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Sarandos: Netflix to Go After HBO Content

26 Jan, 2011 By: Erik Gruenwedel

Ted Sarandos Netflix

Netflix reportedly will challenge HBO for original Warner content. Its license agreement with the studio expires in 2014, according to chief content officer Ted Sarandos.

Speaking before the beginning of the National Association of Television Program Executives annual confab in Miami, Sarandos said Netflix would compete with HBO for original content, including movies, for its burgeoning streaming service.

In addition to movies, Warner Bros. Television is one of the largest producers of original episodic programming. It has a long-standing license deal with Time Warner subsidiary HBO, which has more than 28 million subscribers. That exclusivity has been an irritant to Netflix throughout the years as it attempts to upgrade its programming.

As Netflix aggressively ups the ante on spending for streaming content, Time Warner would notably benefit as it generates incremental revenue from third-party sources.

“We will be an aggressive bidder for that content,” Sarandos told The Hollywood Reporter. “That will be good for Warner Bros., not so good for HBO.”

Sarandos said Netflix also would be willing to license repurposed HBO content, including the popular “True Blood” series, AMC’s “Mad Men” and Showtime’s “Dexter” when those series conclude their cable runs.

He said the Los Gatos, Calif.-based online disc rental pioneer is not a threat to pay TV, cable or satellite TV. Instead, Sarandos said Netflix complements pay TV by increasing the value of its original programming into the future. The executive said cable costs primarily increase due to the spiraling expense of professional and college sports license fees.

“We’re not in that at all,” Sarandos said.

In Netflix’s financial call Jan. 26, CEO Reed Hastings downplayed analysts’ projections that its subscriber base could surpass HBO’s by 2012, putting parent Time Warner CEO Jeff Bewkes in the awkward position of entertaining competing content license bids.

Hastings said Netflix spends $100 million a year licensing content from Warner and allowing it to compete with HBO for content going forward could be financially advantageous to Time Warner and mutually beneficial.

Hastings said ongoing growth has made it easier to more aggressively bid on third-party content.

“Clearly, they will make a strategic decision based upon the different interest of the different divisions,” he said.

CFO Wells said subscriber growth is making it easier to pay more for content.

"Three or four years ago when we couldn’t pay much, it was very hard,” Wells said. “And now we have people coming to us.”


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