Yahoo Finance Netflix Co-CEO Ted Sarandos Calls On All Streamers To Be Transparent With Viewership Data
UPDATED with additional details: Ted Sarandos, co-CEO of Netflix, is challenging his streaming competitors to be as “transparent” as his company is when it comes to publicizing what viewers are watching.
Touting Netflix’s next viewer report, due on Thursday, Sarandos said on Wednesday at the Fast Company Innovation Festival in New York City that “I don’t think we could be any more transparent than that,” and he added, “I’m hoping that the other folks in the business will follow suit on that.”
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Sarandos intimated that Netflix would look very good in a side-by-side comparison, because people will be able to see a “phenomenal” amount of daily Netflix viewership happening across the globe. He said the viewership report will also demonstrate that “the biggest movies of the year are these movies that are made for Netflix and only playing on Netflix.”
Thursday’s report will show 94 billion hours total of viewing in the first half of 2024, Sarandos said. “That’s a lot of time.”
The top 4 are British-produced television shows, Sarandos said.
Fresh off a keynote address at RTS London, Sarandos arrived at the Fast Company festival with his company’s subscriber base and stock price at or near all-time highs following the introduction of a discounted ad-tier option for viewers. On Monday, the influential Financial Times of London declared Sarandos the victor in the streaming wars over the likes of Disney, Warner Bros. Discovery, Paramount, Amazon and Comcast.
A potential black eye looms in the $170 million defamation suit filed by Fiona Harvey, the real-life “Martha” depicted in Netflix’s multiple Emmy winner Baby Reindeer. Sarandos at RTS defended the show and its creator as “not a documentary” and as “Richard Gadd’s true story,” one in which it’s “abundantly clear that there is dramatization involved.”
Sarandos also made clear that scripted programming remains at the heart of Netflix’s content strategy, and to that end has sought to calm fears about AI’s capacity to wipe out industry jobs.
“If you look back over a hundred years of entertainment, you can see how great technology and great entertainment work hand in hand,” he said on an earnings call in July. “Animation didn’t get cheaper, it got better in the move from hand-drawn to CGI animation. And more people work in animation today than ever in history.
“So I’m pretty sure that there’s a better business and a bigger business in making content 10% better than it is making it 50% cheaper,” he added.
Sarandos also has said that Netflix never will be a breaking-news provider. As the company eases into live sports broadcasting, an area of aggressive expansion for rival streamers including Amazon, Sarandos has struck a note of caution about Netflix’s possible future as a sports outlet.
He’s all in, though, on the company’s acquisition of Monday Night Raw and other WWE pro-wrestling fare in a “drama of sport” category, as he’s called it, that fits with Netflix’s storytelling ethos and its growing library of sports documentaries.
Sarandos, questioned about transparency by Fast Company Editor-in-Chief Brendan Vaughan, said that Netflix’s decision to stop reporting subscriber counts beginning in 2025 is “a Wall Street thing.”
“For the longest time, our subscribers and our financial metrics all were aligned,” he said, adding, “We only had one tier of service and basically one price point. … Today we have multiple price points, multiple price points by region. We have an ad tier that we’ve introduced recently. So Netflix starts at $6.99 and all of these subs have different economics to them, so they don’t tie as cleanly to revenue and profit growth as they used to.”
A “disconnect” between subscriber numbers and finances “led us to try to get to a cleaner view where we’ll talk mostly about revenue and profit,” Sarandos said, “and then we’ll announce subscribers at different milestones in the business.”
Netflix has 280 million subscribers globally, Sarandos said.
In the wide-ranging 35-minute talk, Sarandos also reflected on Netflix’s complicated rivalry with YouTube.
“If you look at revenue, engagement and profit, our businesses are very, very similar, almost identical,” he said of YouTube. “But that’s kind of where the comparisons end. It is a very different business model, and we’re barely advertising. They’re all advertising. Where they’re mostly user-generated, we’re now no-user-generated.”
And while Netflix trailers are a YouTube staple, “when fans love a show, they want to go on YouTube and talk about it,” Sarandos said. He added that Netflix garners “forty times” more trailer views on its own site than it does on YouTube.
He called both platforms “pretty similar in terms of the ability to reach and generate excitement,” but wondered whether YouTube would fare as well with the obligations that Netflix has, such as assuring safety on production sets and abiding by union regulations.
“I don’t know how brittle that business model becomes if you introduce content costs and any form of regulation on YouTube,” he said.
Looking back on Netflix’s progress, Sarandos said that from his early days working for company founder Reed Hastings, the goal was “to put the right show in front of the right people at the right time.”
At first, he recalled, it was “100 people in a warehouse stuffing envelopes,” a reference to the company’s pioneering DVD-by-mail subscription operation. Netflix has spent 25 years, in effect, trying to build an “audience matching algorithm,” Sarandos said, explaining that “the problem we were trying to really solve was personalized marketing.”
One of the company’s next goals is to increase its share of everyone’s viewing time, Sarandos said.
“We’re only about 10 percent of screen time” in the U.S., the company’s “most penetrated” market, he said — a figure he called “hard to imagine,” but one that leaves room to grow. Original films and television series will be a part of that growth, he predicted, as will Netflix’s move into live events such as sports and sports-adjacent programming.
“Our first one that really broke through is the Tom Brady roast,” he said. He also pointed to a pair of NFL games to be streamed live on Christmas Day.
“I think we can continue along this path, which is about a $600 billion market that we’re only about five percent of today,” Sarandos said. “So it’s not that big of a stretch to think that we can get to twice that.”
Even if Netflix doubles, reaching 560 million subscribers globally, he said, “that would still be very short of the household penetration of pay television in its heyday, but with a much better economic model and, I would argue, a much better product because it gives choice and selection and variety and control to the consumer.”
Asked about last year’s writer and actor strikes, Sarandos said they were in part a response to people being “generally fearful of the new model.”
“Until they get to know it and get to understand it better,” he said, “I can understand why they would be.”
Sarandos said that Netflix and the creative people who work in film and television remain “mutually dependent.”
“We need great storytellers,” he said. “My goal is they all get rich and famous, and we can try to provide them the opportunity for that to happen. And if they do their job really, really well, they will. There’s a romanticism of clinging to things that used to be, always. So I think we see that with the movie model, which was not — the returns on the movie model overall were never that great. Single-digit-return businesses over any given decade.
“The problem is that the physical distribution costs, and the marketing costs to get there, it creates a lot of inefficiencies that don’t go to the talent and they really don’t end up on screen,” Sarandos continued. “And what we’re trying to do is take all those things and put it on the screen so that we do compensate people.
“It’s in a different model,” he said, “but at the end of the day I think it’s a greater model than it was before, which is, risk is shipped to us, so that we pay for the production of the film, we buy the talent, and we actually kind of pre-negotiate what we think of how it will perform, and pay as if it did.”
Sarandos said the detailed biannual viewer reports for thousands of Netflix titles are one way of reassuring the film and television community. “Put the number out there so that talent can see it, so that agents can see it, so that the press can see it, and know what’s a hit and what’s a miss.”
He said that not everything on Netflix is a “home run,” using a baseball analogy to say that Netflix thrives by also hitting singles, doubles and triples.
Asked about predicting hits before they air, he said, “This creative process is incredibly human, so you’re going to have hits, hot and cold streaks. And the beauty of it is when you’ve got the decision-making of what’s being made distributed to so many great people all over the world, as long as all their hot and cold streaks don’t line up perfectly, you’ve always got great things coming up.”
“All over the world” meaning the local Netflix teams in each country such as the U.S., the United Kingdom, Spain and South Korea where original programming is made. Sarandos cautioned that there’s really no such thing as a global hit.
“It’s very rare,” he said. “Squid Game was the most global thing we’ve ever done, too, meaning that it was nearly as popular everywhere as it was in Korea.” He said that his mandate to the in-country offices is “make sure that you’re making the show for the local market.”
At a moment when Netflix is being crowned king of the streamers, and is riding high on what Fast Company’s Vaughn called a “journey of disruption,” Sarandos was also asked about memorable digs that rival entertainment executives have taken at his company over the years.
“Nothing really fires up a team of employees like being called ‘the Albanian Army,’” Sarandos said, referencing a dismissive quote in 2010 from then-Time Warner CEO Jeff Bewkes. He spontaneously recalled that in 2022 Disney chief Bob Iger likened the idea of licensing content to Netflix to “selling nuclear weapons technology to a Third World country, and now they’re using it against us.”
“Those kinds of things, again, really just fire up people who want to win, which is great,” Sarandos said. “But in general, with the creative community, what they’ve found with us is that we can help them reach an audience bigger, better and more global than anyone ever has in media. So most people who want to do the best work of their life, hopefully they want to do it with us.”
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