Netflix looks to grab Formula 1 rights from ESPN, report says

Netflix is one of the few subscription-based streaming video services that has not offered live content, but that could change if it emerges as the successful bidder for the rights to a certain brand of auto racing.

On Monday, the business-centric Insider reported Netflix is one of several video companies seeking to land digital distribution rights to Formula 1. Those rights are currently held in the United States by ESPN, a joint venture between the Walt Disney Company and Hearst Communication, with the broadcast license set to lapse later this year.

This week, officials at ESPN confirmed they are holding talks with Formula 1 to extend those rights and have entered a bid of around $70 million, Insider said, well below the racing league's target of $100 million.

Netflix and ESPN are not the only companies expressing interest in Formula 1: Comcast's NBCUniversal, which closed its national sports channel NBCSN last year in favor of streaming more sports on its standalone service Peacock, is also reportedly bidding on Formula 1 rights.

But Netflix could stand to gain the most from landing the rights: While Comcast and ESPN's streaming services have grown over the last several years, Netflix's recently shrank, with the company affirming that it lost more subscribers than it gained in its most-recent financial quarter.

Since then, executives at Netflix have been under pressure to turn things around. Shortly after the company reported its subscriber loss, analyst Michael Nathanson said the company "may want to add sports to a more premium tier, helping to boost [average revenue per user, or ARPU], gain exposure to in-game advertising and broaden the appeal of its service in an increasingly competitive market."

Even before Netflix's most-recent report, there have been signs that the company has sought sports rights, and specifically Formula 1. In an interview with the German newspaper Der Spiegel last year, Netflix's Chief Executive Officer Reed Hastings said Netflix skipped out on bidding for Formula 1 rights when they were up for grabs a few years ago, but affirmed that "today, we would think about it."

Netflix has apparently done more than just think about it: According to Insider, the company has held discussions with Formula 1 over the last several months, particularly after the streaming service's Formula 1 documentary "Drive to Survive" generated new interest in the sport among American TV audiences.

Netflix would not stand alone in offering live sports alongside its video on-demand catalog: Amazon Prime (baseball, American football), Hulu (hockey, through a simulcast with ESPN Plus), Apple TV Plus (baseball) and Paramount Plus (soccer) have done the same, and other competitors like HBO Max (hockey) are set to offer live sports in the future.

But it would mark a stark pivot for a company that has been primarily focused on scripted content. Last year, Netflix spent $17 billion on its on-demand content, and if year-over-year trends are any indicator, that figure could rise again this year. Less clear is how much of that budget will be earmarked for its live-streaming endeavors.