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Netflix Entering Reality TV, Testing Consumer Products

5 Dec, 2016 By: Erik Gruenwedel

Netflix CCO Ted Sarandos

Netflix is on track to produce 1,000 hours of original content heading into 2017, including for the first time 20 unscripted shows such as global competition series “Ultimate Beastmaster,” from executive producer Sylvester Stallone.

Netflix released 30 original episodic programs in 2016, with individual shows designed for specific demographics — underscoring the service’s mandate not to release viewership ratings on shows.

Speaking Dec. 5 at the UBS 44th Annual Global Media & Communications confab in New York, Netflix CCO Ted Sarandos said original series seek diverse audiences, with some targeted toward broader audiences (“tens of millions”) and others focused on a “couple million” people. A show is considered a success if it meets undisclosed criteria data points. Netflix’s ability to cater original programming toward specific audiences makes it unique, Sarandos said.

“We’re trying to make sure that we have something for everyone in the house.”

The executive said unscripted programming appears to be “largely interchangeable,” which he likened to a show about hoarding whereby competing programs on the subject showcase equally passionate viewership.

“By producing our own [reality shows], we can focus on the shows that are more likely to ‘travel’ globally … and more event driven.”

Sarandos said Netflix would incorporate nation-specific productions for “Ultimate Beastmaster” in order to widen viewer appeal. He said that unlike live sports programming, repeat viewing for “American Ninja Warrior” is equally strong due to the personalities of competitors and less about who won.

“When ‘Beastmaster’ hits in South Korea and feels like a local Korean TV show, they have never seen anything like that before from the scale of production.”

Another original program, “Roman Empire: Reign of Blood,” is a hybrid documentary/drama based on historical events about the rise and fall of the Roman Empire, and began streaming last month. 

Meanwhile, Netflix is not pigeonholing itself to self-made content. The service has licensed several U.S. broadcast shows to be marketed internationally as Netflix Originals. It does the same with foreign TV productions streamed (the season after) in the U.S.

Notably, when CBS airs “Star Trek: Discovery” on CBS All Access, Netflix will have exclusive streaming rights to the show internationally (CBS boss Les Moonves brags All Access essentially got the show for free after Netflix paid all production costs). Domestically, the service just brought back “Gilmore Girls,” which Warner Bros. owns and is creating for Netflix.

“There’s no model where I could have done [‘Gilmore Girls’] myself,” Sarandos said. “It’s the reason nobody else did it. We have a unique ability to bring [The CW show] to consumers.”

He said DVD, Netflix and piracy kept the “Gilmore Girls” legacy alive among viewers since its broadcast ended in 2007. Notably, 40% of Google searches for the show are among non-English speaking users, according to Sarandos.

“We come back 10 years later and people flip out about it. It’s a very global experience.”

The Netflix studio, which the company will occupy in January, sits on the backlot of Sunset Bronson Studios in Los Angeles. Studio costs are less about infrastructure (which Sarandos said is ‘very rentable’) and more about “people costs,” which includes content rights and physical production costs.

“We have the ability to take advantage of [Bronson Studios'] infrastructure.”

Separately, Sarandos said management remains pleased with original movie releases, characterizing titles starring Adam Sandler (The Ridicuous 6, The Do-Over) and Kevin James (True Memoirs of an International Assassin) as “comfort food” comedy. He said the films have appeared No. 1 in every Netflix region globally.

Sarandos said that as long as rising content costs result in subscriber growth and increased viewership, the law of diminishing returns remains in check.

“We’ve been really happy with the results in terms of people watching. We’re trying to make movies people would go see in theaters if that’s where they were on a Friday night.”

The first real test of a high-profile movie will be a title called Bright, which is Will Smith’s next feature film and co-stars Joel Edgerton. Sarandos said the creators behind the movie made Suicide Squad for Warner Bros. as well as the forthcoming sequel.

“That’s the kind of project we’re trying to skew the [movie business] model toward. We’ve been able to create television events. Can we do that in the movie space? And can those movies be subscription drivers and retention builders the way our original television has?”

When asked why Netflix’s movie offerings are slimmer than TV, Sarandos said a strong percentage of Netflix subs mainly watch movies, with some regions — such as Canada — skewing higher due to the abundance of theatrical titles available as a result of major studio license agreements.  

Comparatively, Netflix has no major domestic studio movie streaming deals other than with Walt Disney Studios, which includes Marvel, Pixar and Lucasfilm titles. Yet, 30% of domestic Netflix subs still stream movies.

“I think there’s a behavior that people like to watch movies and like to watch TV in some combination,” Sarandos said, adding that streaming Disney titles Jungle Book, Zootopia, The Finest Hours and upcoming Captain America: Civil War (Christmas Day) and Finding Dory in January occur in “not terribly exclusive” release windows, but play to the larger appeal for Disney content.

Indeed, the upcoming Rogue One: A Star Wars Story will be Netflix’s first "Star Wars" title in the pay-TV window.

Finally, Sarandos said there is ongoing testing into consumer products (T-shirts, action figures, etc.) revolving around original programs, including popular series “Stranger Things.” 

“We don’t look at it as a revenue source as much as a marketing driver to build the content brand. Down the road there might be some real business there.”

About the Author: Erik Gruenwedel

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