Delayed gratification is not Netflix’s style. As one “chapter” of the streaming service’s “Originals” reaches the end credits, viewers are given a mere 10-second countdown to when the next episode will begin playing.
This is the age of binge-viewing and Netflix's chief content officer, Ted Sarandos, the man in charge of its $2 billion programming budget, is an adept feeder.
“Some shows you know you did pretty well when you get a big jump-over. Sometimes you see a drop off, or people come back slower, so you get some sense that you almost lost them,” he says. “But because it is so much easier to come back in, they almost all come back.”
Netflix has developed a habit of pleasing viewers, in large part by producing its own shows, like Orange is the New Black ("a pop culture phenomenon") and House of Cards ("it's not congressional politics, it's Shakespeare"). In this part of the world, it is also premiering the final season of Breaking Bad, a show that has been watched many more times on Netflix than it has on its commissioning network, AMC.
Some of the people paying the closest attention to what it does – the analysts paid to watch the stock market performance of Netflix Inc – haven’t always been as easy to satisfy.
In July, when Netflix’s quarterly earnings were published, the company comfortably beat earnings-per-share estimates, but the instant market reaction was to knock 7 per cent off its share price.
After adding three million in the House of Cards launch quarter, the 1.2 million added in the Hemlock Grove and Arrested Development quarter disappointed some on Wall Street.
"There's a lot of moving parts always," says Sarandos. "What does a growth curve look like? Nobody has been in the position we're in today, a paid entertainment service with 38 million subscribers. It's very new ground, so the analysts don't know how to compare it. We don't know how to forecast it sometimes. We know what we know and it usually turns out to be right."
'Quite successful'
Sarandos was speaking to The Irish Times in Cambridge, in the wake of a public interview. Channel 4 executive Jay Hunt had grilled him on Netflix's practice of not releasing country-by-country subscriber numbers and not revealing the viewer ratings for each show.
“We’re a public company. I’m pretty disciplined about these things,” he says afterwards, having told Hunt “you will just have to take my word for it that it is quite successful”.
Netflix officially has eight million international subscribers, but a recent estimate that it has 1.5 million customers in Ireland and Britain, including 150,000 in Ireland, is “a third-party number”.
While Netflix doesn’t publish ratings – with no advertisers, it has no need – it does, of course, trawl through those numbers internally.
“We have a super instant feedback loop. If I spend money on a show and people don’t watch, I should have spent that money on something else that people do watch. There is a direct correlation between usage and retention,” he says, “so if we buy shows that people don’t watch, it’s very bad news.”
Some 10 per cent of his $2 billion budget is currently spent on original programming and he intends to double this over the coming years. "I would move all the dollars to Originals if I thought we would get more viewing and retentions as part of it."
Sarandos, who wooed the makers of House of Cards by ordering two seasons without demanding a pilot, prides himself on taking educated risks. So far they have paid off. House of Cards may continue beyond that initial order – "not officially, but yeah". Orange is the New Black and Hemlock Grove – "not a critic's show" – will return and another run of Arrested Development will be made once everyone involved has a gap in their schedule. The next new "ambitious" commission is Sens8, a science-fiction show by the Wachowski brothers.
“We’re not trying to make a show that appeals to everybody. I think that’s where you go wrong on these things. We’re trying to use the data to predict the size of an audience for any given show.”
This gives Netflix "a leg-up" in deciding how much to invest in each project. A failure will come, he is sure.
Sidestep
Making more Originals will help it sidestep a possible roadblock – what if the television networks and film studios that supply it with its library of acquired programming suddenly decide that Netflix is too powerful and stop cutting deals? He isn't worried. "Every one of our suppliers is a competitor," he points out.
Sarandos differentiates between traditional “eventised” television and the novel-like experience of dipping in and out of a Netflix programme. Episodes of Originals are purposefully called “chapters”, he says.
"These shows are much more akin to a novel. Some nights you're tired, you read one or two pages and fall asleep, and other nights you can't put it down. That's how people experience House of Cards, for sure."
