Netflix built its business freeing viewers from cable television. Yet last week, the company streamed Major League Baseball’s Home Run Derby, an event long associated with the cable sports network giant ESPN.
Reports that suggest the streaming pioneer may be embracing some of the same strategies it once disrupted.
Anthony Palomba’s research examines the intersection of entertainment, analytics and business strategy. (Photo by Matt Riley, University Communications)
Why the shift? UVA Today posed that question and others to Anthony Palomba, a streaming expert within the University of Virginia’s Darden School of Business.
Q. Why is Netflix embracing live channels and bundles?
A. After nearly two decades of on-demand abundance, Netflix has come to recognize that live programming creates scarcity, synchronicity and urgency in ways that on-demand content cannot. Live sports, award shows and tentpole events drive subscriber acquisition, fuel cultural conversation and help reduce churn.
Ironically, Netflix’s greatest innovation also created one of its biggest challenges. The binge-watching model encourages subscribers to consume an entire season in a matter of days, cancel their subscription and move on. Unlike YouTube or TikTok, which are sustained by an effectively limitless supply of user-generated content with relatively low upfront costs, Netflix must continually invest billions in premium programming to keep viewers engaged.
Q. Is the streaming model changing?
A. Fundamentally, I think it must. The original streaming model was “all content, whenever you want, for a flat fee,” which was pure on-demand abundance. That model is maturing and competing against social media and video game companies.
Netflix is under pressure from investors. Its Granted, its free cash flow and .
However, , and it’s unclear how Netflix will grow. There’s an inherent expectation on Wall Street that firms should be in perpetual growth.
Q. What advantages does live programming offer?
A. Live programming addresses two distinct consumer needs: the lean-back experience of continuous television and the urgency of shared cultural moments, which Netflix has worked hard to be at the forefront of. FAST (free ad-supported television) channels recreate elements of the traditional cable experience by providing always-on, scheduled programming that reduces choice overload and creates habitual viewing patterns. They offer a low-friction way for audiences to discover content without actively searching through an endless library. For instance, there are channels devoted to “Law and Order” and “The Office” on Peacock.
Live events create urgency by producing synchronous shared experiences that drive word-of-mouth and social engagement. A live sports event, awards show or cultural tentpole generates real-time conversation across social platforms, mobilizing audiences to discuss, share and advocate for the content. In doing so, consumers effectively become marketers themselves, amplifying reach at near-zero marginal cost.
Q. Why do advertisers like it?
A. Advertisers want reach, attention and targeting capability simultaneously. Live events deliver all three. A live sports broadcast can reach millions of viewers within a concentrated time window while generating exceptionally high engagement. Audiences are less likely to skip ahead, multitask or abandon the experience because the value comes from being part of the moment.
For streaming platforms with commerce capabilities, live programming can create a powerful closed-loop advertising system. They can track users, viewing habits, engagement and consumer journeys as consumers view programs through user accounts.
