Netflix CCO Ted Sarandos Reveals His Strategy for Expansion

David Fincher Netflix Illustration - P 2012
Illustrated by Alex Fine

David Fincher Netflix Illustration - P 2012

The once DVD only company enlisted Kevin Spacey and David Fincher for a new series to become "more on-demand centric."

Ever since Netflix rescued Arrested Development, Chief Content Officer Ted Sarandos has been treated like Santa Claus by disenfranchised fans of shows traditional TV has ditched.

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“Arrested Development is the rarest test case – the rarest of cult brands that actually grew from the time it went off TV,” Sarandos said Wednesday at the Nomura 2nd Annual U.S. Media & Telecom Summit in New York.

“I get letters from people all over the world to please bring back my favorite show – hundreds of them a day. I get letters like Santa Claus… it was the gold standard of rescuing a show.”

As has become standard when a Netflix executive speaks to Wall Street analysts lately, Sarandos was also asked about original shows and competition from HBO Go and TV Everywhere initiatives, like an app for watching ESPN on mobile devices (earlier in the day at a different conference, Disney CEO Bob Iger said similar apps for the Disney Channel and ABC are on the way).

“Our difference in strategy is, we’re launching our shows with every episode at once,” Sarandos said. “So it’s really taking on-demand to its natural extreme, which is that for every 100,00 people that want to watch every night at 8 p.m., there’s a couple of thousand that want to watch the whole thing this weekend. And I want to be able to service them both."

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“Everyone keeps talking about whether or not Netflix is becoming more like HBO, and the truth is HBO is becoming more like Netflix. Much more on-demand centric, much more serialized-centric. That’s the evolution of television, to become much more like Netflix.”

Netlflix’s biggest gamble in original content is the upcoming House of Cards, which Sarandos said was a smart deal because there are a few million people who will watch just based on the involvement of Kevin Spacey and David Fincher, and the fact that it’s based on a successful show in the U.K.

“There’s a built-in base for that show without spending a nickel in marketing,” he said. “Now, the risk is, do they make a lousy show…we bet that they’re going to make a great show.”

He said a 100,000 square-foot soundstage in Baltimore was built at an old pharmaceutical warehouse for House of Cards and more can be done with the facility.

“It’s so large and soundproof that they can actually run two units shooting at the same time. Their sets are built for feature filmmaking,” he said.

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“Us getting involved in casting, or us getting involved in developing storylines, I’d be very nervous about that,” he said. “What we do is leverage the production companies who have a great track record doing this, and what we do is give them the financial capability.”

Sarandos also slammed pay-TV providers who have taken aim at Netflix during negotiations for carriage fees.

“The quality of television has increased phenomenally over the last fewyears,” he said. “And then you have the MVPD side of the business wanting to pay lower fees for better content, and then penalizing those folks for doing business with us in the form of lower carriage fees if they have a Netflix deal, and that is not a good recipe for increasing the improving content.”

Sarandos also said he doesn’t mind the month-long delays that studios are imposing on Netflix.

“If it fuels VOD transactions, which is higher margins for studios, then that’s good for the overall creation of content,” he said.