Netflix Exec Touts Originals, Says Pay TV Industry Content Is ‘Out of Whack’

LONDON – Netflix chief content officer Ted Sarandos said here Thursday that he is happy that the online streaming giant doesn’t have to deal with carriage fee showdowns, while reiterating that it will be more selective about what content it licenses in the future.

Asked about showdowns between content providers and distributors, he said: “That’s a business that fortunately we don’t have to participate in.” Highlighting that USA is the most-watched cable network, but ESPN commands a much higher monthly price per subscriber from pay TV operators, he added: “The pay TV industry is kind of out of whack.”

Speaking at the Financial Times Digital Media Conference, he said if Netflix had to pay more for lesser-watched content, “we would have a lot of content we’d pay for that nobody would watch.”

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A few days after Netflix said it was looking to renew some content licenses for specific shows with Viacom, but not extend its whole current content deal with the conglomerate, Sarandos said his team would rather pay a little more for a show that does well on the service than buy every piece of content available from a partner.

“Our appetite for non-exclusive content is going to near-zero,” Sarandos said. “We are willing to pay more on an exclusive basis.” Consumers get confused if “non-exclusive bulk” is available on several online video services, he added.

An increasing focus on exclusive content, originals and very popular content has helped Netflix increase users’ viewing hours, which have a strong correlation with retention, he said. And usage and retention are key for all subscription businesses, he said.

Original shows help here as people “give you brand affinity points for shows they haven’t even watched,” Sarandos said. He cited a survey of U.K. subscribers who said horror was not their cup of tea, but they were happy to hear that Netflix had landed recently launched Hemlock Grove.

“It is the beginning of a very positive cycle,” he said about the four originals this year.

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The Wachowskis’ adult sci-fi project Sense8 and Turbo: F.A.S.T., a first animated kids show for Netflix based on a Dreamworks Animation film are also in the production pipeline as is the second season of Lilyhammer, which just wrapped, he said.

Lilyhammer will give Netflix its first taste of a second original season. “I think the audience will grow over season one,” he predicted.

Discussing the much-anticipated Arrested Development, Sarandos said its 15 episodes are “very entwined,” so people will be wanting to re-watch to understand all the jokes. “Every time you watch it, it will be a different experience,” he said.

Like other Netflix shows, “it’s crafted for multi-episode” viewing and is therefore denser than regular TV shows that need to remind viewers of what happened in the previous episode.

Earlier in the conference day, Time Warner chairman and CEO Jeff Bewkes had been asked about Netflix, its continued growth and its original content push, saying Netflix could maybe get to 40 million subscribers, while HBO has 110 million, but globally. Bewkes also predicted slowing sub growth for Netflix.

Asked about the comments, Sarandos said: “I don’t know why he would make that comparison.” He highlighted that Netflix added 2 million U.S. subs in the first quarter, about the same as in the year-ago period. “We’re not seeing [any] slowing,” he said.

He also argued that HBO is a very different product around the world and has, for example, joint ventures in some countries.

“They don’t necessarily kill each other,” he said about premium TV services. “HBO set a very high bar for us in original content. The winner is going to be the consumers.” Netflix didn’t shoot for AMC or FX content quality, but wanted its originals to be as good as or better than HBO’s, he said, adding:

Sarandos’ appearance kicked off with a sizzle reel featuring such Netflix originals as House of Cards, Hemlock Grove, Arrested Development, as well as Lilyhammer.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai