Means Premium Revenues
Why would a low-priced, all-you-can-eat subscription service add mass media events to the bundle? Because eventually it will need a new revenue stream — and it can’t justify premium pricing without adding new premium content.
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