Fall 2015

What's Next for Netflix?: Ted Sarandos

After changing the way people watch television, Netflix is moving into features in a big way. Chief Content Officer Ted Sarandos talks about the future of the company—and the industry.

1. Was there a light-bulb moment when Netflix went from a DVD-by-mail company to a creator of original content?

Well, honestly, the company had always been conceived as a digital delivery company, and when I met [CEO] Reed [Hastings] for the first time in 1999, I think we identified accurately the jump in point, which would be when the cost of bandwidth dropped below the cost of postage. At the beginning, we named the company Netflix, not DVDFlix or Mailflix. We believed that most content would be delivered on the Internet. So for us, the guidepost was the lowering cost of bandwidth and the slowly rising cost of postage, and when those two intersected, we knew it was time to jump in.

2. What do you see happening to broadcast television?

I believe that television is true mass media. It’s perfectly suited for those things that are really meant for mass audiences to do at the same time, like sports, competition shows, awards shows. Everything else that gets programmed around it is going to have to get better and better at engaging audiences, who will be increasingly expecting an on-demand experience. So I think that a lot of scripted television is going to move to various forms of on-demand models. ABC.com will be more important than ABC over time. HBO has created an app, the same way that Showtime started an app. I believe these networks and channels will evolve their businesses.

3. In terms of actual work for directors, will original content on the Internet offset potential loss of work from broadcast shows?

Yes, I think so. We’re keeping a lot of people busy. Our entry into original programming sparked the most active period for original programming on television in the history of the medium. Right now there are more than 350 new series, new content being produced for various networks and online channels, and I think if you look around at how that has grown, you’d say that Netflix has been very good in sparking a lot of new work for directors, producers, writers, actors, electricians, carpenters. We’re making movies on the same budget with the same equipment and the same crews that studios are for theatrical release and the networks are for television. So I don’t think a new skill set is required, just great storytelling.

4. One of the things that helped brand Netflix was the release of all episodes of a series at the same time. Where do you see that going?

What we want to do is stop investing in pay-television output deals and do something that’s unique to Netflix and release to all of our subscribers around the world at the same time. That’s the way we were able to innovate, by releasing all episodes at once. We couldn’t have done that with a network partner, in the same way we couldn’t have done a meaningful day-and-date release [for films] with a studio partner. That’s why we’re embarking on it by ourselves. [Releasing TV series] all at once is becoming a lot more the norm for television. I think day-and-date will become the norm for movies too, but it will take a little bit of time.

5. So do you think distribution methods for feature films are antiquated?

What’s really interesting is that the Internet has changed the distribution model for every form of entertainment except for theatrically released studio films. Obviously, music, television series, the whole way we consume all of our entertainment has changed. The windows have changed, the access points have changed, and yet theatrically released movies from studios are still relatively unchanged. So if you spend $100-million-plus on some of these movies for a global marketing campaign and then don’t give the world access to the movie, it seems a bit out of step. For me, it’s much more efficient to spend the money on the screen instead of marketing and then hide the movie from consumers. If we’re going to market our Netflix original films, we’ll also make them available to the people at the same time we’re marketing them. Not just in the U.S. but around the world at the same moment, because all of these holdbacks and these staggered windows around the world are really promoting piracy.

6. Do you see Internet theft as a function of limited access?

Yes, I believe that it’s a sign that people want something and there’s no legitimate way to get to it. Now, some piracy is just sport. A pirate, a hacker just loves to upset the system, but most of it, the mainstream piracy, I think, is just a function of people having no legitimate access to programming when they want it.

7. Do you anticipate becoming more involved with features?

Oh, yeah, definitely. We plan on launching about a dozen films in the next 12 months. It will look a lot like a studio slate in that it is diverse genres, diverse budgets, all kinds of movies that people want to see. I’m a big believer in consumer choice, so if theater owners are going to book the movies that are showing on Netflix on the same date, I would be 100 percent supportive of it. The theater owners have drawn the line in the sand on some of these films, as you see how vocal they were with the release of the Adam Sandler film The Ridiculous 6 but they were less united and less angry about David Michôd’s [upcoming film] War Machine with Brad Pitt, and we booked a deal with Landmark Theatres for Cary Fukunaga’s Beasts of No Nation to play in 30 cities around the country.

8. What do you say to directors who have their heart set on theatrical release?

I don’t know for sure that what they’re talking about is wanting to be on a screen in a dark room. I think what they’re really saying is that they want to be in the culture; they want their movie to matter. They want people to talk about it and people to see it, and I think if Netflix has proven anything in the television space, it’s that our shows are in the culture. People see them, they talk about them, they win awards, they get reviews, all the things that traditional television used to have a lock on. So our plan is to do the same for films. Directors often think that maybe making a movie for Netflix is like making a TV movie, and not until they get into the project do they realize that we want them to bring their scope and scale to these projects, that it’s not a compromise of scale.

9. Will the Netflix model create more opportunities for midrange films and independent directors?

What’s happening right now in the theatrical side of the business is that the movies that get made are either the enormous spectacle or the tiniest independent. So either Paranormal Activity-style movies or the $200-million special effects movie, and nothing in between. I look at that as a great opportunity, because I do believe people want to see those stories. I think the finan- cial risk in producing them has nothing to do with the consumer desire to watch them. It’s that those movies aren’t where people want to watch them. They want to watch them at home, so we can produce those films at those budgets and keep a lot of great storytelling alive. I think that’s where there’s a real hole in the market that we can serve.

10. What impact will the on-demand world have on directors?

Well, I think it’s great for directors, because they get to tell their stories in a much more organic way. When you’re making television, particularly if you’re making television for broadcast, especially a serialized show, you have to make it to the format more than you’re making it to the audience. You have to create act breaks for commercials, you have to have cliffhangers at the end of every episode, you have to create them in a way that the stakes are artificially high, so people come back next week. In the on-demand world, as you see with House of Cards and Bloodline, you can create television at a pace that people can just watch and absorb and not have it thrown at them.

(Photo: Netflix)

10 Questions

Question and answer sessions with prominent figures outside the Guild about current creative and business issues.

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