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HRTS -- Sarandos on Stacking Rights: 'We Just Won't Pay as Much'

Beverly Hills, Calif.--Calling it an issue that has been "wildly misreported," Netflix chief content officer Ted Sarandos addressed stacking rights Thursday at the Hollywood Radio and Television Society's Programmer's Summit as part of its Newsmaker Luncheon series, saying that allowing networks and pay-TV distributors to make full, current seasons of television series available on demand would diminish those series' value to Netflix.

"It's not that 'Oh, we can't do a deal because Netflix won't allow us to do stacking' discussion," Sarandos said. He added that allowing networks and pay-TV distributors rights to a limited number of previous episodes to give viewers a chance to catch up on shows makes sense. "When you do full-season stacking, it becomes SVOD. And we're going to spend about $3 billion next year on content for SVOD. So what I'm saying is that if you're going to also offer that, it's not exclusive anymore, and the rate goes down."

He continued, "It's not that we won't do it. We just won't pay as much."

Sarandos was joined onstage at the Beverly Hilton by Showtime Networks Entertainment President David Nevins, NBC Entertainment President Jennifer Salke, and NBCUniversal Cable Entertainment President and Chief Content Officer Jeff Wachtel for the HRTS panel moderated by Cynthia Littleton, editor in chief of television at Variety.

Nevins quickly addressed the death last weekend of actor Philip Seymour Hoffman, who was set to star in the pay cabler's upcoming comedy Happyish.

"I just got back from New York last night," said Nevins. "I have not quite processed it personally, let alone what it means as a programmer. I was very excited to put that show on the air. Shalom [Auslander] created a character who was in a state of existential torment. He made it really funny, and Phil made it really funny."

The topic of shifts in viewer behavior sparked a lively conversation among the executives. Nevins asserted that the concept of binge-watching was pioneered by premium pay-cablers more than a decade ago with on-demand. He added that changes to how viewers watch series have created opportunities for his network to experiment with scheduling and content.

"I do believe in the Tantric form of television, which is sort of slow and steady," he said. "It's fun. You want social media to get going; you want people to start talking about it; you don't want to give them too much too soon."

Salke said that overnight ratings have become "less and less relevant" from a business perspective in an era of delayed viewership. "We look to those C3 numbers," she said. "Those are the numbers we use now. We look at the seven-day, and we hope that that measurement continues to be more relevant to advertisers."

"It's not like fewer people are watching," Wachtel said. "It's that people are watching in ways that are harder to count and harder to get paid on."

Sarandos claimed his organization is immersed in metrics that help guide the decision-making process, but rejected the notion that Netflix has an obligation to report those numbers.

"No we don't plan on releasing our metrics," he said, noting that Netflix is not ad-supported. He added, "I honestly believe that our ratings success would spin as a negative story to our suppliers, that we have shows that are being watched in greater numbers than are being watched on television."

Salke followed up on comments made by top executives last month at the TCA winter press tour, where Fox entertainment chairman Kevin Reilly announced that his network would be "bypassing" pilot season.

"We've all acknowledged that pilot season makes no sense and is crazy," Salke said. "But you are sort of restrained by upfronts and a little bit of the structure there and when pitches are coming in. So we're constantly evolving, trying to figure out how to do things more year-round in a more sensible way."

The problem with pilot season, Salke added, is the competition for talent.

"We find ourselves casting, all of us casting so many things against each other right now, and going after a small pool of directors," she said. "It does bring the quality, I think, of everything down."