• Netflix and TKO Group Holdings said Tuesday that the streaming platform will air the WWE's flagship program Raw starting next year.
• Netflix is trying to drive revenue by cutting down on subscription sharing and pushing viewers toward its ad-tier membership.
• The streaming platform is making its first major foray into live sports, while WWE will get access to Netflix's roughly 250 million global subscribers.

Netflix and TKO Group Holdings said Tuesday that the streaming platform will air WWE's flagship program "Raw" starting next year, in Netflix's first major foray into live sports.

The 10-year deal is valued at more than $5 billion, according to a company filing. Netflix will have the option to exit the deal after five years and to extend it for another decade. The streaming platform will be able to stream "Raw" globally, and will start the agreement with exclusive rights to it in the U.S., Canada, U.K. and Latin America. Netflix will also become the home for all WWE shows and specials outside the U.S., including "SmackDown" and "NXT" as well as "WrestleMania," "SummerSlam" and "Royal Rumble."

TKO shares spiked more than 15% following the news and a separate announcement that actor and former wrestling superstar Dwayne Johnson would join its board of directors. Netflix shares rose about 1%, ahead of the company's fourth-quarter earnings report after the bell Tuesday.

Netflix, which is trying to drive revenue by cutting down on subscription sharing and pushing viewers toward its ad-tier membership, has made few attempts at live programming in its history. Adding "Raw," which currently airs on USA Network and produces three hours of live programming per week year-round, to its programming lineup will be a boon to the platform and a significant historical shift for Netflix.

"This is a super game changer," said TKO President and Chief Operating Officer Mark Shapiro in an interview. "When you look back at the chapters of sports media history, new chapters are driven by extraordinary new paradigms. ESPN and Turner bringing NFL to cable in 1987. Rupert Murdoch bringing football to Fox in 1994. When new histories are written, Raw on Netflix will be such a chapter starter."

Netflix has dabbled in sports recently with documentary-type series about Formula One and professional golf, tennis and football. This deal will allow Netflix to tap into WWE intellectual property for similar projects. With WWE permission, Netflix could even develop movies or series around WWE characters, a person familiar with the matter said.

For TKO, the parent company of WWE, striking a deal with Netflix brings WWE wrestling to about 250 million global subscribers. WWE President Nick Khan has had Netflix on his radar as a potential landing spot for "Raw" for several years.

He discussed the world's largest streamer on a WWE earnings call in the first quarter of 2022, referencing how Netflix has showed openness to changing long-held stances, such as rejecting advertising and cracking down on password sharing. As recently as December 2022, Netflix co-CEO Ted Sarandos said at the UBS Global TMT Conference that Netflix had not "seen a profit path to renting big sports."

"Netflix is willing to make adjustments and reverse positions when it identifies an issue," Khan said back in 2022.

Choosing Netflix

TKO held discussions with other media companies but zeroed in on Netflix in December, according to people familiar with the matter.

Netflix's global footprint, which outreaches every other streaming service, was a key draw for WWE, Shapiro said.

"This is one of the greatest entertainment platforms in the world," Shapiro said of Netflix. "It has marketing you can't even comprehend. It has positioning that's unparalleled in terms of what they do on their front page."

Netflix announced earlier this month it had 23 million monthly active users for its advertising tier, which the company launched in November 2022. Matches will be scripted around commercial breaks to satisfy ad-free customers, who will see continued action from live matches that aren't important to the outcome, such as a wrestler in a sustained headlock, according to a person familiar with the matter.

"Raw" is the top program on the USA cable network, drawing 17.5 million unique viewers per year, the companies said. Shapiro said Amazon's ability to stream "Thursday Night Football" this season without a glitch and Peacock's recent success streaming a National Football League playoff game gave him confidence Netflix will be technologically sound streaming "Raw," even if it hasn't done anything like this on a consistent basis yet.

Disclosure: Comcast NBCUniversal, CNBC's parent company, owns USA Network.

Clarification: This story was updated to reflect that Netflix said it had 23 million monthly active users for its advertising tier.

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