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Netflix’s New Aim: Exclusives

13 Sep, 2012 By: Erik Gruenwedel

Netflix is seeking to lure and retain subscribers through third-party deals for exclusive access to content as well as through producing original programming, chief content officer Ted Sarandos told an investor group.

Speaking Sept. 13 at the Bank of America–Merrill Lynch Communications, Media & Entertainment conference in Beverly Hills, Calif., Sarandos cited Netflix’s deal with AMC Network, which he said has helped underwrite the premium channel’s content production costs while helping the subscription video-on-demand pioneer secure exclusive streaming access to “The Walking Dead,” “Breaking Bad” and “Mad Men,” among others.

“Our product is incredibly complimentary to the total ecosystem,” Sarandos said, adding that AMC has “a particular programming sensibility that works very well on Netflix.”

“We can take a lot of risk out of the production of their shows,” he said.

Los Gatos, Calif.-based Netflix is producing several proprietary episodic series for release in 2013, including “House of Cards,” “Orange Is the New Black,” “Arrested Development” and “Hemlock Grove,” among others. It is also producing a second season of “Lilyhammer,” which premiered in February.

Sarandos says Netflix is also able to supply AMC with user data that the premium channel can use to help it make better programing decisions.

“Netflix is the killer app for that,” he said. “We are beneficial to the media business.”

Sarandos said broadcast television has predominantly become event driven around reality programming and sports — content he said is perfectly suited for the networks, cable and satellite TV operators. Content delivered over the Internet, however, has the ability to be personalized, which Sarandos said is the polar opposite of linear TV.

He said consumers are getting frustrated by the current business model that mandates viewing TV shows on a weekly basis. Sarandos said all of Netflix’s original programs would be available in their entirety on day one.

Netflix continues to work on altering the current premium-TV distribution window hierarchy by shrinking the window, increasing exclusivity and exploiting the content, Sarandos said. Netflix’s deal with Epix, which was exclusive and now includes Amazon Instant Video, he noted, achieved none of the aforementioned goals due largely to the fact that the movies Netflix had paid a premium for actually were delayed 90 days from their availability on Epix’s other platforms.

“Over time it proved not to be differentiated enough … and it really wasn’t exclusive,” Sarandos said, adding that movies from DreamWorks Animation and Relativity Media will be exclusive.

He cited the recent announcement for three ABC TV programs that would only be available on Netflix beginning in October as an example of the push for exclusivity. Its previously announced deal with DreamWorks Animation begins offering exclusive access to the studio’s movies starting in the fourth quarter.

When asked how confident he can be that Netflix’s original programs will connect with viewers when just one in six primetime TV shows do, Sarandos said each program earmarked for production is based on data-centric decisions and economics.

“We establish early on whether there is an audience for the show,” he said. “The most watched content on Netflix is exclusive to Netflix.”

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