Netflix CEO Reed Hastings and Chief Content Officer Ted Sarandos say original programming is starting to overtake acquired fare and its platform has scaled to the point that linear rivals like HBO and Disney are not principal’s main rivals.
Those were two of the key takeaways from Netflix’s fourth-quarter earnings interview, the company’s answer to the traditional earnings call. This quarter’s edition was moderated by Eric Sheridan, an analyst with UBS.
Sheridan asked Hastings to expand on his quarterly letter to investors released before the call, in which he wrote, “We compete with (and lose to) Fortnite more than HBO” — an unmistakable jab at the company whose uber-boss once dismissed Netflix as the “Albanian army.” In the earnings interview, he elaborated, “I think of it as us winning time away – entertainment time – from other activities. So instead of doing Xbox and Fortnite or YouTube or HBO or a long list, we want to win and provide a better experience, no advertising, on demand, incredible content.”
As to new offerings, like Disney+ and WarnerMedia’s forthcoming service, he said they don’t faze Netflix. In the U.S., he estimated, about 1 billion hours of television content are consumed a day across households, bars and restaurants, and Netflix accounts for about 10% of that.
“Disney has great content and we’re excited about their launch and, you know, maybe they grow over a couple of years to 50” hours, he said. “We compete so broadly with all of these providers that any one provider entering only makes a difference on the margin. So that’s why we don’t get so focused on any one competitor. I really think our best way is to win more time by having the best experiences in all the things that we do.”
Sarandos amplified another point made in the investor letter, which revealed viewership data for six series as well as the original movie Bird Box.
Before launching House of Cards and its other initial originals, Sarandos said, the company recognized that it could find itself in an environment where suppliers would pull back their titles, as Disney is doing and Warner Bros. and NBCUniversal have threatened. “That’s a corner I’m glad we saw around six years ago,” he said.
Overall viewing, despite standout off-net titles like Friends, The Office and Grey’s Anatomy, which could all be gone by 2021, is increasingly dominated by originals, executives said.
“It’s a lot of hours of watching” for those acquired titles, Sarandos said. “But if you stack that viewing into a Top 50 or Top 25 shows, it’s dominated by our original brands.” Hastings added that total viewing of originals is “getting closer” to overtaking that of acquired titles.
The goal of releasing data, Sarandos said, was to paint a picture of Netflix as an essential feature of the landscape around the world. “These are less financial metrics than they are cultural metrics,” he said. Bird Box drawing 80 million households in four weeks, he said, “means the same thing as 80 million people buying movie tickets.” He added, “As part of your Netflix subscription, you’re in the zeitgeist.”
Sarandos said co-productions like Bodyguard (shared with ITV and aired in the UK by the BBC) are growing as a category, with 140 in 2018 and 180 projected this year. These project entail more than simply slapping on a red label, he insisted. “We come on at the script stage,” he said. “We come on at the first-money stage.”
While co-productions offer increasing opportunities, Sarandos stressed that “the best content” remains the company’s main goal. “That means a combination of business models,” he said. “We don’t want to be stuck on any one business model because the consumer really doesn’t understand that and isn’t thinking about that.”
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