Ted Sarandos on Netflix Programming Budget: "It'll Go Up" From $6 Billion

Ted Sarandos - Getty - H 2016
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Ted Sarandos - Getty - H 2016

A week-and-a-half after Netflix revealed a slowdown in subscriber growth, Ted Sarandos took the stage Wednesday at the TV industry's summer press tour to talk about an area in which the streamer is growing at a rapid clip: original programming. 

The chief content officer used his platform in front of the Television Critics Association to reveal that he plans to spend more than the already sky-high $6 billion that Netflix has allocated for originals and acquisitions. He also indicated that the company has big ambitions for its kids programming. After announcing in January that Netflix would double down on its kids and family programming, Sarandos noted that he's focused on "building a slate that today's kids will grow up loving." 

Since it wouldn't be a Netflix panel without some discussion of ratings, Sarandos kicked off his 45 minutes in the hot seat at the Beverly Hilton by talking about why he won't talk about ratings, noting that subscribers are the more important metric when it comes to Netflix revenue. So it's no surprise that the first question out of the gate was about the meager 1.7 million subscribers that Netflix added globally during the second quarter, much lower than what analysts were expecting. But Sarandos downplayed the importance of the results, noting that several factors — including the price change and unexpected early performance in new global markets — contributed to the slow quarter but "we grew much faster than we anticipated in Q1 and slower than we anticipated in Q2. It was a factor of forecast and not growth or success." 

From not talking about ratings to defending the renewal of Real Rob, here are the highlights from his session: 

Ratings Still Don't Matter

The pressure for Netflix to release ratings has heated up in recent months, with both Nielsen and tech startup Symphony issuing data around how many people they believe are watching the streamer's shows. But Sarandos was quick to point out that their numbers for Orange Is the New Black varied widely. "Either number would be great for Netflix," he acknowledged before explaining again why ratings don't matter for the Netflix business. "Ratings and reporting on ratings is an essential piece of the business puzzle for ad-supported businesses for sure," he said. For once, that was the end of the ratings discussion during the rest of his time onstage. 

$6 Billion — and Growing

The last time Sarandos was on the TCA stage in January, the executive noted that Netflix would be spending $6 billion on original programming and acquisitions. Asked Wednesday if he has a new forecast for the streaming giant's budget for originals, Sarandos declined to provide a specific budgetary forecast but confirmed it's increasing. "It'll go up," he said. "We're hitting where we said we would last year and we'll have an update on that in the next few months."

Don't Blame Netflix for Peak TV

After a lengthy list of upcoming programs including Black Mirror, Luke Cage, Santa Clarita Diet, Ozark and many, many more, Sarandos agreed with FX boss John Landgraf's now well-known comments about the Peak TV era where there are more than 400 scripted originals across broadcast, cable, premium and streaming services. But to hear Sarandos tell it, that isn't a problem that Netflix needs to be concerned with. "There are too many mediocre shows on television," he said. "But at a time when the industry has glut of series that fail to have an impact, we've been able to give fans what they want: adventurous storytelling with original voices."

He singled out Peabody Award-wining Netflix comedy Master of None and Marvel drama Jessica Jones, the latter of which was the first superhero show to earn the prestigious prize. "I know there's a lot of shows to watch on TV, but which one of those shows would you have cut to keep some arbitrary title count?" Sarandos said after listing a number of Netflix's upcoming originals, including recent critical darling Stranger Things. "Our goal is to keep the bar high and keep them coming."

How to Solve a Problem Like Chelsea 

Chelsea Handler's talk show, Chelsea, has been plagued by bad reviews and backstage changes, like the departure of its showrunner, since its May premiere, but Netflix showed its support for the project by giving it a second-season renewal (of 90 episodes). Sarandos further backed the show by explaining away the departure of executive producer Bill Wolff as "part of letting the show evolve creatively." He added that Handler "has been killing it" when it comes to booking guests. "It's really just finding the right rhythm for the show," he said. "All the elements are there."  

Can A Netflix Show Be Canceled After Season One?

Without a barometer like ratings to determine success, Sarandos was asked to explain the streamer's puzzling renewal strategy that included a surprise pickup for the poorly reviewed and buzz-light entry Marco Polo, among others including Real Rob — which Netflix, yep, renewed Wednesday. His formula was a lot like that of Landgraf (where ratings, critics and FX each get a vote), only without the ratings point in the triangle. 

"Does it get the audience satisfaction — streaming completions, the rate of which people complete a show, social media buzz and [critics and bloggers] keeping it in the zeitgeist? Then we're happy to make more — as long as there's the creative direction that will take you to a second season," he said. "We're looking for show that pops right away and shows with multiple season arcs. … And that's why our shows tend to go more than one season when some networks don't get to the end of one season."

The Future of Stranger Things

After renewing Lady Dynamite and Chelsea earlier in the day, Sarandos explained why Winona Ryder starrer Stranger Things wasn't on that list despite becoming the watercooler show of the summer. "We always want to take some time to be thoughtful about the process," he said. "When we first come out of the gate with something, we have an idea where it's going to go, but it's sensible for us to let the show breathe. People are falling in love with it, let's focus on season one."

Global Domination Woes

Netflix launched in 130 countries in January, but Sarandos cautions that it will take time before the streamer understands user habits in all of those international markets. He says that's one reason Netflix's subscriber additions during the second quarter were lower than expected, because the company hadn't figured out how subscribers will respond in each country. "We found out that everything we learned about Latin America wasn't helpful at all in Italy and nothing we learned in Mexico really helped us in Taiwan," he explained. But that was part of the impetus for the global launch, so that Netflix can learn from being in each of those countries. And Sarandos shrugged off any long-term concerns. "Latin America was a really difficult process for us," he said, acknowledging the struggles to set up payments and provide adequate bandwidth in some communities. "Now it's such an important part of our global business, and it's some of our fastest-growing territories. It was about four years before we turned the corner on it." 

Marvel's Full Slate

Following an initial slow rollout for its Marvel superhero dramas, Netflix's comic book slate is starting to get very crowded. In addition to the recently ordered third season of Daredevil, the streamer has Luke Cage, Iron Fist, mini The Defenders, Jessica Jones and its Punisher spinoff all in the works. Sarandos confessed that Netflix is going to have to release the shows "quicker" so there's less downtime between each series, though the Defenders mash-up — in which the stars of Iron Fist, Jessica Jones, Daredevil and Luke Cage all appear — slows the production process. As for the release pattern, expect Luke Cage, Iron Fist and then The Defenders, followed by the second and third seasons of the others.