Ted Sarandos, Netflix’s chief content officer, doesn’t think the launch of streaming-video services in 2019 from big media companies like Disney and WarnerMedia will slow down his company’s momentum.
“They’re going to get out there and they’re going to do things and some of them are going to be successful,” said Sarandos, speaking Monday at UBS’s 2018 Global Media and Communications Conference in New York. “I don’t think they’ll be to the detriment of Netflix… I think there’s plenty of room in this business for other players to be successful.”
Sarandos noted that Netflix’s move into original programming almost seven years ago, starting with “House of Cards,” was a bet that studios and media companies would likely move to launch their own direct-to-consumer subscription VOD offerings. So, the thinking was, “we should get pretty good at this,” he said. “We needed to wean ourselves” off a reliance on content licensing.
That said, Netflix has run-of-series deals with many of the off-network shows it has licensed. That means “as long as they’re making the show, they come to us,” Sarandos said. One of those deals is with AMC for “The Walking Dead.”
Meanwhile, Netflix has hit a “new gear” on its movie strategy, Sarandos claimed, tub-thumbing movies coming to the service in 2019 from Martin Scorsese (“The Irishman”), Michael Bay (“6 Underground”) and Noah Baumbach. The company’s original films releasing in December include Oscar contenders including Alfonso Cuarón’s “Roma,” the Coen Brothers’ “The Ballad of Buster Scruggs” and Susanne Bier’s “Bird Box.”
Sarandos offered a new data point to bolster his point about original movies: “The Christmas Chronicles,” starring Kurt Russell as Saint Nick, premiered on Netflix on Nov. 22. In the first week, according to Sarandos, it was viewed by Netflix members 20 million times in the first seven days.
Kurt Russell “never had as many people see one of his movies in the first week ever,” said Sarandos. That huge reach has helped Netflix attract creators, filmmakers and other talent, he said: “Being able to offer this collective audience, in a big way that scales, that differentiates us.”
If it had a theatrical release, Sarandos said, the 20 million views would make “The Christmas Chronicles” a $200 million movie in its first week. However, that’s not really an apples-to-apples comparison, given that Netflix subs aren’t specifically buying tickets to see individual titles.
Some filmmakers are wedded to the “theatrical experience” and “I couldn’t pay them enough” to make a movie for Netflix, Sarandos acknowledged. But he reiterated Netflix’s position that as far as monetizing a big-budget movie, the Netflix model is the best approach.
The existing 90-day exclusive window theater chains demand before films can be distributed elsewhere is “not consumer friendly,” Sarandos maintained.
“I think this kind of exclusivity for the theater and theatrical experience is actually disconnecting people from movies, in a way,” the exec said.
Netflix recently agreed to exclusive, limited theatrical runs of “Roma,” “The Ballad of Buster Scruggs” and “Bird Box” in order “to maximize consumer choice,” he said. “I don’t think emotionally it’s a different experience” to watch a movie in a theater versus at home on Netflix, Sarandos added. “We’re not trying to hurt theaters in any way.”
On the TV series front, Sarandos mentioned upcoming Netflix shows including the “Umbrella Academy” live-action comic book adaptation and “The Dark Crystal: The Age Of Resistance.” Sarandos also plugged Netflix’s special about Bruce Springsteen’s Broadway show, premiering Dec. 16.
“The best thing to do is make great content people love to watch,” Sarandos said. “The best way to get people to talk about you on social media is to blow their mind.”
Netflix will keep on spending on original content, because it continues to see growth in subscriber viewing hours and in some cases customers signing up to watch specific content. According to Sarandos, the way the company looks at the incremental investment in content is that at some point, “you’re going to hit a point of diminishing returns. Until we see that, we’re enthused to keep pushing forward. There’s a lot more growth, we think, in investing in new programming today.”
“The marginal cost of being wrong – overinvesting – is not too high,” Sarandos said, saying he sees a bigger risk in underinvesting. “I think that’s probably the right trade-off in the business.”
Sarandos noted that in 2018, Netflix has moved aggressively into unscripted content, going from no shows in the genre last year to 20 this year. “Viewing of unscripted has grown on quality and breadth of new shows,” he said.
Next year, Netflix will ramp up its local-language shows around the world to 70 services. The company has already introduced some local series that have become pan-regional hits and in some cases global successes like Germany’s “Dark,” India’s “Sacred Games” and Spain’s “La Casa de Papel.”
“We’re not trying to make more Hollywood content for the world,” Sarandos said. Rather, a big part of the strategy is to bring content from different countries to a worldwide audience. With the debut of “Sacred Games” in India, customers “join to watch that and discover ‘Stranger Things,'” Sarandos said, while “the rest of the world is discovering ‘Sacred Games.'”
Netflix had 137.1 million streaming members worldwide (58.4 million in the U.S.; 78.6 million internationally) at the end of September. For the third quarter of 2018, it blew past expectations for subscriber growth, netting 7 million new streaming customers for the period, including 1.09 million in the U.S.
At the start of the session, UBS analyst Eric Sheridan joked with Sarandos that Netflix has finally arrived — because “Saturday Night Live” parodied Netflix’s binge-spending on content on its Dec. 1 episode, with a fake ad showing a Netflix exec literally throwing out cash during a pitch meeting. The faux ad’s narrator says “our goal is the endless scroll” and that “it’ll take 12 human lifetimes to watch all of our content, so start watching now.”
Sarandos initially offered a riposte, noting that an episode of “South Park” did a very similar parody a year ago and commenting that “SNL” needs to be “funnier and faster than those guys.” Later he acknowledged that the reason “they make these jokes is because we do make a lot of programming” compared with traditional TV networks. “We’re making programming for all people,” Sarandos said. He noted that Netflix offers the ability to personalize recommendations, with users worldwide having created 300 million profiles, so “you rarely see everything we’re making.”
Other notes from Sarandos’ talk:
- Asked about Netflix’s interest in live programming — and sports in particular — he reiterated that part of the service’s core proposition is that everything is available on-demand “kind of relieving the consumer form the grid.” For live sports, on-demand “adds almost no value,” Sarandos said. “At some point, do we get in to sports? If it becomes the next best place to spend $10 billion, I’ll do it… But I don’t think that’s the case today.”
- Netflix spent very little on marketing for original romantic comedy “To All the Boys I’ve Loved Before,” which was one of its most-viewed movies this summer. “If we had put in more marketing spend, would it have been an even bigger event?” Sarandos asked rhetorically, saying the originals promotions strategy was “trial and error.”
- In deciding whether to renew or cancel shows, “every show has a weighted measure. It’s not just audience,” Sarandos said. Some shows don’t drive a big audience but do drive subscriber acquisition, he said, citing as an example “Longmire,” which Netflix picked up after it was canceled by A&E. He also said for a show that has won Emmy Awards, that “puts the thumb on the scale” in terms of content spending decisions: “Award-winning shows attract other creators and producers who want to be on the winning network.”