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Ted Sarandos: Netflix Original Programming Better Than Licensed Content

13 May, 2015 By: Erik Gruenwedel

Netflix CCO Ted Sarandos

For Netflix, original shows such as “House of Cards” and “Orange Is the New Black” offer greater fiscal and brand opportunities than licensed content, CCO Ted Sarandos told an investor group.

Speaking May 13 at the MoffettNathanson Media & Communications Summit in New York, Sarandos reiterated that subscriber engagement increased 20% year-over-year — much of it he said due to original programming and on-demand access.

More than 10 billion hours of content was streamed globally by Netflix subs in the first quarter — about 70% on episodic programing.

With 20% of programming original, Netflix aims to increase the percentage significantly as it heads toward a stated goal of global availability by the end of 2016. To achieve that the subscription streaming pioneer wants greater control of content, which in turn enables it to rework existing distribution schedules and practices.

It’s a strategy that no doubt is ruffling feathers within the status quo (notably theater operators) and television broadcasters. But with 60 million global subscribers and $10 billion in content obligations, Netflix has everyone’s attention.

While the licensing of third-party content continues, Sarandos said original programming is proving to be more efficient from a monetary perspective. He cited a report that found “House of Cards” to be the most popular U.S. TV show in China. Sarandos said that association will help when Netflix enters the Chinese market some time in the future.

“For a dollar spent [on programming] and an hour viewed, you get more hours of viewing per dollars spent on original programming versus the licensed content,” he said.

To get control of programming, Netflix has begun dealing directly with creators and producers of TV shows and independent movies. When it licenses a show or movie, the rights are exclusive.

“We license on a global basis. We’re either interested in the global rights or we’re not interested at all,” Sarandos said.

The CCO said exclusivity, binge viewing, commercial free, and on-demand access are important parts of Netflix’s brand proposition. He said that if you ask 10 subscribers you’ll get 10 different answers of what they value most regarding programming and access.

“That’s why we’re trying to do that for all of them,” Sarandos said.

He believes broadcast TV is going to become more linear. Focusing more on events such as award shows and live sports — programming that can’t be replicated.

“Where the attribute really is [live programming], TV is fantastic. When the attribute is on-demand, like scripted programming, then Netflix is a great solution,” Sarandos said.

The executive said Netflix continues to “work upstream” by dealing directly with content creators and producers. Netflix recently secured rights to African warlord drama Beasts of No Nation, starring Idris Elba. The SVOD beat out independent distributors (such as Fox Searchlight) within the major studios — a win Sarandos attributed more to dealing directly with producers and granting immediate access than money.

“We’re trying to get rid of these inefficiencies of long marketing windows where you are more likely to forget about [a movie] by the time you get a chance to watch it,” he said.

At the same time, Sarandos said Netflix would be interested in bidding on new sitcoms with major stars such as “The Big Bang Theory,” “Mike and Molly,” and “2 Broke Girls,” unless the market for the shows is overheated.

He said “soft serialized” sitcoms such as “How I Met Your Mother” and “Friends” work well on Netflix. Netflix secured exclusive rights to Fox TV’s “Gotham” and A&E Networks’ “The Returned” by dealing directly with the shows' producers, Warner Bros. Television (“Gotham”) and A&E Studios, respectively.

“We’re not seeking a lot of [random viewing],” Sarandos said.

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