|Originally run on April 30 2015 after his historic keynote at the APOS 2015 Summit, most of Ted Sarandos’s insights in the article below appear to carry even more currency than before. Netflix’s Asia Pacific expansion has started well with a strong launch in Australia where it has secured close to 1 mil. paying subs, while a Japan launch is due in Sept. 2015 with China, India and Indonesia to follow in 2016.|
With more than 60 million paying subs around the world, and charting a course to be present in around 200 countries by the end of next year, online disruptor Netflix is making a strong business case for the merits of anytime, anywhere video.
“We are not going to buy everything but what we do buy, we are going to buy for the world,” declared Ted Sarandos, the SVOD giant’s chief content officer, during his keynote interview at APOS 2015.
“That means we will be able to do things that most people in the world have never experienced, which is concurrent access to hit programming exactly when the rest of the world is watching it.”
The pledge demonstrates a growing confidence in revenue models taking shape around the possibilities of broadband, a distribution platform offering near-instant worldwide reach, after selling geographical rights for some of its earlier shows at a time the company had fewer hits under its belt.
Regional content teams in Europe and Latin America have also been replaced with a global resource.
“With the internet, there is no reason for distribution to be physically or geographically fragmented in any way,” Sarandos said.
“There is no first to market because we are all there,” he continued. “Now the real differentiation is going to be speed of innovation, quality of programming, does the product work and is it worth paying for.”
Today, Netflix owns global rights to all its self-produced content and is seeking similar access from content providers, a process Sarandos described as “somewhere between aspiration and happening.”
At the same time, Netflix is producing more of its own shows for greater control over its destiny, making another 320 hours this year.
These costs will be underwritten by ease of access and the global access OTT distribution provides, Sarandos anticipates, rather than traditional models around windowing and geographical rights.
Netflix gets a better return on its own IP than licenced content, Sarandos told APOS attendees, although the costs are rising, mainly for content and streaming, much of it funded by debt.
Nonetheless, the company vowed to continue aggressive investment in cash-intensive original content production in its most recent earnings release, projecting breakeven globally next year, and material profits in 2017.
Increasingly, Sarandos is cutting deals with local content providers and producers in Asia, underscoring Netflix's positioning as a global media company.
"We are not looking for a vehicle to export US content to the world," he said.
"We are looking for a vehicle that better distributes US content to the world, but also delivers from the world to the rest of the world."
Global content, local tastes
Geographical expansion also broadens Netflix’s content portfolio as it adds more for subscribers in different markets, although Sarandos feels that staggered global rollouts can obscure the value of timely, well-made shows.
While local box office receipts and TV ratings reflect local regulations and business models, data on pirated content – a more honest picture of what people want, Sarandos contended – show more similar preferences across different markets.
This means there is more demand for overseas content in Japan for instance, where Netflix is preparing to launch later this year, than the current media landscape suggests.
“I think it will be much more local than our other territories have been, but I don’t think it will be the 90:10, the way you’re seeing Japan shake out,” Sarandos said.
“Our chances of global success depend on our ability to launch global brands,” he added. “If my success in Japan was 100% dependent on my ability to compete with Japanese broadcasters on local programming, I would be a little less confident.”
Making its own shows has also allowed Netflix to collapse windows for TV series, releasing multi-episode dramas in one go. Now the company wants to do the same with movies, making films available to online subscribers at the same time they appear in theaters.
In a broadband world, where pirated copies of shows and films are easy to find, the focus should be on making content that people want to buy and see straight away, Sarandos argued.
“If people are waiting a year to watch a movie, they’re probably not very passionate about that movie,” he said. “That’s the kind of dispassionate viewing that doesn’t drive subscription or retention."
That's pushing Netflix into film production too. "Rather doing more and more of these big pay deals, we’re investing in original movies, like we have done with series," Sarandos explained.
"Produced for Netflix, released day-and-date with Netflix, in some cases in theaters and in some cases on Netflix alone, but not on DVD and these other models.”
These films will be good enough to be watched on the big screen, Sarandos continued, although they will also be available online for about US$8 around the world, streamed in 4K.
“These are big films,” he said. “These are not TV movies.”