Netflix Content Guru Looking for More Global Content Licenses

1:47 PM PST 08/24/2012 by Georg Szalai
Jin Lee/Bloomberg/Getty Images

Ted Sarandos also explains why TV Everywhere services are his biggest competitive concern these days.

EDINBURGH -- Netflix is looking to negotiate more global licensing deals that would allow it to make content available in digital form on the same date in its various markets around the world, chief content officer Ted Sarandos told THR here Friday.

"We're trying to accelerate windows best we can, but I'm not trying to do it to harm the other revenue streams," he said on the sidelines of the MediaGuardian Edinburgh International Television Festival. "It's good for studios to be profitable and healthy, so they make good stuff."

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But sometimes, old models don't make sense anymore in a globalized, digital world. In some cases, "they are protecting legacy instead of protecting business," Sarandos said. "In those cases, we are trying to pursue more global licensing, and I think for television, global availability does start to make more sense when the Internet is the distribution platform."

Fragmented distribution was the result of the need to distribute physical tapes, but there is no more need for that in the digital age.

Netflix typically must negotiate deals -- in the case of TV shows usually with the production studio, and in the case of movies, with the distributor -- for each territory.

In the case of The Hunger Games, it had to secure deals with Lionsgate in the U.S., Lionsgate U.K., Telefilms in Latin America and Alliance in Canada. Besides three different distributors, it also has to deal with four different home video and digital digital release dates. Latin America saw an Aug. 18 debut on Netflix, Canada will get the film in another four months, the U.K. in  six months, and the U.S. only a few months after that.

"Some of the windows are just dictated by business realities. In Latin America, piracy ran so wild that it destroyed the home video market," said Sarandos. "So there wasn't much risk in making it available earlier, and I was willing to pay more to get it earlier, because I knew it would have increased usage."

"It's probably much more frustrating for television, especially those shows that are really serialized," he said though. "Europe could be several years behind the U.S. and, dependend on what country, it may not have access to it at all."

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Case in point: Canada. "There was a large following for U.S. that were not distributed in Canada, and that's just a drive across town from parts of the U.S.," Sarandos said. "The marketing leaks across, so people knew these shows even pre-Internet. And now with the Internet, there is an expectation of global access since there is global information. I think it's the gap between knowledge and access where piracy is born. Closing that gap is the way to shut down piracy."

In Canada, Netflix struck a deal for Running Wilde, which wasn't distributed in the country. Similar deals later followed with 90210, Damages and The Hour.

Sarandos told THR that he doesn't expect a change overnight. One studio may jump in to prove the concept, and out of five major Hollywood studios, "you never get more than three" to try something new right away, he said. More likely, indie film companies and high-quality TV series will lead the way to a more unified release strategy, he added.

Sarandos on Friday also signaled that Netflix could look to buy more multi-language series. With Lilyhammer, which will return for a second season, the company tested the appeal of multi-language storytelling, he said.

"if you think about how people are trying to globalize content, they usually try to dumb it down," he said. "What I'm saying is you don't have to do that to make it multi-cultural."

He also explained in more detail how Netflix evaluates the success of content. Viewership relative to the license fee or spending on an original is the key metric for Netflix. "Engagement is important to me," Sarandos said.

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The company's more and more predictive algorithms and models help it forecast what users will watch and in what amounts. And the online streamer can tell the success pretty quickly. Said Sarandos: "We know it within a couple of days." Netflix counts initial response rates and then uses statistical models to forecast usage over longer periods, he explained.

Sarandos said this approach is good news for TV producers at a time when "ratings don't matter anymore" to more and more TV network groups. "They are trying to make cable operators happy," but Netflix still relies on "much more of a meritocracy," he said.

He reiterated a comment he had made in a festival speech on Thursday night that the increase in TV Everywhere services from pay TV operators is his biggest competitive concern.

"What I'm more worried about is other forms of distribution trying to commoditize ours," he said.

One example is Comcast's Streampix, which when it launched, had an email that "said we want to obsolete the need for a service like Netflix -- which is fine, if they pay for the rights," Sarandos said. "But if they use their buying power to take the rights or force producers to give them their rights, then that's something different."

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Comcast, under its NBCUniversal acquisition, operates under a consent decree that ensures no abuse of market power for at least a while though, he emphasized though. Said Sarandos: "In an open marketplace, we can compete with them just fine."

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