Netflix’s Big 2024 Pivot May Be On The Verge Of Paying Off

Summary:

• Netflix’s pivot to live programming and sports content has strengthened its position in the market… especially following its successful adaptation of the ad-supported subscription model.
• The company’s deals with the NFL and WWE mark a significant investment in live sports, positioning it competitively against other streaming giants like Amazon, Apple, and Hulu.
• Despite Netflix’s biggest live event to date being marred by technical problems, it is unlikely to remain a big hindrance in the long run.
• Investors should instead focus on Netflix’s willingness to embrace this new area, rather than any short-term technical setbacks it brings as it continues to innovate and expand.

Live from your living room, it’s Netflix (NASDAQ:NFLX).

While it doesn’t exactly have the same appeal as the signature opening line to Saturday Night Live, it certainly means more than it used to in recent memory. Netflix, the streaming giant that for years decried live programming, ads and sports content, will end 2024 being successful in part because of a decision to pivot into all three categories.

It’s a situation that just drips in irony.

Netflix, which went from “never” to “never say never” insanely quick on several practices, has found a re-invention in many surprising ways. Leaning into “live” and staying the course with its ad-tier over 2024 has put it in a strong position entering 2025.

Yet, some have wondered if Netflix is prepared for this new journey into “live” and all that comes with it – I’ll save you the trouble, stop wondering.

They are.

So how do we know that, and why are investors even having those types of questions?

First, as always, some background.

We are all aware of the stubborn nature of Netflix and “it’s my way or the highway” mentality. We are also aware of its internal “dream team” thinking and “keeper test” concepts. Translation – we are number one, so we can make the rules.

And to an extent that’s true. Netflix has accomplished a lot and continues to evolve the streaming space, but for a while, the company forgot the main rule of innovation… keep moving or die. Netflix was so wrapped up in what got them here they were loath to change it, until the subscriptions began to shrink and earnings began to suffer.

Funny how that works.

Netflix got the memo quickly and began to make a number of changes, including a quick entry into the ad-supported space and a decision to crack down on password sharing. If you follow the stock, you’ll remember the outcry there as well. The common belief was Netflix’s subscribers wouldn’t accept ads, and they’d sooner leave than give up the free login they got from their best friend’s sister’s co-worker they’ve had since college.

In reality, the ad-supported option became popular and people did opt to create their own accounts. So if you think “server issues” are going to be the straw that break’s Netflix back, you may want to re-think your argument.

Let’s be clear, I’m not saying those issues won’t be there, and they won’t be annoying and there won’t be griping – it will all happen. But to doubt Netflix’s ability to fix things on the fly and find their footing quickly is a fool’s errand.

Just as Netflix was able to adjust to ad-supported content, it should have no issue adjusting to live content. If you want to be seen as a player in sports, “live” becomes a big deal. The reason that’s a question now is because of the recent Jake Paul/Mike Tyson fight that was plagued by tech issues. Both during and after the fight that became the story, with a series of slanted headlines about Netflix’s inability to succeed in this area.

Now a month later though, there is a new headline replacing the old one – “Jake Paul vs. Mike Tyson was the most streamed sporting event in history.”

Still want to talk about glitches?

The fight was watched by 108 million people, with 65 million concurrent viewers coming worldwide and 38 million of those coming from the States. Yes, the sentiment around the fight itself wasn’t great, but by that point it really doesn’t matter.

Viewers still tuned in.

And they will again for the next wave of live content on deck – which is exactly why investors bought into the hype around Netflix’s tech issues.

The Paul/Tyson fight was merely a pre-cursor and in some ways a test to prepare for what’s to come. To see it fall victim to lagging, buffering problems and other streaming-specific glitches spooked shareholders.

And yes, a lawsuit didn’t help.

But let’s also be clear, the Paul/Tyson fight wasn’t Netflix’s first foray into live – the streamer has over this year alone aired a comedy special from Chris Rock, the Tom Brady roast and a week of talk shows hosted by John Mulaney – this is just the first time it’s ever had so many people tune in concurrently and the first time they’ve seen this level of problems with that connection.

With the level of deals Netflix has made to stay in this space, you can see why there was some concern. Over 2024, you’ll recall Netflix entered into deals with both the NFL and WWE (NYSE:TKO), which will see a pair of football games on Christmas and the debut of flagship series WWE Monday Night RAW in January.

You can make the argument the NFL games will test the system even further, and it probably will, but the bigger story for investors is that we are even having this conversation in the first place.

With Hulu’s ESPN of it all connection, Amazon in the NFL and NBA game and Apple owning MLS (with a dash of MLB and the Superbowl halftime show rights), Netflix was forced to make a move in a different direction.

The company has heavily invested in live sports, and it is clearly now a larger part of its future. It’s pivot towards this sector over the last twelve months is something that should be appreciated by shareholders, as this is one of the rare times Netflix had missed the boat and was forced to play catch-up – and to its credit, it caught-up fairly fast.

The NFL and WWE deals are massive for them and finally put them in the larger sports conversation in the way they should be. They are no longer the angry old streamer shouting about sports’ limited appeal, and now linked up with two of the area’s biggest names.

Yes, tech issues will happen – as it does with all streamers. Remember, Amazon/Prime Video (NASDAQ:AMZN) had the same problem at the start of its Thursday Night Football run. And just like Amazon, Netflix will be savvy enough to figure out a solution if need be.

Investors can’t get in the head-space of thinking the sky is falling over one setback, especially when the longer-term results signal something very different.

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