Ted Sarandos

This interview originally appeared in the MIPCOM 2013 issue of World Screen.

The word “disruption” is so often used in the media business these days as new platforms and devices completely upend traditional business models and viewing habits. Well, there is no greater disruptor than Netflix. What started in 1997 as a DVD delivery service is today a leading online video-streaming platform that has nearly 38 million subscribers in 40 countries. Ted Sarandos, chief content officer, has been with the company since 2000, sourcing movies and TV series, cutting innovative deals with studios and content suppliers, breaking down windows and creating new ones and, most recently, commissioning original programming like House of Cards, Orange Is the New Black and the revived Arrested Development.

WS: What factors had to be in place for Netlflix to invest in originals?
SARANDOS: Scale. We needed a large enough subscriber base so it would make sense for us to program for our own base. I don’t think we could have built a big audience from scratch for originals, but once we achieved a big enough audience, programming originals for them felt much more like a natural step.

WS: What was the reasoning behind making such a substantial investment in House of Cards, not only financially but also in the caliber of the talent?
SARANDOS: As a company we move pretty quickly and what I didn’t want to do was create a multi-year test to figure out if original programming was going to be successful on Netflix. I didn’t want to do something small and then if it didn’t work, wonder if it was because it was too small. I thought we had to do something substantial that would send a very loud signal to talent that we really were in this business, and to our subscribers that this was a meaningful differentiator among subscription services. So we had to make a little bit of noise the first time out.

WS: How is the Hollywood creative community reacting to you now?
SARANDOS: Very positively. It was very adventurous for House of Cards to make that jump to Netflix but what they have seen since is that we can build an audience, we can bring attention to the show and make sure that it gets seen and that it gets appreciated, even at the highest levels in the form of nine Emmy nominations. When we went into this, we did not have an awards-driven agenda. We didn’t even think that we qualified for Emmy awards when we first convinced David Fincher or Kevin Spacy to bring House of Cards to Netflix.

WS: You don’t give out ratings data, but you have a whole bunch of information about what your subs are watching. What can you tell us about House of Cards viewers?
SARANDOS: First of all, we know to the minute what their viewing has been, on what device the viewing takes place, how many sittings and how many episodes per sitting. We have a very intense set of viewing metrics that we monitor all the time. We don’t track the audience demographically that closely because we don’t sell advertising. But we do compare other programs they watch and enjoy, rate highly and complete.

WS: How does this information inform future projects or choosing future talent?
SARANDOS: It was a factor in deciding on House of Cards that we could identify a sizeable audience of David Fincher fans. I don’t know if people identify themselves as David Fincher fans, but we could see in the data that they liked The Curious Case of Benjamin Button, Fight Club, Se7en, The Social Network and these are all very different films. What they have in common is the point of view of the storyteller. I don’t think people even realize in their own viewing patterns who they really like but we can tell from the data. We had a great combination of David Fincher fans, some hardcore Kevin Spacey fans, certainly Robin Wright fans, fans of the original House of Cards, and fans of political thrillers. When we put that pool together it gave us great confidence that if the show was executed well, we could find a big audience for it. And when the talent involved bet on the execution, it felt like a safe one.

WS: Tell us how you marketed House of Cards to your subscribers.
SARANDOS: I was trying to bring something to the table that others cannot. Our personalized merchandising and the personalized experience for our subscribers is something that I think we are uniquely good at, particularly relative to linear television. If you are a likely customer for House of Cards, we’ll feed you a trailer with something that is consistent with something you are watching right now. David Fincher oversaw seven unique trailers that played up different attributes of the show and we delivered them in a very personalized and dynamic way.

WS: Netflix premieres many episodes all at once. What kind of creative freedom does that give writers?
SARANDOS: It really depends on the material. In the case of Arrested Development, every episode has a different running time. There are 15 episodes, which is kind of a funky episode count by TV standards. In the case of House of Cards they are relatively uniform running times but none of the episodes contain traditional cliffhangers. We certainly don’t have the commercial-break cliffhangers either. So it really gives storytellers the freedom to tell their stories without worrying whether or not the audience remembers what they watched last week. That also frees up 10 or 15 percent of the show’s running time to create much richer characters and denser plotlines. Those cliffhangers trick you into coming back after each commercial or after each episode. When you strip all of those out of each episode, you find it creates a very different rhythm to the show.

WS: By releasing multiple episodes of a series at a time, Netflix has created a market for serialized shows that didn’t exist before.
SARANDOS: It definitely changed the economic model of television. Not only was it difficult to sell those shows, the networks were actively un-serializing serialized shows after [they showed pilots at the] May Screenings. When we saw that phenomenon happen, it made us nervous we wouldn’t have any off-net opportunities for highly serialized dramas. It was one catalyst to start developing our own.

WS: Are there certain audience segments you think are underserved?
SARANDOS: We think the sci-fi category is one. Typically sci-fi tends to be kitschy on television, probably because of a bunch of constraints. We’re hoping to change that all with Sense8 [from The Matrix's Andy and Lana Wachowski]. We are also moving into animated series for the very young with our DreamWorks Animation originals. We’ve launched something for the tween audience with Mako Mermaids, the sequel to H2O: Just Add Water. And now we are moving to sitcoms with Arrested Development and dramedies with Orange Is The New Black and certainly very serious dramas with House of Cards. We are trying to cover all different tastes and demographics.

WS: All of your originals have gone into season two. Are you also giving storytellers the freedom to tell the story as long as they see it as opposed to saying, ‘We have to get to episode 100 because we want to sell the show in syndication’?
SARANDOS: We are supportive of our studio partners [from whom we license these series]. They may need a very different product than we need. But for the Netflix sale, which is the economic driver of those shows being made, we allow a lot of freedom. We definitely want to run a season and see how it comes out before we go forward, but the definition of a season and how many episodes it has is going to start to blur. Given the physical limitations of production, we’re trying to challenge some of those conventions as well.

WS: Challenging conventions is top of the agenda!
SARANDOS: TV conventions suit networks and cable operators really well but not always consumers. And we’ve always been a very consumer-focused company.

WS: Are you seeing great potential in the children’s area?
SARANDOS: It’s interesting. If you ask ten people why they love Netflix you get ten different answers: one is a great deal of content, another is the very low price, or the convenience of having content available on every device. One of the answers we invariably get is, kids love watching Netflix on their iPads or on TV. We hear more and more people saying that their kids want to watch Netflix, not a certain show. Children’s programming has become an important and distinctive selling point of the service. We’ll see if kids’ original series create the same kind of brand affinity that comes from an original series for adults. Will these shows become another reason why kids want to stay engaged with Netflix?

WS: There is a whole generation of kids today that has no connection to any one network and some of them aren’t even seeing commercials.
SARANDOS: It’s been one of the reasons parents really love Netflix because they can put their kids in front of it and know they will not get inundated with candy commercials or toy commercials. It’s really just about the viewing; it’s a safe environment.

WS: You recently made a big deal with The Weinstein Company. As you increase your original productions, what role do your acquisitions take?
SARANDOS: Because viewers’ tastes are so diverse, we will always want to have a good volume of content. We will continue to push on originals, but we’ll continue to be one of the largest buyers of off-net product as well. On the TV side, we want to identify those high-quality super serialized series that are getting ready to hit television, track their success and make sure that we have lined up future episodes the way we have, for example, with AMC—they have a very similar sensibility about their programming. We have an output deal with AMC so that when the next Breaking Bad, or the next Mad Men comes along, we’ll have those series on Netflix.

Movies play a pretty important role; a third of all viewing on Netflix is movies. We were attracted to the Weinstein’s output because of its high quality and super diverse storytelling—and I say high quality in the form of Oscar dominance and critical acclaim. Day in and day out, you can count on Harvey to make or find the best movies in the world. More than that, he is an incredibly inventive executive. I knew we would be able to innovate in the space with Harvey in ways that we never would have with a major studio: playing with windows, playing with formats, really re-thinking the space. There is more to come on how that all takes place, but we are both looking at it like a blank slate.

WS: And your relationship with the other studios?
SARANDOS: Very good. Most of the studios are in long-term deals with other pay-TV providers. That prevents us from doing much in the near term, which is fine. We’ve done a lot already about collapsing windows. When we first got into the business, all of our movies had to be ten years old and now we are collapsing the pay-TV window with a few of the studios and showing [their product] earlier on Netflix. We are also doing animation output deals and you are seeing a lot more of those films debut on Netflix, like The Lorax and ParaNorman and others. We’re finding our sweet spot in the pay-TV window that isn’t necessarily in direct competition with HBO, Starz or Showtime.

WS: Netflix is present in a number of international territories. What factors do you look for in a country before launching?
SARANDOS: I won’t give you the whole list for competitive reasons, [laughs] but we do look for well-developed Internet infrastructure, strong tastes for Western content, mostly because we think that is our current expertise, and an ecosystem where people conduct business online. I strongly believe those things will be in place around the world over time.

WS: And are you looking to do original programming in countries around the world?
SARANDOS: Absolutely, over time, just as we found enough scale in the U.S. business to bring our original programming, we’ll do the same in international territories. For now we are offering originals of a different sort. The only way you can see new episodes of Breaking Bad in the U.K. is on Netflix, it’s like an original for the U.K. In Canada, we have shows like 90210 and others that actually premiere on Netflix. Instead of being available after the series has aired, they premiere the day after broadcast. So we are collapsing the window between U.S. broadcast and local availability in a lot of countries around the world.

As for our original shows, we premiere them simultaneously in all of our territories, which is another key factor that differentiates Netflix [from] any other content provider, because there is no delay between the U.S. premiere and the local premiere. They are extremely popular in all the territories that we operate. For example, a lot of people would doubt that of House of Cards. On the surface it’s a show set in American politics, but at a deeper level it’s very Shakespearean storytelling. That travels extremely well. Orange Is the New Black is a phenomenon in every one of our markets. These are examples of more global storytelling for a global audience.

WS: What does Netflix have to do to remain an “I can’t live without it” proposition for subscribers?
SARANDOS: Instead of trying to figure out what the customer wants right now, we have to also focus on what we think they might want in the future. We have to keep working on the content side, keeping in tune with the projects that are out there and how they reflect our consumers’ tastes, and at the same time really focus on delivering a differentiated content experience to consumers. So one level is the content itself. Another level is the quality in which it is delivered, because from country to country and even from community to community in the U.S., Internet speeds vary. We have to build a service that is nimble enough to deliver high quality with variable Internet speeds, for example, or the ability to stop and start, and pick up programming from one device to another, those are all things that our people are working on. I even think that the improvements in TV Everywhere are mostly driven by the quality of the Netflix service. So it’s spurring a lot of competition and to your point, we just have to stay ahead of them the way we have been for nearly 15 years.