The company is borrowing heavily and sacrificing profits to increase the quantity and quality of shows. And it’s determined to appeal to “multiple demographics and all genres” as opposed to “just a handful of shows meant to appeal to the coasts,” Chief Content Officer Ted Sarandos says.
He doesn’t fear that Netflix will set a pattern, requiring it to shovel additional dollars into original programming as far as the eye can see in order to keep the company moving up. “As these shows grow into their second, third and fourth seasons, they’re more attractive on their own.”
And Sarandos sees big opportunities ahead to amortize the costs across different markets. Orange Is The New Black and the Wachowskis’ Sense8 “have enjoyed great success all over the world.” The upcoming drug-crime drama Narcos “will be an enormous success all over the world” and, while it might do especially well in Latin America, it also will “be a huge hit for us in the U.S.”
Netflix Shares Soar After It Reports Strong Q2 Sub Growth
The process works both ways. The exec is jazzed about Spanish-language programming licensed from Latin America. Some of the productions are “drawing huge numbers in the U.S. … We’re really impressed with the quick takeup on.these shows.”
Sarandos adds that its also important for the company to have films shown in theaters. It sees a victory ahead for a sequel to Crouching Tiger, Hidden Dragon, which will appear in Chinese theaters in 3D — though major U.S. chains have rejected the idea of showing a movie that’s simultaneously available online.
“For us it’s mostly symbolic,” says the content chief. “These movies are not TV movies. They’re of the same size and scope of movies that you’d see in theaters.” He believes that over time, “owners will want to book them in their theaters. … It’s an exciting opportunity, and we think there’s a lot more.”
Netflix also looks forward to adding Disney movies and shows beginning next year. “That programming causes a great deal of excitement for our customers,” which likely will make it “one of the few output deals we pursue going forward” as the streaming video service tries to distinguish itself from its rivals.
Sarandos says he expects Netflix to split its spending equally between original and acquired content.
Looking to its overseas expansion, Hastings says Netflix will avoid some “substantial missteps” that Hulu initially made in Japan. The rival’s pricing was too high, and it didn’t offer local content. “Our pricing will be more aggressive” and will include local originals. Hastings says Japan “is a unique market because it’s very brand sensitive.” Although it probably will be “one of our slowest markets” in terms of growth, over time he expects it to be “one of our best” markets.
CFO David Wells adds that when it comes to China, “we’re taking our time and being deliberate and finding the right path.”
On other matters, Hastings says the company today endorsed Charter’s deal to buy Time Warner Cable because it offered free peering connections at least to the end of 2018. “It frees us up from being taxed by an ISP,” the CEO said. He also urged the FCC to apply the same condition to AT&T’s deal to buy DirecTV.
But Hastings decided to let others have the floor when it comes to discussing whether Netflix is worth its sky-high stock price — up more than 100% so far in 2015.
“When the stock was half this price, I described it as euphoric,” he says. “It’s a mystery to me. … I’m out of the stock-commentary business.”
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