Welcome back to What I’m Hearing+, coming to you from the happiest place on Earth: Walt Disney World. It’s my first time and, I’ve got to say, I’ve never felt more respect for the masochistic parents who travel with children to resorts that require 20,000 steps a day.

Tonight, some data-inspired reflections on Netflix’s increasingly ambitious live events initiative, which includes the recently announced (and seemingly insane) Mike Tyson vs. Jake Paul fight.

The most interesting data point to emerge from the “Netflix Slam” wasn’t viewership—the event didn’t crack the streamer’s weekly Top 10, and the press release didn’t disclose any numbers—but rather the announcement, a few days later, that Netflix was canceling Break Point, its Drive to Survive-style tennis docuseries, after two seasons of poor ratings. This shouldn’t have come as a surprise, however. As I’ve reported, the supply of trendy sports docs and docuseries on streaming is outpacing demand. Drive to Survive, for example, just posted its weakest season debut yet, according to Top 10 data.

Netflix co-C.E.O. Ted Sarandos has been boasting for years about his “drama of sports” strategy—which is code for sports narratives that tap into fandoms without the costly live rights—and, true to form, Netflix is gearing up for a series based on the Boston Red Sox. (Quarterback also performed well, with 836 million minutes registered by Nielsen, landing in the Top 10 list the week of July 16.) But don’t mistake this strategy for an endpoint. Documentaries about sports are a poor substitute for live sports themselves. The number and scope of docs is limited only by the access granted by the leagues, and the entertainment value doesn’t always match the ambition, as was the case with Break Point. If Netflix wants to do more than just add to the drama of sport, it needs to be ready to spend more… or, as with its WWE partnership, to lean further into exclusive live sports (or sports-adjacent) content.

Trying to compare live-event ratings is difficult. The NFL is the gold standard, with regular season games averaging 12 million viewers. The NBA and the NHL hover around 2 million viewers a game, while the MLB attracts around 1.5 million viewers on average. And while awards shows may still draw large audiences (this year’s Oscars garnered nearly 20 million viewers without being available on streaming), the median age of viewership has been going up in recent years, topping 50 for the Oscars, Emmys, Grammys, and Golden Globes—an increase of 10 years since 2000, according to Variety. That raises a critical question for Netflix as it tries to break into this space: Do young demos simply not care as much about these events, or is it an issue of platform mismatch? The fact that Netflix’s livestream of the SAG Awards failed to crack its Top 10 could suggest the former.

It’s even more difficult to create a single benchmark for success with sports. MLB—whose average viewer is 55, the oldest of the major leagues—is the most tightly bound to the pay TV system because of its reliance on regional sports networks. The average NFL fan is only a bit younger, at 48, while the NBA is the youngest league, with an average viewer age of 37. Netflix’s press release announcing the WWE Raw partnership boasted that Raw had the youngest audience in the 18-49 audience demographic for advertisers… but that doesn’t say a lot when young audiences aren’t exactly on cable in the first place. Netflix’s argument is obvious: If young people have access to programming, they’ll tune in. This is something all the aforementioned leagues have contended with as they plan their own post-cable futures, while clinging on to that revenue stream for as long as possible.

Of course, there are other factors beyond ratings and demos for Netflix, especially as it expands into international markets: Australia, for example, has an incredibly large tennis following, as does France, New Zealand, and Austria, according to Google Search. And, more importantly, exhibition events like the Netflix Slam or the Netflix Cup are easier to sell to sponsors, which Netflix’s ad team is prioritizing as it continues to build out its ad-supported tier.

I’ve heard people at other companies characterize these live events as a sign of desperation, and suggest that Netflix is looking to create stunts to sell advertising. But I don’t think that’s fair or accurate. If Netflix wants to get into sports, but isn’t willing to pony up for the pricey rights (NFL, NBA, etcetera), it needs partnerships like the WWE deal. Sarandos and chief content officer Bela Bajaria will almost certainly attempt to buy other rights packages at some point, but in the meantime, gathering audience data from one-off events is very much The Netflix Way to determine product-market fit. What’s the point of paying big for tennis rights, for example, if neither the docuseries nor the live event engaged audiences? By that reasoning, canceling Break Point wasn’t a failure—it’s just a sign that Netflix is learning.

But more specifically, one of Netflix’s current problems is the reach of its ad tier. It boasts the largest active audience of premium SVOD products, but only 7 percent of new customers in the United States chose the ad-supported tier as of October 2023, according to Antenna. The company says there are around 25 million active users on ad-supported plans across 12 countries. Among U.S. streamers, Netflix has the lowest percentage of new subscribers joining an ad-supported tier. That aforementioned 7 percent is well below the portion of AVOD subscribers on Peacock and Hulu, which launched with advertising, and where around 70 and 55 percent of new subscribers, respectively, are choosing the ad tier. So if you’re an ad executive contemplating R.O.I., is it more valuable to put your content on Netflix—or Peacock? You could make arguments for both, but Netflix executives don’t want it to be an argument.

There’s also the issue of overcoming consumer sentiment toward advertising, which can be context-dependent. Netflix is currently charging a lot more for spots than some competitors ($60 CPM, compared with Hulu’s reported $30 range, according to Insider Intelligence), which could be hard to justify. But live events can justify those prices, given that audiences already strongly associate the format with advertising, which is why consumers are fine with ads appearing during live games even on ad-free services.

As TV executives have known for decades, live events are also an important promotional platform. CBS’s Tracker drew nearly 20 million viewers following its Super Bowl lead-in, for example, and has retained enough of that viewership to warrant a second-season order. Creating predictable and consistent habits is vital for slate planning in the streaming era, too: If the cost of acquiring a customer is effectively just marketing budget at this point, then promo spots can help bring people in for new titles.

Events like WWE also provide enough predictive behavior—not just who comes in for the event, but what they watch after—to better build a strategic plan around that group of customers. The more that Netflix can create different ecosystems for these events, the more it can keep those customers engaged after an episode of Raw. So if the goal is reducing churn and making more revenue per user, live events—and their ability to create a less risky slate—are basically perfect puzzle pieces.