This was published 9 years ago
Netflix Australia: How our crap internet delayed the launch
When Ted Sarandos joined Netflix in 2000, he worked from a desk in his bedroom. On one corner of that desk was a set of scales; he was constantly looking for ways to trim the weight of the mail-order DVD parcels that used to be the company's bread and butter.
Today, Netflix is the world's biggest on-demand movie and TV streaming service, with more than 57 million subscribers. As its chief content officer, Sarandos decides what they watch. This makes him one of the most powerful programmers on the planet – not least because of his aggressive push into original, quality programming. (House of Cards and Orange Is The New Black are the best examples.)
Red carpet launch: Netflix content chief Ted Sarandos (tenth from left) with the stars of Netflix's original series.
Netflix's Australian launch on Tuesday has sparked a new kind of war. One in which rival streaming services – including Stan*, Presto, Foxtel Play, Quickflix and Ezyflix – compete through quality content, low prices and convenience.
Since he arrived on our shores, Sarandos has been repeatedly asked why it's taken so long for Netflix to come to Australia.
Yael Stone, who plays Lorna Morello in Orange Is The New Black, with Netflix's content boss Ted Sarandos, at the Netflix red carpet launch in Sydney.
So why has it taken you so long to come to Australia?
[When you choose to launch in a country] is determined by the rate of broadband adoption and high-speed internet ... and Australian and New Zealand internet infrastructure built up very slowly.
(A report from Screen Australia shows that 51 per cent of Australians say slow connection speeds stop them from watching as much video on demand as they'd like. Overall, "internet speed" was nominated as "the single most important barrier" to streaming.)
Now the rate of catching up has been remarkable. Between now and the next two years it's going to be more remarkable. [If we'd launched any sooner], I don't think enough people would have been able to use it, or attuned to wanting it.
If you grow up with fast internet, though, your behaviours are really different. The lowest-income household in the Nordics, for example, have faster broadband than me [in the US]. So all their behaviours are completely different: how they consume and what they're willing to do online.
Having well-distributed, fast, easy-to-access internet creates a bunch of societal benefits that are much bigger than Netflix.
You won't go into a country unless you're sure it's ready in every way?
Yeah. But Australia and New Zealand have been historically very under-served entertainment markets. Movies and television shows would get here late. Then they would be priced more expensively than in America. Now we're in a position to fix that.
For years, Australians have been exposed online to the marketing of some great TV shows – which are then withheld from us for ages. Is that why our otherwise law-abiding citizens are among the worst illicit downloaders in the world?
I'm sure of it. If you use the internet to create demand – and then don't use it to give access – the gap between demand and access is where piracy comes from. You're inviting it. I do think that people – with a well-distributed, well-priced service that works – will choose that over questionably illegal activity online.
In Australia, we now have multiple streaming services competing through quality content and low prices. Can traditional networks still afford to do things like run their programs overtime and delay the launch of international programs?
I call that "managed dissatisfaction". And we're all about consumer satisfaction.
The all-at-once [binge-watching] model – when we said we were going to do it, I had every network executive in America called me to tell me how foolish it was. They said, "You don't give people what they want! You stretch it out to make them come back."
Did you deliberately create the binge-watching model? Or was it something your viewers created?
We really discouraged the word "binge" at the beginning because binge seemed negative! Like "binge drinking" or "binge eating". But now it's something people love, and we encourage it.
It was the consumer who really created bingeing. We made it easier. We gave them the tools.
Before we did our original Netflix series, we found that people loved to watch the [externally produced and licensed] shows that way. So when we started doing our own series, there was a lot of debate inside the company about how we should release it. Once a week, like on TV? All at once, like we do with the shows we've licensed? Or something in between?
Finally, we said the best way is to put it all up at once and let people decide how they want to watch. It was a natural evolution. It didn't feel groundbreaking.
Why does Netflix offer a smaller catalogue to its Australian viewers?
You should think of [the current Australian catalogue] as about half the collection it will be in 12 months. Every day, we're going to add more and more programming. Literally, if you check the site every day, you'll see new programming.
We'll use local viewing data to influence what we licence from here on out.
Also, there are a lot of things under licence but we're still encoding them, or the studio delivered the wrong file... all kinds of stuff. We try to get as much as we can without spending the whole budget at launch, because we want the programming to be more dynamic relative to what people want to watch. So we do our best guess going in [to a country]. Then we'll learn a lot in the next four of five days, looking at viewing data.
You've rapidly expanded your original content from Orange Is The New Black and House of Cards to a large range of new shows. What's your strategy? (New shows include: Marco Polo, Daredevil, Sense8, BoJack Horseman, Unbreakable Kimmy Schmidt, Grace & Frankie, Bloodline and others.)
You have to revisit your strategy every once in a while and ask, "Is this still true? Do we still believe in this?"
And one of our beliefs was that most filmed entertainment would be coming into the home via the internet. Our vision was that there would be a time when that technology would be novel, and we would want to be the best at that – as we always do – but we should start investing in that and differentiate ourselves.
Original programming seemed to be one thing that would make sense. Very few people watch one network over another because the colours are better. There is some form of standardisation that comes to technology eventually. So this was an investment in what will differentiate us for the next 10 years of our life.
When you commission a show, how conscious are you of traditional network concerns such reaching women aged 18 to 39, for instance?
Zero. If it's a great show, we're going to attract a lot of people. We have 57 million-plus people watching these shows. As long as we find enough people to watch the show – relative to what it costs – we're golden. I don't care how old our viewers are or what sex they are because we're not trying to sell an ad.
How has the Netflix model changed the programs themselves?
When we licence a show from a network, we strip out all the commercials and put it on. But those shows are built to be watched week-to-week. The narrative is built to trick you into waiting until next week to see the next episode. And when the next episode airs, they're not sure if you remember what happened last week, so they have to remind you a lot in the story. Sometimes they even say it explicitly: "Last week on..."
But Netflix shows are built to be watched together, so we don't do any of that. We allow much richer storytelling, because we have 10 or 15 minutes an hour more to play with.
So that's why Netflix shows have fewer cliffhangers at the end of an episode?
Right. There might be some in there but they're not artificial or half-baked, which then fail to deliver when you tune back in again! If you watched the first season of House of Cards, the second episode ends with Frank rowing [on a gym machine]. It's the anti-cliffhanger. You couldn't do that on network TV.
We took that to a further extension when we made the fourth season of Arrested Development. All the episodes had different run times. The shortest was 26 minutes and the longest was 47 minutes. We let storytellers tell stories in the form they want to. If they're onto a funny joke thread, they don't need to cut to make it exactly 22 minutes. I don't need them to.
Will Netflix ever have ads?
No plans to. The uninterrupted, ad-free environment is part of our current consumer promise.
How will network television be forced to change?
In the US, when we announced we were [launching a full season] of House of Cards without a pilot, everyone thought we were crazy. Now everyone is moving away from doing pilots [and ordering full seasons instead].
And whether the networks move towards all-at-once launching, they're certainly moving closer to it. When AMC launched Better Call Saul, they launched two nights in a row, two new episodes. I think that was influenced by the consumer desire that was seeded by the things that we've done.
We're going to be doing original films this year, too. (Crouching Tiger, Hidden Dragon II, Pee Wee's Big Holiday and others.)
Will these movies be released in cinemas as well?
Some will go in cinemas simultaneously, but not before they're on Netflix.
Sometimes you want to go out and see a great movie, and that's fine. Interstellar is a good example. But I have a great TV, my couch is comfortable, and I'm happy to watch a lot of other movies at home.
Theatres have got to keep improving the experience, from online ticketing to food service.
One of the studio heads told me – back in the early days of DVD – that if we release movies in cinemas and on DVD simultaneously, their theatres would be empty. I said, "I think you're wrong. And I don't think you have as much faith in your product as I do. And if you're right, then you should be rushing to put your movies on DVD, because you know exactly what your customer wants and you don't want to give it to them. And what business has ever succeeded by doing that?"
Netflix has changed radically since its early days as a start-up business that mailed out rental DVDs to customers. What might the company look like in a few years?
I think there's so much growth to come both in the expansion of our original programming and our international expansion. Improvements like ultra-HD and high dynamic range will continue to move production standards up. Delivery standards will go up.
If you'd asked me five years ago where we'd be today, I hopefully would have said we'd be here. But I probably would have called it wrong! It's tough to say.
*Stan is owned by the Nine Entertainment Co and Fairfax Media, owner of this website.