Netflix wants to focus on viewers, not critics or media executives, and on original, locally-focused content, co-CEO Ted Sarandos said at a television industry conference in London on Tuesday.
Speaking at the keynote for the Royal Television Society’s London 2024 convention, of which Netflix is a major sponsor, he also shared his thoughts on Netflix’s hits in the UK, including “Baby Reindeer,” for which star Richard Gadd won Emmys this weekend for best actor and best writing in a limited or anthology series or film. This is the UK’s creative advantage. For example, he said that when Netflix releases its latest audience engagement report on Thursday, its top four shows will all be made in the UK – “Foo Me Once,” “Baby Reindeer,” “Bridgerton” and “The Gentlemen” – and will reach a combined total of 360 million homes.
“Choice and control” are key in the streaming era, the executive argued, and said “change” is key to the industry. “We had two big competitors,” he said, “piracy and Netflix’s own DVD business,” he said, recalling Netflix’s early days, calling it a “painful breakup” when the company gave up its DVD business. The executive quoted Steve Jobs as saying, “Cannibalizing your own business is the key to continued progress.”
“Today, our members can watch a world of entertainment for a fraction of the price of a 2007 box set of ‘The Sopranos,’ and they don’t have to wait two months for every episode of a show to be released or for a movie to finish its theatrical release,” Sarandos said.
“Audiences don’t care about movie duration at all,” he said, talking about the industry’s constant push for change. “We don’t talk about it at the dinner table.” The exec also explained that streaming companies don’t see a business need to recoup their investment in a film at the cinema. “Netflix is unique in that we have enough scale,” Sarandos said. “We’re unique in that we can spend $200 million on a film and have enough viewership that we can put it directly on Netflix without trying to recoup a portion of the theatrical revenue, which we think is a pretty inefficient way to distribute some films.”
While discussing the moves of some of the entertainment giants, Sarandos also emphasized that “if you find yourself trying to protect your business, you’re pretty much finished.” Instead, he believes in the idea that “you have to constantly challenge yourself, disrupt[your business]and move the business forward for the consumer.”
Does Netflix need so many shows and movies? Sarandos said he gets this question a lot, and the answer is yes. After all, he explained, you can’t make a show for “one sensibility” when tastes are so diverse. “You have to like everything.” He said that people who like The Crown also like Dolly Parton’s Heartstrings. His lesson: “Put the audience first.” Sarandos urged his industry colleagues to think about their work from the perspective of a fan, not a critic or media executive.
He also argued that targeting a global audience with shows and films was the wrong approach. The content itself does not have a global audience, he said, arguing instead for an authentic, local focus that would reach beyond borders. Supacell and Baby Reindeer became global hits because they were “authentically British”, he argued, adding that they were commissioned by a local UK team based here.
And it’s important to remember that success is more art than science. An algorithm can’t “reverse engineer success,” Sarandos said. Otherwise, Netflix wouldn’t fail. “It does happen,” he acknowledged.
Sarandos also revealed that Netflix owns less than 25% of the IP in its UK catalogue. “There’s huge potential in TV today,” he concluded. “This generation loves storytelling just as much as ever, if not more. We just have to find the right way to connect with them.”
When asked about the $170 million lawsuit filed by the real-life person who was the inspiration for the character Martha in “Baby Reindeer” over the show’s use of the “true story” label, Sarandos argued that this was a UK-specific controversy that “hasn’t happened anywhere else in the world.” He added that the show “is not a documentary” because “it has dramatized elements.”
Sarandos recalled on Tuesday debuting the first trailer for The Crown at an RTS event seven years ago, touting the show as “breaking conventions.”
He said he has long considered the UK the “birthplace of prestige television” and that since 2000, the company has invested $6 billion in the UK, with more than 30,000 cast and crew. More than 100 productions are made in the UK, including Bridgerton, Thursday Murder Club and the new film Knives Out. He praised the UK’s creativity and technology, production incentives and education for industry professionals. “The UK has become one of the best countries for TV and film,” he concluded.
Sarandos also said Tuesday that he and his wife have different tastes in content, so they like to watch things together that they both enjoy: His wife “loves” “Emily in Paris,” and the two of them finished watching it in one sitting, Sarandos said.
Netflix, which launched in the UK 12 years ago, is the first streamer to sponsor the annual RTS event, Anna Mallett, Netflix’s vice president of production EMEA/UK, said in opening comments, who also highlighted that the UK entertainment industry is expected to exceed 100 billion pounds ($132 billion) this year.
At another conference in London this summer, Sarandos co-CEO Greg Peters said that streaming, linear, advertising and gaming combined represent a revenue opportunity of more than $600 billion, leaving Netflix with a lot of room to grow. He showed a chart on a screen that listed linear and streaming subscription spending at $300 billion, advertising at $180 billion and consumer gaming spending at $140 billion.
Netflix beat Wall Street expectations on July 18 with strong second-quarter financials and subscriber growth (8 million subscribers added, bringing the total number of users worldwide to 277 million). However, management expects growth to slow going forward, and expects lower net paid subscriber additions in the third quarter compared to the same period last year. One reason for this is that the company has already benefited from the success of its crackdown on password sharing that began about a year ago. Many Wall Street analysts felt the results had little impact on their financial projections or stock outlook, although some raised their price targets.
