Considering Netflix CEO Reed Hastings was only on stage for 30 minutes at the Royal Television Society Convention in Cambridge on Friday, he covered a fair bit of ground.
Less was made of the company’s extensive rights demands, as well as its intriguing deal to pick up veteran sitcom Seinfeld earlier this week, rumoured to have topped $500m for a five-year, global agreement.
Significance of Seinfeld
Talking to TBI after the event, Hastings suggested the reasoning for the rich deal was pretty straightforward: “We are always trying to please our members,” he said, suggesting that he also expects more mega-bucks arrangements involving veteran shows.
The deal with Sony Pictures Television will see all nine seasons of Seinfeld launch on the platform from 2021, more than two decades since it first debuted on NBC in the US. While financial details have not been revealed, the five-year deal came on the back of Netflix losing the rights to Friends to WarnerMedia’s HBO Max offering, and The Office to NBCUniversal’s streamer Peacock.
Clearly, as David Zaslav alluded to earlier in the week, there is a rush for cut-through, iconic content. And while Discovery might be happy to let the scripted-skewing streamers fight it out among themselves, Netflix wants to be involved.
When asked by TBI whether he expected more deals for such iconic IP from both Netflix and its rivals, Hastings remarked from behind a grin: “You could say that, but I couldn’t possibly comment.”
The implication was there and it goes some way to explaining Netflix’s ongoing content strategy evolution that parries both acquisitions and originals. Further, where once it hoovered up endless reams of third-party content, it is now having to pay nine-figure sums for what might once have been seen more as catalogue material.
UK production pledge
So it makes absolute sense that the company is spending more on originals: £400m ($500m) on UK programming this year alone, with a “big increase” for 2020.
That suggests we can expect to see plenty more series joining the streamer’s current UK slate of 50 shows such as Black Mirror, Sex Education and The Crown, with its UK production hub at Shepperton Studios no doubt revving its engines on new programming already.
Acquisitions of companies makes less sense, Hastings told RTS delegates, and while the streamer has picked up outfits including comic firm Millarworld, the Netflix chief said little to suggest that he was poised to hoover up a raft of production companies rather than their content.
Losing out to rivals
He did though reveal the streamer had lost out to Amazon in a bidding war for BBC comedy Fleabag, while a flippant remark that The Crown – a notoriously expensive show – would “look like a bargain” in years to come perhaps hides a deeper revelation about the way content costs are still spiraling upwards.
The next few years would be “unbelievable” for producers, he said, and Hastings accepted that there is “tremendous new competition” on the horizon with the likes of Apple TV+, Disney+, HBO Max and NBCUniversal’s Peacock set to join SVOD incumbents such as Amazon over the next six months.
For producers and IP owners, its means options when it comes to selling and a shift away from the notorious global rights deals that Netflix has tended to push for.
Producers have been telling TBI for some time that these models are shifting with flexibility increasing, something that seems only set to increase as competition grows.
These new SVOD entrants are set to create “a whole new world”, Hastings continued, enveloping an ecosystem that Netflix has largely had to itself for several years.
Time “to grow up”
While the Netflix chief did return to the line that video games such as Fortnite remain key competitors, there was also an acknowledgment that the launch of new direct-to-consumer offerings will impact the world’s biggest SVOD, a noticeable shift in stance.
Hastings also looked to highlight the fact that Netflix is maturing and indeed he admitted the company needed “to grow up” when it came to sharing data.
It is perhaps hard to argue with the company’s reticence to do this to date given that this is a company that has gone from garage start-up to Disney rival in barely two decades. Indeed, Hastings admitted that Netflix’s secretive nature was largely borne out of its humble beginnings.
“When we went public in 2002, we had $50m in revenue and Blockbuster had $5bn. We then had a long fight which we barely came out of and we learnt to be defensive about hiding information. But the things that made us successful can then trip us up over time.”
And things are changing. There was another admission that Netflix would be happy for the Broadcasters’ Audience Research Board (BARB) to work with the streamer on its ratings, as happens with broadcast rivals. Given that BARB is broadcaster-funded though, one would expect the world’s biggest streamer to have to cough up for the privilege.
Binging remains core
Elsewhere, Hastings said the company would “experiment” with new release models, with shows such as soon-to-launch music competition series Rhythm + Flow being released weekly.
But producers hoping to hear that their carefully crafted products would get more fanfare over a longer duration – rather than being dumped online in one go – were left largely empty handed.
Hastings said that binge viewing is at the “essence of what viewers love” about Netflix, adding that it was simply a “better model and [one that] we will be sticking with that.”
Love and preparation
Then there was the admission that for Netflix, trust in the service is not a “core attribute.” News sources, he said, had to be trusted but Netflix is in the entertainment game and it has no plans to move into live sports or reporting. “It’s good to be trusted but it’s ancillary to love,” he added.
And that is the point. Hastings has bet the house on subscribers loving Netflix shows to the degree that they will remain paying their monthly dues. Simultaneously, through a portfolio approach to heavy-hitting acquisitions such as Seinfeld and global originals such as The Crown, he is hoping to lure in new lovers of content.
But the company cannot get away from its financial spending and the subject was a regular discussion at RTS, although understanding the complex nature and potential impact of Netflix’s $12bn “long-term debt”, $19bn of “obligations” and between $2bn to $5bn in “unknown” spending is far from straightforward.
Those figures were from the FT, which succinctly summed up the issue by stating that the streamer “projects it will spend $3.5bn more than it will generate in cash in 2019.”
The suggestion is that this is all part of the plan. The “whole new world” we are all set to live in shortly, complete with myriad streamers from the US, was foreseen by Netflix, Hastings said, and it is now poised for battle.
“We said that eventually all these companies will go direct-to-consumer – we’ve been preparing for this for a long time because we’ve known it’s been coming.”