Ted Sarandos says Netflix sees no ‘profit path’ in live sports rights for time being

Netflix currently sees no route to making a profit from live sports, according to co-CEO and chief content officer Ted Sarandos.

Ted Sarandos

With the streaming giant poised to make its entry into live programming with a Chris Rock comedy special next year, many have speculated that Netflix could soon also be bidding on big-league sports rights, as some of its rivals, such as Amazon and Apple, have already done.

However, Sarandos poured cold water on the idea that Netflix could imminently find itself in the mix for certain live sports rights.

“We’ve not seen a profit path to renting big sports today,” said the exec during the UBS Global TMT Conference on Tuesday in New York.

“We’re not anti-sports, we’re just pro-profit,” he continued, adding that the economics of live sports are built around pay TV, not streaming.

Sarandos did not rule out such a move one day, but said that, for now, Netflix management believes the service can achieve sustained growth without the addition of live sports programming.

“I’m very confident we can get twice as big without sports, and then beyond that maybe we’ll have to figure it out. By that point, maybe the economics change or we have the scale to figure that out or something,” he said.

Sarandos’s comments come a month after a report from the Wall Street Journal (WSJ) said Netflix had explored the possibility of bidding for certain sports rights.

According to the WSJ, Netflix bid for the live streaming rights to Formula 1 in the US but ultimately lost out to Disney-owned ESPN earlier this year. It also bid for certain tennis rights, including the ATP tennis tour for some European countries such as France and the UK, but it eventually dropped out of the running.

Sarandos also said that, while a project like Drive to Survive has driven a spike in interest in Formula 1, it ultimately increases the cost of the live sports rights. “If you create the value, it just transfers into higher prices for licensing down the road,” he said.

The exec also downplayed the significance of Netflix’s expansion into live programming, saying it built live-streaming capabilities to support its existing programming rather than expand into live sports.

“Things that are creatively benefited by live – a live event like Chris [Rock]’s concert, or the results show of one of our competition shows – those kinds of things are actually a lot more fun to watch live, so we built the ability to do it,” he said.

“This, I would say, is mostly creatively driven versus trying to open up other kinds of programming. It’s [about] how to make the programming we do today a little more fun when it’s live.”

When asked if Netflix would pursue M&A activity in the future, Sarandos said there are no acquisitions planned in the short term.

While Netflix has typically looked for organic rather than acquisitive growth, the company has made a handful of acquisitions over the last 13 months, including buying VFX firm Scanline and animation company Animal Logic.

Future acquisitions will likely be “things that are attractive in the IP space, like we did with the [Roald] Dahl Story Company,”  said Sarandos.

“Historically, we’ve been builders versus buyers, so I think we’ll possibly lean on that for a while.”