Reed Hastings, Ted Sarandos Talk Strategy at APOS

BALI: Netflix’s Reed Hastings and Ted Sarandos weighed in on the ups and downs of the platform’s international expansion at a session at APOS in Bali today.

Vivek Couto, executive director of Media Partners Asia (MPA), organizer of the conference, interviewed the CEO and chief content officer of the streaming platform during a morning session at APOS.

Discussing the Asian rollout, Hastings conceded that the platform is still “far below the number of languages we need to support. We support 21 languages; YouTube is over 50. We’re building out partnerships, the network infrastructure and in particular the content. We just continue to learn as we go.”

Hastings mentioned the learnings from Brazil. “We weren’t really ready. We didn’t do very well in the beginning in Brazil. But we were steady, we fixed issue by issue, we talked with members, we improved the service and now we have a huge and growing business in Brazil. It gives us confidence that we’re on the right path.”

Hastings noted that the platform is investing in “local content for the world,” such as the Korean film Okja.

“We’re producing local content in Asia much quicker than we had with most of our other launches,” said Sarandos, noting that the platform is about 100 days into its Asian business. In addition to Okja there’s a Cambodian film from Angelina Jolie and several originals in Japan.

Hastings addressed the issue of VPN blocking. “We have to get content globally. We did that with How to Get Away with Murder. That’s the path for us, license all of our content globally. And to have global rights to our originals.”

He said one of the company’s greatest regrets was not having the global rights to House of Cards, which was greenlit when Netflix was still just an American service. [In Asia, RTL CBS has the rights to air the show.]

“The most effective way to shut down VPNs is eliminate the [need] for them,” Sarandos said.

Another issue for Netflix in Asia and other parts of the world has been censorship. “We have to really help the creative freedom of storytellers,” said Sarandos. “The art is finding that balance with local authorities. For the most part the internet is not as highly regulated as broadcast. There’s no passive viewing on Netflix. Regulators have found that to be a differentiating factor between broadcast and Netflix. How the internet is censored around the world is going to be unfolding every day.”

Addressing the highly regulated Chinese market, where Netflix does not yet have a presence, Hastings said, “We’re continuing discussions. Great rewards can follow great patience.”

The conversation moved to Netflix’s relationships with content suppliers. “Almost all of our suppliers have regional selling apparatuses and [global licensing deals] disrupt that world…. The virtue of global licensing is that in a huge way it de-risks production. The real dynamic shift in the economics of global entertainment is that you used to be able to produce a very expensive show, deficit that against the U.S. license and then roll the dice trying to sell your show around the world. [With global licensing] before a show rolls [out] its first episode, in many times it’s already profitable for the studio. When does that benefit overwhelm the opportunistic benefits of being able to turn over every rock in every territory and squeeze any extra bit of licensing dollar out?”

Asked about maintaining its edge in a crowded market, Hastings noted, “the consumer appetite to pay for great entertainment is very high. Even with Netflix in 50 percent of U.S. households, pay TV is steady at 100 million. It’s overstated, the impact Netflix has on the existing ecosystem, and what’s understated is the interest of consumers in spending a little bit more to have one more experience.”

Couto asked Hastings and Sarandos about the potential of adding offline viewing to the Netflix offering via a download function. In most markets the need is small due to the ubiquity of WiFi, Sarandos noted. “In developing markets, [with slower internet speeds] we’re more open-minded about it,” he said.

Discussing how many SVOD platforms any individual market can sustain, Hastings noted, “I expect that in ten years there will be thousands of SVOD services, some will be ad-supported, some subscription, and it’s based on this mobile app ecosystem that is so powerful and eventually will spread to television—you’ll get the same apps on TV as you get on mobile.”