Netflix Content Chief Defends International Expansion, Original Content Spending

The Hollywood Reporter
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EDINBURGH - Netflix has confidence in its international strategy and will continue launches in new countries to become a global player over time, chief content officer Ted Sarandos said here Thursday. He also defended big bets on original content, saying that taste-based algorithms give the company trust that it won't have major flops that cost it big amounts of money.

"If you believe in the international growth model, you invest in Netflix," he also said during a Q&A when asked about the company's weak stock price. "If you don't, you don't." The company has previously said it would return to profitability in 2013 following near-term losses due to its international expansion

Netflix's stock has been under pressure this year amid new competition and international losses. On Wednesday, the stock had closed at $65.49, giving the company a market value of $3.63 billion. In late August 2011, it had set a 52-week high of $241.88, but early this month, it set a 52-week low of $52.81.

Sarandos vowed that the online streaming giant would continue its expansion outside the U.S. after launches in Canada, the U.K. and Latin America.

Giving the Futureview Address at the Edinburgh International Television Festival, he opened by saying that it was his first time at the conference. "As a TV nerd myself, this is heaven," he quipped.

Netflix's original content strategy, built around such upcoming series as the $100 million David Fincher project House of Cards and the return of Arrested Development, was another key topic that he discussed in front of the TV industry crowd. And so was whether content and pay TV giants should worry about Netflix, to which he reiterated that Netflix is an ally.

With eight episodes shot for House of Cards, "we are very thrilled," Sarandos said, showing a brief trailer.

Talking about Arrested Development some more, he showed some production stills. He quipped that the cast seems so excited to be back working on the show that they "keep tweeting pictures." The shoot for Hemlock Road is a couple of episodes into production, he added, showing a couple of stills as well.

While he didn't put a dollar figure on Netflix's original programming strategy despite several questions, he said it was a small percentage of the company's total content costs

Earlier this month, Netflix announced plans to launch in the Nordic countries of Sweden, Norway, Denmark and Finland in the fourth quarter. Further details about the service, including pricing, content and supported devices, will be announced closer to launch. Some observers had predicted that Spain could be next for Netflix.

Earlier this week, Netflix said that it has crossed the 1 million-subscriber milestone in the U.K. and Ireland within seven months of launch - "faster than in any other territory it has launched." Sarandos also addressed the topic of European competition from the likes of's LoveFilm. Sarandos said he didn't know how many of them were short-term promotional users, but said the figure was likely in line with other territories.

Asked about competition with U.K. pay TV giant BSkyB, he said that Netflix will negotiate for various upcoming pay TV content packages and see how things go. Sarandos also mentioned a recent U.K. Competition Commission decision, which confirmed that pay TV giant BSkyB, in which Rupert Murdoch's News Corp. owns 39 percent, has no material advantage in pay TV movies. It said that it would not suggest any regulatory action, citing the rise of streaming video providers Netflix and LoveFilm.

Asked if BSkyB's Now TV online-only content service was a threat for Netflix, Sarandos said: "I don't know that it's a direct threat." He said he would be more worried about TV Everywhere services, such as Comcast's Streampix. "We just have to compete with them and beat them," he said in expressing confidence. In terms of service offered, he said he was really confident about Netflix's competitive position. And in terms of content licenses, he said he was also fairly confident based on past experience, emphasizing that Netflix is now a key part of entertainment companies' financial returns.

So should European pay TV giants like BSkyB or Canal Plus be worried? No, because Netflix is giving consumers the choice and content that allows them "to fall in love with TV again," Sarandos argued.

Sarandos on Thursday didn't comment on Netflix's plans for its current digital content distribution deal with U.S. premium TV venture Epix. The exclusivity period of the deal ends in the coming days, and Netflix can choose to extend it or continue the arrangement on a non-exclusive basis. That would allow Epix to also do digital distribution deals with the likes of and others.

He also didn't mention and wasn't asked about Time Warner's HBO, which Netflix CEO Reed Hastings has called a key competitor for the company, but one the firm would like to work with. In his latest quarterly earnings letter to shareholders, Hastings had said there might be ways for the two parties to work together - only for HBO to come out and say it wasn't in any talks with Netflix and wasn't planning any collaboration. 


Twitter: @georgszalai