Ted Sarandos: Global Content Licensing Netflix’s Biggest Challenge7 Dec, 2015 By: Erik Gruenwedel
Executive says subscriber growth the best way to judge original content ratings
With $5 billion in contracted content spending this year, Netflix commands the largest global TV programming budget in the world. With 16 original scripted TV programs this year, growing to 31 in 2016, in addition to 10 feature films, 30 kids series, 10 comedies and 12 documentaries, Netflix's biggest challenge is getting global rights to programming, according to CCO Ted Sarandos.
Speaking Dec. 7 at UBS's 43rd Annual Global Media and Communications Conference in New York, Sarandos said Hollywood and media properties continue to operate a business model predicated on licensing content on a regional basis. With Netflix planning to operate in more than 200 countries by the end of 2016 — in effect becoming the first worldwide buyer of content — securing global rights has been problematic.
“There’s some resistance to it, but mostly from the regional sellers who don’t want their jobs marginalized,” he said.
Sarandos argues that Netflix offers content holders a more efficient, economically neutral distribution channel, unlike the current piecemeal approach. With critics arguing the latter can hike fees based on individual market dynamics, Netflix’s willingness to outspend competitors is upsetting the status quo.
“It’s a pretty big change. We are kind of alone in the space buying global rights. And at the end of the day, it’s a structural change that I think all of our studio partners are wrestling with,” he said.
With Netflix’s ongoing resistance to divulging viewership data for original programming, when asked about ratings for new programming, Sarandos again punted, saying viewership could be best judged by Netflix’s subscriber growth.
“Because people are attracted to Netflix for the great content they are going to watch,” he said, adding that Netflix tracks viewership internally by the number of hours consumed by subscriber.
“This is programming people want to watch. [But] at the end of the day, [net subscriber growth] is the ultimate measure of our health.”
Despite Nielsen recently citing “Game of Thrones” as the most-watched TV show, Sarandos believes select individual Netflix programming, such as “Narcos,” “Orange Is the New Black,” “Jessica Jones,” “Master of None” and “Daredevil,” trumps the HBO hit on pay-TV when factoring in all distribution channels, including broadcast, online and mobile on a global basis.
Sarandos said “Narcos” is 85% in Spanish, produced by a French company, filmed in Columbia with a Brazilian cast and “hugely” popular in Europe.
“It’s the first flavor of what global television can be … and the next phase of filmed entertainment,” he said.
Finally, the CCO reiterated his aversion to entering news and sports programming due to Netflix’s on-demand business model. He said Netflix’s entry into live sports programming would necessitate creating original sports programming such as ESPN’s “X-Games.”
“It’s the only way I would be interested,” Sarandos said.