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NATPE 2012: Netflix Jumping Into Original Business With Both Feet

Complete Coverage: NATPE 2012

After the premiere of Netflix's first original series – Lilyhammer, starring The Sopranos' Steve Van Zandt, on Feb. 6 – the cascade of original launches for the online subscription video-on-demand business will begin, Netflix's Chief Content Officer Ted Sarandos told former NBCUniversal Entertainment Chairman Jeff Gaspin during a Tuesday afternoon (Jan. 24) at NATPE in Miami.

Following Lilyhammer will be House of Cards, starring Kevin Spacey and Robin Wright Penn, and original episodes of Twentieth Century Fox's Arrested Development. Both series are targeted for early 2013 launches.

"We have two other shows in the works," said Sarandos. "By mid-2013, we should have five very high profile original shows on Netflix."

Netflix turned to original programming when it couldn't get the premium programming it wanted from the pay-cable networks – HBO, Showtime and Starz, Sarandos said.

"In a perfect world, we would do nothing but license their stuff a year or two after it airs," said Sarandos. "But they have a different strategy and that's fine."

That strategy doesn't involve licensing content to an over-the-top provider, which comes into direct conflict with on-demand and other deals the premium channels have with cable operators. In fact, that's why Netflix was unable to renew its licensing deal with Starz, which came to an end in early September.

"We were at the table for a long time and we would have liked to renew that deal," said Sarandos. In the end, Starz's programming wasn't achieving enough viewership on Netflix to make renewing it worth Netflix's while, especially because Starz had to demand exorbitant license fees to make up for the loss of other carriage agreements that conflicted with any deal that Starz would have made with Netflix.

"The requirement to renew the deal would have been way disproportionate," said Sarandos. "And that would have been a huge negative for our subscribers. It would have meant that we [wouldn't have money] to close other deals for content that people were watching in much greater numbers."

Without premium content in the mix, Netflix had to look for another way to distinguish itself, and like basic cable operators before it, turned to original content.

"The origin of the strategy is that our streaming business was built around non-exclusive content. Exclusive content wasn't able to be part of Netflix's differentiation. And over the next few years, people began co-opting the benefits of our business, with services such as HBO Go, Showtime's mobile app and TV Everywhere coming online."
When Netflix's new series premiere, the service plans to put them up on the site in their entirety, a scheduling experiment in which Gaspin admitted traditional TV programmers would be "very interested."

"If people want to watch our series every week they can, and if they want to watch it all over a weekend they can," said Sarandos.

Allowing viewers to watch TV series in bulk allows them to really engage with it, and that's something that Netflix focuses on, through efforts to personalize viewers' likes and dislikes and make recommendations of what they might like to watch next.

"The way we differentiate ourselves in that space is personalization and in helping people find shows they've missed," said Sarandos.

In fact, some shows, such as FX's Sons of Anarchy and AMC's The Walking Dead, availability on Netflix has helped the series grow its ratings.

Said Sarandos: "In every case, it's been a net positive for a currently airing show to have its earlier episodes available on Netflix."