Why Netflix’s Raw Deal Will Strengthen Its Streaming Lead

Netflix has put media companies in a chokehold. The streaming giant’s $5 billion deal to assume the rights to World Wrestling Entertainment’s Raw from NBCUniversal’s USA network—and other WWE programming overseas—demonstrates its growing competitive advantage over older TV companies. USA has aired Raw since 1993—with a five-year break in the early 2000s—but, with the cable sector in decline, the channel is presumably becoming more careful about how much it spends on programming. That makes it less able to compete for programming with Netflix, which can afford to pay more because it is growing and churning out billions in cash every year. That dynamic isn’t going to change. Netflix’s lead is only going to strengthen with the rights to Raw, which draws a couple million viewers a week.

Netflix demonstrated that with its fourth-quarter earnings report this evening, when it posted a better-than-projected 12.5% higher revenue of $8.8 billion, driven by 13% growth in subscribers. It generated $1.6 billion in free cash flow in the quarter, which is noteworthy given that older TV companies are mostly burning hundreds of millions of dollars on their streaming services still. The company forecast a slightly stronger top-line growth rate for the first quarter, which investors certainly appreciated, as the 8% jump in the stock to just above $530 in after-hours trading showed.