Exclusive Interview: Netflix’s Ted Sarandos

PREMIUM: Inking a broad range of licensing deals as Netflix continues its international expansion, chief content officer Ted Sarandos tells World Screen Newsflash that while bringing “Hollywood content to the world is a proven good business…I think [offering] the world’s content to the rest of the world is a bigger business."

WS: At MIPCOM you announced the acquisition of the Norwegian drama Lilyhammer for your U.S. and international feeds. What appealed to you about the show?
SARANDOS: I think that Lilyhammer represents a new wave of distribution of content. It’s multiterritory, multicultural. The show is completely shot in Norway, mostly in native Norwegian. Steven [van Zandt] who stars in the show speaks English throughout and it’s completely consistent with the storytelling, the way the two languages cross and co-mingle. And it’s such great storytelling and the characters are so rich that you get into the rhythm of the subtitling almost immediately.

As a company [we’re working] to help distribute the world’s content to the world’s viewers. I believe that Hollywood content to the world is a proven good business, but I think the world’s content to the rest of the world is a bigger business.

WS: What’s your approach to acquiring content for Netflix’s diverse customer base?
SARANDOS: The thing that we have done to address the diversity of the audience on Netflix has been to algorithmically figure out [what subscribers want to watch.] That’s a very important distinction, because if I had editors trying to figure this out they’d be wrong as often as they’re right and people bring their own preconceived notions and prejudices to the way they program. This is a very democratized system of getting great content in front of viewers and it takes into consideration what you’ve watched, what you’ve loved and it starts to broadly define you first and then narrowly define you around what you have tolerances for. We wouldn’t waste the marketing message to somebody who hates watching a subtitled movie…. I think as programmers you tend to create your own destiny—because you think [a show will be hugely successful] you spend massively on marketing. If you didn’t believe in it you wouldn’t spend anything on marketing. And if you’re wrong, you’re just wrong and it’s a very expensive thing to miss. What’s beautiful is in [every international territory] it’ll work the same way. In Latin America right now, you can watch The Godfather on Netflix in English, Spanish or Portuguese, subtitled or dubbed and in any combination of the two. So you can just pick which language track you want, pick which subtitle track you want and enjoy. There are some people for whom subtitling is their preference, because they’re more purist around cinema—they want to hear Al Pacino’s voice when they watch The Godfather, and there are some people who just don’t like to read subtitles so they’ll take it dubbed. This way I don’t have to choose for them.

WS: How has the reception been from Latin American content creators?
SARANDOS: It’s exciting that this wasn’t a Hollywood attack on Latin America. This was a very broad content offering, including content from different parts of Latin America. Telenovelas are huge in the Mexican culture and all over Latin America and once they air and they’re over, they’re over, they disappear from the culture. We’re able to resurrect these shows that were very popular three, four, five years ago. It’s a very interesting kind of reigniting of these shows that really had no other monetary business. And we’re right behind the airdates, so it’s not just the oldest ones, it’s also right as they go off the air.

WS: As much as you’re a great source of revenue to a lot of people, some broadcasters and platforms feel threatened by your company. Can you address that?
SARANDOS: I think that people should not be threatened by Netflix, they should embrace it and be excited about it. The revenue opportunity that will come from taking local content global is much greater than the local threat will be. We very actively don’t get into the crosshairs of cable operators because we think that the thing that people most value on television is live events and sports, and I’ve come to that conclusion because that’s what people pay the most for and that’s what has the highest ratings. So we are completely out of that business—we don’t pursue sports licenses, we don’t do American Idol or The X Factor in any country. I’m not into results-oriented shows, I really am looking for long shelf-life content. So we stay out of the thing that’s most valuable to most suppliers, which keeps the existing food chain pretty stable. What we do is offer a different way to monetize that content and it’s differentially attractive to consumers and we price it low enough that you don’t have to cancel or get rid of anything else to afford it. It’s bringing the efficiencies of the Internet to an otherwise slightly inefficient market and actually expanding the revenue for everybody and more importantly growing consumer excitement for content. I grew up a complete TV nerd—I knew all the character’s names, I knew what was going on, I was excited about the fall season. Now I find that people have no relationship to content whatsoever because there’s so much clutter in the market that you’re unlikely to find something that you love. We really focus on finding something that you’ll love.

In Latin America, the CBS show Jericho is rocking it—it’s top five in every country in Latin America, and there’s a show that the DVD sales are done, it’s not sold in syndication anymore; it’s done for all practical purposes, and we are giving it a new life in a new part of the world and they love it. Not only is it being heavily watched, it’s being very highly rated. I think that the opportunity is much larger than the threat.

WS: Premium networks like HBO certainly saw your deal for House of Cards as a threat. What led to the move into original programming?
SARANDOS: People like to put people in buckets. They like to put Netflix in a bucket and they say, “Well, you’re closest to pay TV.” We charge a subscription, we don’t have commercials, we aggregate content in a very premium window and we try to present the content in a very premium way. Arguably we’re most similar to HBO, Showtime, Starz, Epix in the U.S. The truth of it is, we don’t compete with HBO on any content in the same window at all. Nothing that’s on HBO is on Netflix, so if you think we compete with HBO, we compete with them the way that baseball competes with football for sports dollars—it’s a different pool of content. HBO is very specific about their brand around their original programming, so we certainly have none of their original programming. I would tell you that my entry into original may be a bad step, because a better way for me to spend that kind of money would be to buy all the previous seasons of HBO’s great content. We’re trying to =give our subscribers what they want and they like these really highly serialized one-hour dramas—shows like Breaking Bad, Mad Men, Weeds and the first couple seasons of Dexter are doing phenomenal. People really love this connection with content in a way that they can binge and watch multiple episodes in one sitting and it’s a new behavior that people really enjoy. Someone described to me these one-hour serialized dramas as almost the new literature in America, because you can take a long time to flesh out characters, so it’s much different than watching an episode of a sitcom or even sometimes watching a two-hour movie. So we’re trying to do what our customers want and help them get these great one-hour serialized dramas. The economics for those shows are very challenged: DVD sales have slowed dramatically on box sets and it’s very difficult to syndicate a serialized show, especially the more serialized, the worse for syndication. What I saw this past season was we looked at a couple of pilots that ended up on networks and the networks actually unserialized them before they brought them to air because they were so worried about this phenomenon. What I saw was that these shows would not be made for commercial television and that pay television—HBO, Showtime, Starz—are unlikely to want to sell to us, so that maybe if we were going to want to bring this content to our customers we may have to develop the muscle of doing it with producers instead. We’re excited to jump in the fray and do a show like House of Cards, which would’ve been a perfect show to go to HBO in the first window, but instead we’ll spend a lot more bringing it to Netflix in the first window and it kind of forced us into a competitive space with them where I don’t think we needed to be, but if it turns out to be successful, then it’ll be an efficient way for us to spend programming dollars.

WS: Do you think we’ve gotten past this conception of replacing analogue dollars for digital pennies?
SARANDOS: Absolutely. I think we’ve gotten to a place where people stopped doing deals and holding their breath to see what happens. People were very excited about these deals because they are additive to their revenue stream in a way that doesn’t compete. The most watched episode of Breaking Bad last night was episode one, season one, so I’m bringing new viewers to the market—there’s nowhere else they would’ve been watching that even if it was available. The money that we pay… it’s serious money, it’s competitive with the syndication market. We want that content—we don’t necessarily want it exclusively, but to make sure we can secure it, we bought out the syndication window on a show like Mad Men. When it goes off the air on AMC, it will go off of television and only be on Netflix. I think it’s a healthier business model to be also on linear television in some form. For me it’s like we have to try to reinvent the wheel all the time to guarantee access to content and in that way we become additive, or at least we become just another buyer, and in either one of those cases it’s not threatening. DreamWorks is the same deal, so when it moves off of HBO it will move off of television and be exclusively on Netflix.