Speaking at the UBS Global Media and Communications Conference a day after Netflix inked a major deal with Disney that will give it exclusive pay-TV rights to stream the studio's new feature films starting with 2016 theatrical releases, Netflix chief content officer Ted Sarandos noted that the deal was "a game changer."
Sarandos also stressed the importance of getting more exclusive program rights and developing additional original content.
With the Disney deal, Netflix beat out Starz, which currently has the pay-TV rights, for new titles from Disney, Walt Disney Animation Studios, Pixar, Marvel Studios and Disneynature, as well as some major library product. Harvey Weinstein, cofounder of The Weinstein Company, who moderated the Sarandos session, called the Disney deal "a game changer because it affects Starz and the whole market place."
Sarandos noted Netflix was looking for more exclusive rights and continues to ramp up its original programming, with four original series set to launch this year.
But he also stressed the ongoing importance of their library product and highlighted a number of differences between Netflix and other pay-TV providers like Starz and HBO that would also be bidding for international rights.
With its original program, House of Cards, Sarandos noted that they would be making all 13 episodes available at one time, which is a very different programming and promotional strategy than traditional premium channels, and that they would not be focusing on ratings.
"Ratings are an irrelevant number," Sarandos noted. "The relevant number is subscribers and growth in subscribers."
Because of that, they would continue to focus on shows that could perform well over their multiyear rights deals.
Sarandos also noted that their push into original programming would both change the way stories are told and promoted. With the new series, their website would continue to play a major role in making subscribers aware of the program based on their past usage. This would generally be more effective and less expensive than traditional promotional campaigns, though Netflix is planning on extensive promotional campaigns around the new series.
"Trying to get America to do the same thing at the same time is hugely expensive," he noted.
Having all the episodes available, also changes viewing patters so creators don't have to spend as much time recapping past story lines for viewers who might have missed earlier episodes. Creators traditionally spent about "one-third on catch-up," he noted. "If you don't do that, then you have all this extra time for additional storytelling."
Their original series are currently being developed by outside producers, but Sarandos noted that they would ultimately get more involved and look to own more of the content to help build up a library.
While exclusive deals are more costly, a subject not addressed by Sarandos, he noted that the company's growing sub base provided the financial clout to fund them. "Netflix has an exciting growth story with 4 million additional streaming subscribers in the U.S. and another 3 million internationally in just one year," he said.
"This allows the scale to compete with pay-TV windows," he added. "It all happens with scale."
While the Disney deal highlights increased competition for pay-TV rights, Sarandos did however downplay notions that the rise of streaming over-the-top services like Netflix was hurting the overall TV industry.
With Netflix streaming about 1 billion hours of content each month, "you would think that would be eroding TV like crazy...but [Nielsen just released figures] that linear TV has barely moved and it is growing [when you add in] on demand," he said.
Those numbers indicate that new technologies are expanding the overall pie, he noted.