Theodore ‘Ted’ Sarandos, Chief Content Officer and Vice President of Content at Netflix, has a clear goal in mind for the digitally disruptive entertainment provider:
Within five years we definitely would love to see, the product to be completely global, available everywhere in the world.
While Netflix started life in the US, its international expansion has been rapid:
I think that it is true that on-demand and catch-up was better developed outside of the US, so it’s not unusual for our show in the UK to premier or a show in France to premier with the first two episodes on-demand. So it’s not I guess so they’ve been a head of the curve in that way, but overall access to on-demand services have been suppressed.
Sarandos sees the BBC’s iPlayer as probably the most mainstream in use on-demand service outside of the US:
BBC iPlayer is very widely adopted and everybody has access to the content. Typically [it is] on the shorter catch-up windows and we’ve been able to come in and license after these catch-up windows. By the time it gets to our window it’s not also on the on demand service.
[Channel 4’s] 4OD is a really great service and we license from Channel 4 very aggressively. We co-produce the Derek all over the world together and they have their products on 4OD You might say they’re indirectly competitive, but they’re maybe not competitive it at all because they are ad supported and they are tied to pay television subscriptions and all these things.
It’s not always the case that Netflix can hold on to its own shows outside the US, but can still exploit them as brand ambassadors:
France and Germany was a interesting one both because we didn’t have House of Cards in those markets because they’ve been pre-sold to Canal Plus in France and Sky in Germany . But it was cool that everybody there readily recognized that they were Netflix shows, even though Netflix doesn’t appear on any of the branding. They said 'Its a Netflix show on Canal Plus', so those shows actually acted as great brand ambassadors for us in those countries, where we didn’t have to spend much energy explaining what Netflix was.
As well as providing on demand access to other people’s content. Netflix intends to beef up its own original programing, potentially to up to 20 new series, according to Sandaros, which would mean:
launching original series or original season of content every two half weeks or so, kind of getting into a regular drumbeat with consumer expectation around originals. Not a show or not a new show for everybody, every two and a half weeks, but a new show that for segments of the viewership every couple of weeks.
Original movies are also seen as new opportunity:
We’re starting with our original movies. What’s happening today is that movies are being nearly completely displaced in the culture by television. I think it has less do to with the quality of television to the lack of quality movies and a really lousy distribution model for movies.
We're a subscription service, so our first access to film is kind of in that pay TV window, the 10-months to a year after they open in the theater. So if you wanted to see one of those movies you would have seen in the theater, you would have seen it on DVD, you would have seen it on VOD, you would have seen it in a hotel room, you would have seen it on an airplane seat. There are many ways you could have seen it.
All of this is based on data and analytics as much as creativity, adds Sarandos:
Our role is really a business model, is a really a business process, taking the best shows, using our data, using our ability to analyze that data to pick shows and to pick universes that would make great shows and then sizing our commitment to those shows accordingly and then hire people who have a great idea, who have a history of executing and trusting them.
That said, Netflix doesn’t provide ratings data and never will, according to Sarandos:
It’s an irrelevant measure of success for us. We don’t sell advertising. Nielsen’s ratings are all about just applying the cost of advertising. We don’t jockey for channel position with cable operators. There is no reason for us to review all ratings, because I honestly think that it works against the quality of television.
When a show comes out of the gate and it has a soft number, it can’t make it to a third episode and gets cancelled. Ratings measurement has been bad for creative of television. Now maybe it’s been necessary for the business of television, but it’s been horrible for the creative of television. If you remember Seinfeld was not a hit show for four years. That was not a great show until the third-year. If you look back to the history of television these shows really take a while to get their stride.
The first couple of episodes of every new show is a little clunky, trying to figure out how to introduce a lot of new characters, a lot of new story lines in a very fast time to get [up to] speed. Look how many shows don’t get past the third episode, because they get a sub number. Not because they are bad, because they were in a wrong time slot on the wrong network.
That happens always. That’s why we got Breaking Bad in the UK. It was on the wrong network at the wrong time and it got cancelled, because it was being the failure. So I do think that the rating discussion relative to the television has been very negative for the creative of television.
But of course there are measures of success and failure inherent in the Netflix model:
Right now the metric that’s powerful is the viewing hours. Our subscribers are watching more and more viewing hours. [If] we keep throwing money and they are not watching more that would be a bad return. As we've been growing the subscriber base, it has afforded us the ability to buy more and to keep putting more high quality programming into the mix ,which is growing the subscriber base. So far it has been a really great virtue of cycle of growth.
The truly disruptive aspect of the likes of Netflix however has been the creation of the ‘box set’ generation of viewers. Just as the likes of BBC iPlayer has led to UK viewers setting their own time-shifted TV schedules, so Netflix has encouraged the ‘gorge it all at once’ concept. Sarandos agrees:
There is no question the viewing behavior has changed. We can all debate what’s driving it and what the ultimate outcome is, but people like on-demand viewing. They like to watch multiple episodes in one sitting. They like to stack up the viewing. So now you have people either waiting three, four weeks and watching them stacked on cable or they are waiting a whole season to watch them on Netflix. That is absolutely happening because that’s what people love.
This has troubling revenue implications for traditional broadcast models:
You can spend all your energy trying to circumvent that business or say ‘I cannot sell to them anymore’ or you could say ‘how do we fix the root of the problem?’. It wouldn’t matter if cable operators would invest in dynamic ad insertion.
So if people are watching content weeks, months later that begins to monetize it. It’s absolutely fair for Paramount not to want to pay for an ad for a movie that they placed before a Friday opening that doesn’t get watched for five weeks after the movie opens. It’s absolutely a fair, but I think that if you want to fix the economics of ad supported television you have to fix the product.
The multi-platform nature of viewing is also something that needs to be factored in, advises Sarandos:
Depending on how old you are, watching a Lawrence of Arabia on an iPhone makes sense. The rapid adoptions of Smart TV is only going to make that grow I think over time. I think what people do is they use devices like tablets and phones to get introduced to a show or a movie and then they get home and pickup the viewing at home. We try to do big bold shows and trust that people are going to watch them on different size screens.
The emergence of 4k TV is also going to have a major impact on viewing expectations, predicts Sarandos:
On December 12 [new Netflix series] Marco Polo streams in 4K and it looks amazing. I mean its gorgeous and it’s actually a higher visual quality level than you can get on cable TV, it’s probably even better than you can get in the movie theater on 4K. I think it’s a complete kind of juxtaposition of the quality expectation of internet content. It is literally streaming in the highest possible visual quality.
And for Netflix that means
continuing to invest in the experience, continue to invest in the content and refining the marketing proposition of the shows and the service.
Marco Polo looks jolly good...