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Why Netflix Is Spending $5 Billion To Win The Fight For Your Screens—And How It Plans To Do It

At the Television Critics Association’s event this week, Netflix pimped A-list actors and a slew of new projects. Oh, and: Keith Richards.

Why Netflix Is Spending $5 Billion To Win The Fight For Your Screens—And How It Plans To Do It
[Photo: Eric Liebowitz, Courtesy of Netflix]

A few years ago, journalists attending the Television Critics Association press tour might have slept in had a streaming service kicked off the event.

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That’s the place, after all, where the titans of cable and network television have traditionally rolled out their upcoming slates and competed for headlines.

But this year, not only did Netflix launch TCA with an entire day crammed with panels and A-list speakers, they set the bar for the event, announcing a slew of high-profile projects that amount to a mind-blowing statistic: In 2016, Netflix will have more series (over two dozen) than powerhouses like HBO and FX/FXX. Over at Vulture, Joe Adalian contextualizes this figure and lays it out in a helpful chart.

Ted Sarandos

Just last week, Netflix announced another staggering statistic: It expects to spend $5 billion on content next year, with roughly 10% going to original programming. That will cover shows like Marco Polo, whose first season cost a reported $90 million; and more Marvel series, such as the upcoming Jessica Jones. Once again, that figure breezes past the war chests of its rivals. According to reports, HBO, Showtime, Amazon, and Starz combined spent $4.5 billion on programming last year.

What helps one understand how Netflix can be this aggressive is the company’s far less sexy DVD business, which is still chugging along and churning out profits for the company despite its diminished size. Netflix now has only 5.3 million DVD-by-mail subscribers, compared to its 65 million global streaming customers. But the DVD business generates hundreds of millions of dollars each year, according to The New York Times, compared to its streaming business, which is expected to just break even in 2016.

Numbers aside, Netflix’s TCA day is symbolic of how the game has changed for the company here in Hollywood and how it is no longer playing defense with its TV peers and chroniclers in the press. Although there was the inevitable “When will you release data about your shows?” question lobbed early on at Ted Sarandos, Netflix’s chief content officer, it was treated as nothing more than a fly-sized annoyance to be brushed aside with a humorous retort from Sarandos: “Did you think if we did this early enough, I might be tired and fall into [answering that]?”

Instead, Netflix was very much on the offense, ticking off high-profile announcements, such as the new Keith Richards documentary and a possible new season of Arrested Development, and rolling out the kind of A-list stars who are more commonly booked by HBO or Showtime. Tina Fey joked about Donald Trump while touting the new season of The Unbreakable Kimmy Schmidt. Chelsea Handler took jabs at her former employer while talking about her upcoming documentaries and talk show. “It’s such a different relationship than with E! It’s nice to be involved in a show where I do respect their opinions,” she said. “It’s like going out with a guy that you’re proud to be seen with.”

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Tina Fey talks Kimmy Schmidt; Photo: Eric Charbonneau, Courtesy of Netflix

Netflix’s targeting of top talent is very much a page stolen from HBO and, by now, everyone else in the original programming game, but TCA was also a reminder of how Netflix’s rule book is ultimately very much its own–one that is defined by a combination of Sarandos’s taste and the company’s sophisticated algorithms and endless data and testing. Whereas HBO would presumably never touch someone like Adam Sandler–whose latest box office bomb was just released–with a 10-foot pole, Netflix, of course, made a multimovie deal with Sandler on the basis of his international appeal. And it’s hard to imagine anyone else in traditional television (or streaming) picking up a canceled A&E show like Longmire, a modern-day Western whose third season premieres on Netflix in September.

At TCA, Sarandos simply said the show was good by way of explanation. “There’s no real policy,” he said. “There’s no ‘a show has to check off these boxes to make it.'”

Perhaps, but behind the scenes, it seems likely that Netflix found data-driven reasons to back up its decision.

None of that was revealed to the folks at TCA. For all of its splashy announcements, there are certain things Netflix is still very good at not talking about.

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About the author

Nicole LaPorte is an LA-based senior writer for Fast Company who writes about where technology and entertainment intersect. She previously was a columnist for The New York Times and a staff writer for Newsweek/The Daily Beast and Variety

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