Netflix’s Peloton Pivot

Netflix founder and co-C.E.O. Reed Hastings.
Netflix founder and co-C.E.O. Reed Hastings. Photo: Michael M. Santiago/Getty Images
Julia Alexander
January 3, 2023

Arguably the most eyebrow-raising new title to drop on Netflix at the end of 2022 wasn’t Noah Baumbach’s $100 million adaptation of the notoriously “unfilmable” White Noise, or the unwatchable Kevin HartMark Wahlberg comedy Me Time. It was Nike fitness videos, sandwiched between a new Witcher spinoff and the latest season of The Circle. And while the platform’s Jane Fonda-ification may seem strange, the partnership makes sense for Netflix, which is trying to boost engagement, establish new channels for affinity marketing, and distinguish itself from HBO Max. 

It wasn’t long ago that Netflix seemingly had streaming all to itself. But the proliferation of competitors, and the increased expense of content production, has prompted the company to pull other business levers. Much of the industry has fixated on its advertising tier, in part because co-C.E.O. Reed Hastings had pooh-poohed it for years. Yet just as significant is the attempt to leverage its pure scale and saturation—Netflix is still by far the largest and most international player—to pivot beyond entertainment. Fitness and connected engagement can help keep Netflix the first screen of the connected home, and do so without adding lofty production costs.

As I predicted last week, we’re about to see much more bundling and cross-promotion of platforms and services in 2023. The streaming market, after all, is now so competitive that it’s basically unprofitable, forcing companies to find new ways to acquire and retain customers while increasing perceived value and decreasing costs. It’s a tall order, and immensely difficult to achieve with programming alone. 

Bundling streaming subscriptions with retailers (e.g. Paramount+ and Walmart) is one way to entice customers. Building a broader product ecosystem around daily consumer behaviors (like Amazon Prime Video or Apple TV+) is another. The Netflix+Nike partnership suggests a third path, whereby a streaming pure-play could become a lifestyle brand, itself. 

The Pivot to Lifestyle

Netflix isn’t the first media company to attempt this subtle pivot. The New York Times, as my partner Dylan Byers recently noted, has essentially transformed itself from a newsgathering operation into a lifestyle company built atop a tech platform. Cooking, Games, and The Athletic all create daily entry points, alongside traditional news. This has helped generate stronger subscriber numbers and more revenue per user, at a time when the rest of the journalism industry is struggling. During the past couple years, as The Washington Post has lost subscribers, the Times has gained 4 million. 

By comparison, Netflix’s entertainment content is still the core product, of course. But its offering is basically saturated to the point where there is decreasing marginal value—or to put it simply, Netflix’s content isn’t as special as it once was because every streamer has some level of entertaining content similar to others, especially in the U.S. and Canada. And history has proven that it’s incredibly tough to scale simply by hoping to replicate Stranger Things. Netflix can (and has) bundled with telecoms, but it also needs to differentiate from competitors—something that gets people to open the app daily, and that creates a sense of additive value. Fitness is a natural frontier, and a relatively inexpensive place to experiment. 

Unlike Peloton, a hardware business that tried to become a tech media company, or Apple Fitness+, an ancillary subscription that piggybacks on Apple Watches and iPhones, Netflix’s partnership with Nike doesn’t require any physical device. There are licensing costs, sure, but putting Nike Fitness videos on the platform doesn’t create new price hurdles for people using the platform, nor does it ask subscribers to buy anything new. Partnering with a brand like Nike also feels elevated, instead of trying to create popular trainers that might get lost in the mix.

Of course, the better comparison for Netflix isn’t Apple or Peloton, but YouTube. Fitness content there increased dramatically between 2013 and 2022, according to public data, constituting nearly a third of all platform views in 2019. TikTok, the Gen Z social app of the moment, also became a hotbed of fitness during the pandemic. In every case, fitness brings people into the app and introduces them to related content. 

If Netflix can be top of mind when people want a new show, or an old movie, and when they work out, plus provide multiplayer and social gaming (which is in the development pipeline), the service becomes more than just a habit—it becomes the hub for entertainment and lifestyle that spans the entire day. It’s also an answer, of sorts, to Hastings’ famous declaration, in 2017, that Netflix’s only true competitor is sleep. The real question for Netflix, with its Nike partnership, is what took so long to get it going?