Netflix's Ted Sarandos Reveals His 'Phase 2' for Hollywood

9:00 AM PST 05/22/2013 by Lacey Rose
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Miller Mobley

Algorithms, deep pockets and a disdain for the existing TV model as the chief content officer reveals why the agent who talked about their budgets was "remarkably ill-informed," and countering "the managed dissatisfaction … of the entire entertainment business."

THR: How appealing are original films or miniseries?

Sarandos: There are some parts of it that are really appealing in that you tend to get a lot of the same fundamental benefits of original programming -- star power, excitement, event content -- on a smaller budget. And if you get proportionally the same amount of watching, that’s a good thing. The reason why I've shied away from original movies has been that there are so many more great movies that get made than ever get distributed, and I think we function better as a distributor for movies than we do as a creator or marketer of movies for now. But I probably would have said the same thing about TV shows three years ago.

THR: How important is Emmy attention?

Sarandos: It’s a valuable symbol of the mainstreaming of Internet television. It puts it on the same playing field with the best of broadcast, cable and premium television and resets the expectations of the industry and of the consumer. We’ll have to challenge conventional thinking among the voters.

THR: CAA agent Peter Micelli recently revealed during a conference that the budgets for your originals range from $3.8 million to $4.5 million. Accurate?

Sarandos: It was remarkably ill-informed and really out of character, so I don’t want to beat him up about it. But no, it’s not accurate. He wouldn’t know the information that he was sharing at that level of granularity. There’s an enormous range in the budgets.

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THR: At this stage, describe your place in the Hollywood ecosystem.

Sarandos: There’s no question when we launched our series 13 episodes at a time that the one thing that everybody agreed on in this town was that it was insane. I got a call from every network executive I knew who said: “Don’t be crazy. You’ve got this huge investment, drag it out. Make ’em come back every week, and you could launch new things off of them.” It just sounded to me like the same kind of managed dissatisfaction that is the entire entertainment business. I believe there’s a bigger business in customer satisfaction than managing business satisfaction.

THR: You’ve garnered a reputation for being hands-off. When do you weigh in?

Sarandos: It’s typically when we can bring to the table really factual and data-based information. On Orange Is the New Black, there was a lot of casting influence. But because we’re not getting involved in the minutiae, [our showrunners] want to hear what we have to say. I'm not saying I'll never give a note, but I'll never give one like, “So-and-so shouldn’t have a mustache.” It’s that kind of process that’s built for conflict.

THR: How do you assess which shows make sense to revive?

Holland: Arrested made sense for us because the show was a cult favorite and we’ve had it for a number of years and knew how many new fans were being created through our service. And because there had been talk of the movie, we knew that Mitch was interested in doing it again and that the cast loved it.

Sarandos: There’s no specific agenda around reviving shows as part of our strategy. Arrested Development is unique. If all of the technology that’s in place today were around when Arrested came out, it probably would have been a huge hit. Remember, the show was canceled the same year that we started streaming. Prior to that, the notion of catching up on a show didn’t really exist. For us to consider [reviving a series], it needs to be more than a great show for the people who love it. We need to try and find a bigger audience for it for the economics to make sense. I've not seen anything that was as much a slam dunk as Arrested Development is.

THR: Looking ahead, how important will it be to own your content as opposed to licensing it?

Holland: We will be seeking more control over some of our series. As we think about international expansion, it’s a natural extension for us to want to ensure that we have a series to launch in other places. [Cards, for instance, is owned by Media Rights Capital and distributed internationally by Sony.] But I think we’ll continue to license series in a bunch of different ways.

Sarandos: Also, we’ll continue to pursue this hybrid model where we’re premiering a show that launched in other parts of the world, like Derek did in the U.K.

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THR: Does that suggest you’ll get into the development business, too, which you so far have managed to avoid?

Holland: We have a tremendous amount of respect for the development and pilot process, but it’s not something that necessarily works for our model. It’s much better for us to make a season of something because then we have an asset that we can actually get out there and monetize, as opposed to having a bunch of development projects and then narrowing that down to a bunch of pilots and then narrowing that down to the ones we order. There’s a lot of activity that’s not terribly efficient, and for our model we can’t do much with it.

THR: There’s been much attention paid recently to Netflix ending some studio movie deals. Are you backing away from film?

Holland: No. We’re programming our service, and just like any other network, there are movies and series that come and go and we have an enormous amount of content. It’s not like when HBO's window on a series of films expires the world ends.

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