Credit: Rohan Solankurkar via Unsplash
Netflix spends 5% of its content budget on live programming for just 1% of viewing hours.
But the streaming giant considers it money well spent because live events are a powerful subscriber acquisition tool.
Co-CEO Greg Peters, briefing analysts on June quarter earnings, said live events deliver value beyond raw viewing numbers.
"There is not a linear relationship between view hours and revenue and profit, because all hours are not created equal," Peters said.
"Live events do a lot of lifting for us for acquisition. They're good for monetisation. They drive ad revenue, fandom. They're also a promotional platform. They do not yield typically as many raw view hours.
"Live, we expect, will be 5% of our content budget this year, but we think that'll only be 1% of view hours.
“Having said that, six out of top 10 new member sign-up days over the past five years have come from live events."
By comparison, animation and kids' family TV also takes about 5% of content spend but drives an expected 8% of viewing hours.
This is eight times the raw hours for the same investment but Netflix sees both categories delivering equal value to the business.
Netflix's content spend is forecast to rise about 10% this year against a cash content budget of around $US20 billion, putting the live investment at US$1 billion.
Co-CEO Ted Sarandos gave another example of the benefit of live programming.
The World Baseball Classic drove a wave of new members in Japan, helped by a low-cost first month offer.
"World Baseball Classic on Netflix in Japan was a huge hit. It became our most-watched program ever in Japan. It was the biggest baseball streaming event ever," Sarandos said.
"They drive disproportionate sign-ups, because of that acceleration, they can exhibit slightly higher churn. The results are exactly consistent with that trend and in line with our expectations and all of our modeling.
"We're continuing to lean into live events because they have a big outsized positive on the business. They drive conversation, drive net acquisition.
“We're going to continue to build out that global live event calendar and expand it to include some regional live events as well."
Netflix reported June quarter revenue up 11% to $US12.56 billion. Viewing hours grew 2% in the first half, an increase of 1.5 billion hours on the same period last year.
Live sport is also a winner in terms of audience for free-to-air networks in Australia but that comes at a cost.
Nine, Foxtel and Sky NZ confirmed on 7 July they would continue to control NRL broadcast rights to 2034, valued at a record breaking $5.3 billion over seven years.
The annual cost to Nine will be $145 million in cash, offset by $10 million of committed annual NRL spend on advertising or other services, plus $15 million a year in contra.
Seven network and Foxtel in September 2022 signed a $4.5 billion signed with the AFL.
In Australia, the major sports streamers are Kayo (AFL, NRL, f1, basketball), Stan Sports (English premier League, Australian Open, Wimbledon, US Open, French Open Rugby, Super Rugby, Nation Cup) and Nine’s 9Now (NRL, Australian Open, Wimbledon, US Open, French Open Netball, Suncorp Super Netball, Australian Diamonds matches, Netball World Cup Sydney 2027).
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