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Netflix's Stance on Sports Investment Despite WWE Deal

Netflix announced a groundbreaking deal with WWE's parent company TKO Group to license the rights to WWE's Raw for the next ten years. The deal, valued at over $5 billion, has sparked speculation about Netflix's potential entry into the live sports streaming arena. However, Co-Chief Executive Officer Ted Sarandos is quick to emphasize that professional wrestling is not to be confused with traditional sports.

“WWE is sports entertainment,” Sarandos clarified during Netflix’s fourth-quarter earnings conference call. “It’s really as close to our core as you can get in terms of sports storytelling. In terms of the deal itself, it has options and the protections we seek in our general licensing deals, and with economics that we’re super happy with globally. So, I would not look at this as a signal of any change to our sports strategy.”

Despite the WWE Raw deal, Sarandos sought to put to rest any discussions about Netflix venturing into acquiring streaming rights for major sports leagues. Speculation had arisen, especially given Netflix's preliminary discussions with the National Basketball Association (NBA) reported by CNBC in October. However, Sarandos's comments indicate that Netflix is not positioning itself as a near-term player in traditional live sports negotiations.

“We can build [WWE] like we have with Formula 1 through our shoulder programming,” Sarandos said. “Now, the events themselves are the storytelling with WWE. So, this is a proven formula for us.”

The WWE Raw deal is not without flexibility for Netflix. It includes an out clause after five years, providing an option for Netflix to reevaluate its position. Additionally, there is an option to extend the deal for an additional 10 years, showcasing Netflix's commitment to exploring long-term partnerships.

The move into wrestling aligns with Netflix's strategy of delving into "sports adjacent" programming. Over recent years, the streaming giant has produced documentary series centered around Formula 1 and various other sports like tennis, golf, cycling, and football.

However, Netflix's executives, known for their flexibility, have a track record of changing their minds on key business issues.

The company, which initially refrained from advertising and password-sharing crackdowns, has reversed course in recent years. This giant rights deal for WWE's Raw signals a clear shift for Netflix, prompting industry observers to question if traditional sports could be the next logical step for the streaming giant, despite Sarandos's assurances to the contrary.

The landscape of streaming sports may be in for a significant shakeup, and Netflix's foray into the world of professional wrestling may just be the beginning of a broader strategy shift for the company.


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