Dealmakers
TED SARANDOS Chief content offi cer, Netfl ix
O CAREER
2000 Joins Netfl ix as chief content offi cer and vice-president of content, going on to strike landmark deals with major US networks and studios 1999 VP of product and merchandising, Video City 1993 Western regional director of sales and operation and general manager at video distributor ETD
ne of the most eye-catching events at this year’s MipCom will be the keynote speech
from Ted Sarandos, currently chief content offi cer at TV and fi lm sub- scription on-demand service Netfl ix. A decade into his role, Sarandos has
helped Netfl ix grow to a point where, in its core US market, the company has 20,000 movies and TV shows available on more than 400 devices – which makes him one of the most dynamic dealmakers in the business. However, his speech comes at a criti- cal moment both for Netfl ix and for rights holders trying to get to grips with the impact of VoD on the value of their content. Currently focused on the US, Netfl ix
built up its business by offering movies via mail order. It was the fi rst to realise that the shift from VHS to DVD was an opportunity to take on bricks and mortar businesses like Blockbuster by offering better value, a greater range of titles and increased convenience. It created a business with 25 million subscribers and $800m (£520m) revenues. Strategically, the company invested
aggressively in its online and on- demand capabilities. At the same time, it elected to expand the range of content on offer, so its customers now receive an all-you-can-eat fi lm and TV streaming service in return for a monthly subscription fee. For new-look Netfl ix to deliver on its consumer promise, it needs to offer as complete a service as possible, says Sarandos. That’s why he has been keen to stress that Netfl ix is “the only online premium service with shows from all four US net- works and dozens of cable’s biggest brands”.
This pursuit of TV content has brought Netfl ix to an inter- esting place. While content owners were happy to let it be the online equivalent of Blockbuster, they’re more ambivalent
about the com- pany’s desire to reinvent itself as the one-stop shop for on-demand TV content.
54 | Broadcast | 30 September 2011 Cheers Netfl ix pays good money for
content – and this is the point on which Sarandos tends to focus. So far this year, for example, it has paid CBS $200m (£130m) for the US rights to shows like Star Trek, Cheers and Frasier, and $300m (£195m) for shows like Saturday Night Live and The Offi ce (pictured, below). But Netfl ix is starting to emerge as a direct competitor to the major studios. Today, it may look like it is content to be the leader in on- demand, but how long before it launches a linear network, or starts to generate ad revenue around on- demand? Similarly, how long before it starts to migrate its model to the inter- national market? It’s already estab- lished in Canada, while lack of penetration in the Latin America pay-TV market gives it room to build. Further afi eld, there are reports that a new pact between Netfl ix and Lionsgate is part of a plan to roll out in Europe.
If Netfl ix is allowed to grow unchecked, it is a threat to the established players. But we’re starting to see signs that this isn’t going to
happen. The fi rst is the cost of those deals cited above, which is far higher than Netfl ix previously paid. As a result, Netfl ix has
had to signifi cantly increase its subscription prices in the US and expects to lose 1 million subs.
Content won’t get any cheaper, particularly now
‘Sarandos has helped Netfl ix grow to a point where it has 20,000 movies and TV shows on 400 devices’
that Amazon has moved into the same on-demand space. This is why Saran- dos decided to do a deal that gives Netfl ix fi rst-run rights to the US remake of House Of Cards. That may be one way for it to deal with its lack of a production pipeline and increased acquisition costs. But it’s expensive – and also takes it into territory that brands like HBO, Showtime or Starz regard as their own. A number of European content
owners have made it clear they are not going to allow Netfl ix to surf into their market using their content. RTL chief executive Gerhard Zeiler, for one, is cautious about next-generation aggre- gation models. Perhaps the biggest body blow for
Netfl ix was the news that one of its key US partners, Starz, has decided against renewing its content arrangement – losing Netfl ix about 1,000 titles. Presumably, Sarandos will use
his speech to continue to argue that Netfl ix is the content owners’ friend, helping to monetise content that otherwise is not being used effectively. But like that other great industry friend Google, Sarandos will need to convince his audience that Netfl ix has no intention of trying to pick their pockets.
www.broadcastnow.co.uk
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