Netflix (NFLX) and TKO Group Holding’s WWE (TKO) announced a new partnership early Tuesday that will bring WWE’s flagship program Raw to the streaming service, beginning January 2025.
The 10-year deal marks Netflix’s first big venture into the world of live sports entertainment while Raw will be leaving linear television for the first time since its inception 31 years ago. The program currently airs on NBCUniversal’s USA Network and draws in 17.5 million unique viewers a year, according to the companies.
While financial stipulations of the deal were not disclosed, multiple reports said the agreement is valued at more than $5 billion.
Shares of TKO, which also serves as the parent company of UFC, soared more than 20% in early market trading. Netflix shares traded flat at the open after jumping roughly 2% in premarket trading.
“This deal is transformative,” Mark Shapiro, TKO president and COO, said in a joint press release.
Bela Bajari, chief content officer at Netflix, added, “By combining our reach, recommendations, and fandom with WWE, we’ll be able to deliver more joy and value for their audiences and our members.”
The news comes as TKO also announced Dwayne “The Rock” Johnson to its board of directions. Netflix, meanwhile, is set to report quarterly earnings after the bell on Tuesday.
Wells Fargo analyst Steve Cahall described the move as a “logical next step” in a reaction note to clients.
“It adds to NFLX’s ability to continue to look for growth beyond paid sharing as new content = more ads and/or more subs,” he said. “We think NFLX’s #1 focus is driving scale in ads as it needs reach and frequency to carve out a seat at the top table with US ad buyers.”
“The biggest challenge is it’s a narrow demo, so NFLX might look for more live content to further expand its reach,” he continued.
Still, the analyst noted WWE is not quite the same as major sports rights given the financial gap between the two entities sits at about $500 million annually. “The inevitable question is ‘when will NFLX get into live sports?’, but we think that’s still years away,” he said.
The last frontier of streaming
Live sports quickly emerged as an untapped area for Netflix, even as tech giants like Apple (AAPL), Amazon (AMZN) and YouTube (GOOGL) have snatched up pricey professional sports contracts over the past few years.
Netflix has taken its own unique approach by producing docu-series and sports-adjacent content like “Formula 1: Drive to Survive,” “Full Swing,” and “Break Point” instead of committing to big-ticket deals.
But Wall Street analysts and industry watchers have predicted that change, describing live sports as the last frontier of streaming amid a deteriorating cable bundle.
“Eventually we expect Netflix to move into live sports, particularly as it scales in [free cash flow] generation and has the ability to invest in major sports rights around the world,” Morgan Stanley said in a report published last June. “In addition, as its advertising capabilities scale, we think live sports will fit well into its content offering.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].
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