Bloomberg News

Netflix’s Sarandos Says Video Service Eyeing Film Projects

November 04, 2013

Netflix.com

Verizon's victory over the FCC lets the carrier charge extra for faster delivery of digital content, which could increase costs for Netflix and other online companies. Photographer: Scott Eells/Bloomberg

Netflix Inc. (NFLX:US), the world’s largest streaming subscription service, is evaluating potential film projects and suggested its programming budget would increase if the company expands into original movies.

“We’re keeping our minds wide open in terms of what these projects will look like,” Ted Sarandos, chief content officer, said today at “The Business of Entertainment” event in Los Angeles, sponsored by Bloomberg and the Tribeca Film Festival.

Netflix has “no short list yet for movies” and is “completely open-minded about the size and scale and scope of what they could be,” Sarandos said.

First-run films would add a dimension to Netflix’s formula of offering viewers a mix of original series, with a library of movies and reruns. The company is also backing documentaries. Today Netflix said it acquired early streaming rights to “The Square,” about the protest movement in Egypt that led to the ouster of former President Hosni Mubarak.

Netflix is expanding its content investment as it battles with Amazon.com Inc., the largest online retailer, and Hulu LLC for online viewers. In the third quarter, Los Gatos, California-based Netflix passed Time Warner Inc.’s premium-cable outlet HBO in paid U.S. subscribers, reaching a total of 31.1 million.

“Tens of millions of people watch Netflix shows,” Sarandos said. “I really look at this as an organic shift relative to how we’re going to spend the money.”

Shorter Windows

Sarandos provoked criticism from theater-chain owners last month when he suggested at a Film Independent event that Netflix may start backing movies to release on its service at the same time they arrive in cinemas. He said then that cinema chains, by blocking earlier home-video access to films, are stifling innovation.

Those restrictions contrast with the growing flexibility of television viewing, and let TV shows move to the forefront of the cultural conversation, he said today.

“I was calling to move all the windows up,” Sarandos said. “Television is eclipsing movies in the culture.”

Neflix has implemented a three-pronged growth plan, focusing on exclusive content, wider access to its service and expansion outside the U.S.

On the content side, Sarandos has focused on obtaining exclusive first access to TV reruns and movies from Walt Disney Co. (DIS:US) and DreamWorks Animation SKG Inc., while expanding into original shows that include the women’s prison drama “Orange Is the New Black” and “House of Cards,” the political thriller with Kevin Spacey.

“It’s monumental to have such established brands to do something out of the box,” Sarandos said.

‘The Square’

“The Square,” from director producer Jehane Noujaim and producer Karim Amer, will make its debut in all markets where Netflix operates in early 2014, the company said. Versions of the documentary won awards at film festivals in Toronto and at Sundance, in Park City, Utah.

As part of its strategy, Netflix posts entire series of shows online for viewers to consume as they wish. That frees the company from the scheduling headaches traditional television networks contend with, he said.

“For ‘House of Cards’ to be successful, I didn’t have to find a night to put it on,” Sarandos said. “There’s a real art there that we don’t have to be great at.”

That freedom makes Netflix more appealing to the film and TV industry’s creative communities, Sarandos said. Netflix offers its service on computers, tablets, smartphones and Web-connected television sets.

The company is also seeking to expand access to the service to cable set-top boxes and media-streaming devices, such as TiVo Inc. (TIVO:US)’s Roamio and Google Inc.’s Chromecast.

Growth Plan

Chief Executive Officer Reed Hastings is pouring profit from U.S. DVD and streaming operations into international growth, with a goal of reaching several hundred million subscribers globally within an unspecified period of time.

Analysts have suggested the company may raise its $7.99-a-month subscriber price to help pay rising licensing costs for movies and TV shows. Hastings has said he doesn’t favor that.

Netflix rose (NFLX:US) 2.5 percent to $337.60 at the close in New York. The shares have more than tripled this year and rank as second-best performer in the Standard & Poor’s 500 Index for 2013 behind Best Buy Co.

To contact the reporters on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net; Jonathan Erlichman in New York at jerlichman1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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Companies Mentioned

  • NFLX
    (Netflix Inc)
    • $454.53 USD
    • -2.38
    • -0.52%
  • DIS
    (Walt Disney Co/The)
    • $90.33 USD
    • 0.06
    • 0.07%
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