“This is going to be a big year for us,” Robin Wright’s character said to Kevin Spacey’s in the trailer for the series House of Cards, which premieres on Netflix Feb. 1.
Ted Sarandos, Netflix chief content officer, certainly hopes so. In 2013, Netflix will make a big leap into original programming: Besides House of Cards, it has the horror series Hemlock Grove; the Ricky Gervais vehicle, Derek; 14 new episodes of Arrested Development; and Orange Is the New Black, from Weeds creator Jenji Kohan.
“I knew going in I wanted to do it in a big way, meaning if it didn’t work, I wanted to know it was because it didn’t work, not because we didn’t step up enough or try hard enough,” said Sarandos, 48.
Since Sarandos joined Netflix nearly 13 years ago, the company has evolved its business model from DVD-rental-by-mail to streaming video and is now fully in the television licensing business. The company is actively bidding for syndication rights (such as its recent deal with Warner Bros.) and " rst pay-TV windows, like grabbing Walt Disney Co. titles from Starz starting in 2016.
Sarandos has a history of learning on his feet. He was studying journalism at a community college in Arizona and working part-time at a video store when the owner asked if he would stay and run the nine-store chain instead of transferring to a university.
“Running these stores was like an MBA course,” said Sarandos, who never " nished college. “I had complete operational control over the chain of stores—marketing, programming, hiring, firing, negotiating leases.”
From there he headed sales and operations for ETD, a third-party home video distributor, and then ran West Coast Video for two years, where he did the first DVD revenue-sharing deal in the industry. That got the attention of Netflix CEO Reed Hastings.
The most fundamental change at Netflix during Sarandos’ tenure has been its transition from distributor to programmer. With more competitors (Hulu, Amazon, Redbox) looking to license content, as well as the rise of TV Everywhere and the DVR, exclusivity, including original programming, has grown more important.
Television, though, has a high failure rate. And original content is something that has challenged Netflix before. Sarandos spearheaded an early division called Red Envelope, which produced independent films along with partners. The unit shuttered in 2008 because Netflix said it was daunting to back original fare in competition against studio suppliers.
The new push into originals has the benefit of more data and financial muscle behind it. For House of Cards, financed by Media Rights Capital (which is still counting the profits from the Seth Macfarlane surprise hit Ted), Netflix looked at how many of its subscribers were fans of Kevin Spacey, of series executive producer David Fincher’s films, of political thrillers or had watched BBC’s original House of Cards on DVD.
“Then all of a sudden you’ve got all these audience pools and you can look where they overlap. And then you have millions of people who, if the show is good, they’re going to be perfectly targeted to love the show,” Sarandos said.
That specificity also applies to the marketing. Subscribers who are predisposed to like the series will see a lot of promos on Netflix, while others won’t see much at all. Fincher even cut thematic trailers so that if you’re watching Thelma & Louise on Netflix, you’ll get a House of Cards promo centered on its female leads; if you’re watching Margin Call, you’ll see one with Spacey.
That Netflix had not marketed an original show before actually turned out to be a positive for its creative partner. “They said, ‘We don’t know how to do this. Let’s put a great team together, let’s all sit in a room together and best idea wins.’ Which I think is really refreshing,” said Asif Satchu, cofounder of Media Rights Capital. “They said, ‘We don’t have to do it the traditional way, let’s try something different,’ but they had data supporting it.”
In another change from linear television, the episodes will be released all at once, allowing a different kind of storytelling that doesn’t focus on recaps. Unlike last year’s Lilyhammer, acquired from Norwegian TV, House of Cards will be the first series truly made for Netflix.
Sarandos sold that concept to Arrested Development creator Mitch Hurwitz on the fact that much of the comedy’s audience discovered the show after it was off the air by binging on episodes on Netflix, making the new episodes ideally suited for such a rollout.
“It’s not how we came up watching TV; it’s not how I looked forward to seeing The Sopranos,” Hurwitz said at Netflix’s first Television Critics Association press tour appearance this month. “But you’ve got to follow the audience. You’ve got to stay fresh. You’ve got to keep challenging yourself. So, I mean, we’re just embracing it.”
While TV executives like FX’s John Landgraf have repeatedly called for on-demand services to release their viewing figures if they truly want to compete with networks, Sarandos said doing so would “create a race with no winners.”
“I have no relationships with cable operators, no advertising,” he said. “There’s no financial benefit if you watch House of Cards on Feb. 1, 2013, or Feb. 1, 2014. What I want to do over a very long time is build the perfect, huge audience for House of Cards.”
Not that Sarandos won’t look at the numbers. “I’m sure I’ll obsess on them,” he said. But since Netflix has already made a two-season commitment to House of Cards, he has the luxury of a much longer window to determine success that is not solely focused on ratings.
“When people ask me if you’re going to be really successful at this thing, at what you’re doing, how will you know?” Sarandos said. “I look at what Norman Lear did.…He took a medium and really jammed the culture and the technology, just smashed them together and really had an influence on the world.”
He acknowledged the lofty goal with a laugh and added, “Not setting the bar too high!”
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