Netflix Versus Hollywood: From Oscar Frontrunners to A-List TV Creators, Ted Sarandos Reveals His Master Plan
Netflix is bent on world domination and the industry's most controversial content czar tells IndieWire how he's doing it.
Overspending. Netflix has allocated $6 billion this year to produce must-watch original content, making offers to talent that no traditional studio can afford. (That’s partly because they estimate and buy out future revenue streams in advance, so there’s no royalties or backend deals.) Ask Sarandos why Netflix spends so much when it doesn’t have to, and his reply is designed to inspire heartburn: “To make them comfortable, to come out whole,” he said. Who can compete with that?
Netflix has come a long way since network execs made a habit of telling Sarandos that he didn’t know how television works. “I wasn’t trying to get people to come back week after week,” he recalled in an interview at his airy new Sunset Studios office overlooking the Hollywood sign. “There was also a theory that if movies were on DVD the same day they were in theaters, they would be empty. I don’t believe that’s true, because people want to go out and have a differentiated experience. And if it is true, then everybody should be putting movies out on DVD immediately. In what other business do you know what the consumer wants and refuse to give it to them? In what other business has that ever worked?”
Added Sarandos, “If you lean into the customer, you will win every time. They’re telling us they don’t want to wait week after week for advertising.”
Hacking the Oscar business. “Mudbound” marks Netflix’s next Hollywood frontier — disrupting the movie business, as the streaming service seeks to hack some Oscar nominations without playing its day-and-date movies in theaters for more than a week. (Netflix has pacted with iPics, a luxury theater chain in 16 cities, to book its one-week runs.) The theatrical run isn’t necessarily for the audience; it’s to keep filmmakers happy, and for Oscar qualification. (Noah Baumbach declared at Cannes that he intended “The Meyerowitz Stories” for theatrical consumption.) The award is still the ultimate benchmark of quality, and a useful global marketing tool for this cinephile voting member of the Academy who has twice run for the Board of Governors. (The executive branch denied him.)
But many in Hollywood wish Netflix would recognize its proper domain as television, and stay away from movies and any pretense at theatrical distribution. So far, Netflix’s Oscar success has been limited to the documentary realm (“White Helmet” won the 2017 Oscar for Best Documentary Short). It remains to be seen if Netflix can successfully turn its would-be Oscar contenders into must-sees for Academy voters.
They have no investment in the status quo. In 1999, Sarandos was a vice president of product and merchandising for Video City/West Coast Video when Netflix CEO Reed Hastings asked to meet him; he’d read a trade interview about Sarandos’ then-groundbreaking revenue-sharing deals with Warner Bros. and Sony. “It turned into a pretty unbelievable first encounter,” said Sarandos.
The executive and his new boss both shared a “kind of contrarian thinking of being able or willing to challenge the status quo,” Sarandos said, “and just say, ‘Look, if the only reason you do things is because that’s the way you do them, that’s not good enough.'”
At the time, Netflix was a DVD-by-mail business with less than 100,000 subscribers; Netflix did not have a direct relationship with studios and bought DVDs from Costco and Best Buy. “We were burning through cash like crazy because we had to keep buying inventory to keep up with the growth of the business,” Sarandos said.
Back when the studios argued with exhibitors about who should pay to install digital hardware, Hastings and Sarandos agreed that they needed to focus on “how to match audiences to movies.”
The next major steps in Netflix’s Hollywood onslaught is Martin Scorsese’s $100-million gangster movie “The Irishman,” which starts shooting this month with Robert De Niro, Al Pacino, Joe Pesci, Bobby Cannavale, and Harvey Keitel. Steve Zaillian (“Moneyball”) adapted the screenplay from Charles Brandt‘s 2003 book, “I Heard You Paint Houses,” about hitman Frank Sheeran.
“‘Bright’ is a turning point in terms of the scope of the movie and the budget to be able to put together the deal with A-list talent,” he said. “It raises the confidence we could put it together again.”
Director Angelina Jolie, on the other hand, came to Netflix to pitch arthouse Cambodian-language drama “First They Killed My Father,” which is now heading for fall film festivals. “She had a very specific view of the story she wanted to tell,” said Sarandos. “It’s very traditional. It’s just as resource-intense to make a small film as a big film, where there isn’t much infrastructure in Cambodia. It would have been difficult to get made anywhere, with all local talent. It all pays off on the screen.”
For now, Netflix can afford to outspend its rivals. Sarandos works overtime to win over Hollywood talent and producers by showing them that as studio ambitions narrow, Netflix offers them freedom of choice. “Our goal is to create the environment for filmmakers to do the best work of their lives and connect with audiences around the world,” he said. “That model has served us and our members very well for TV and has helped to attract and retain subscribers. We are betting with great filmmakers, we can do the same with films.”
Netflix is chasing consumers all over the world as they try to build audiences. It saw 300 percent subscriber growth in 2016, and much of that came from overseas. “That’s where the population is that doesn’t use Netflix yet,” said Sarandos. “The ability to export great storytelling from anywhere to anywhere is the real opportunity, (like) finding Bong Joon Ho in Korea and giving him a bigger canvas to show what he could do. Filmmakers outside of America don’t usually have the opportunity to work with a big budget.”
Oscar-winning Plan B producers Jeremy Kleiner and Dede Gardner (“12 Years a Slave”) first chased down Bong, whose “Snowpiercer” was Korea’s biggest-budget movie to date. He sent them his original script with Jon Ronson about a Korean mountain girl’s threatened relationship with her super pig. It’s a strange polyglot: a message comedy that’s dead serious.
And at $50 million, starring Tilda Swinton, Jake Gyllenhaal, and Paul Dano, with shoots in Korea and New York, “Okja” didn’t come cheaply. Creating the title character required sophisticated VFX executed by Erik De Boer, who designed “Life of Pi” tiger.
While Netflix promised Bong a wide theatrical release in Korea, it could only obtain dates in 150 independent theaters — exhibition chains resisted for the same reasons they did in America and France. But thanks to its Competition launch in Cannes and high-profile, one-week theater showings in New York and Los Angeles (it played a second week in August at Quentin Tarantino’s New Beverly by popular demand), “Okja” built social media buzz. People watched it and liked it, all over the world.
Hastings mentioned “Okja” on an earnings call as part of its push for international subscriber growth. In May, Netflix marketed Plan B’s Brad Pitt satire “War Machine” by sending the star to India; it opened at number one in 190 out of Netflix’s 193 countries. “You need a shorthand when people say, ‘There’s a new movie called ‘War Machine’ on Netflix,'” Sarandos said. “The first question is, ‘What’s Netflix?’ The second is, ‘What’s ‘War Machine?’ But when you say, ‘We have a new Brad Pitt movie,’ [it’s]’Where do I see the new Brad Pitt movie?'”
Global thinking is the norm. Traditional studios are struggling with an inversion of their global box office: Where domestic returns once delivered 60%-70%, today the international audience drives the bottom line. Netflix works from a more catholic worldview. “The Brazilian original production ‘3 %’ is all in Portuguese, subtitled in English, with a Brazilian cast,” Sarandos said. “We have millions of people watching in the U.S. It would, by cable standards, be a huge hit show. Produced by a French movie company, ‘Narcos’ is 85 percent in Spanish.”
It’s great when the shows play in their own countries, but even better when they travel. “When you get the storytelling right they’re incredibly global,” said Sarandos. “’13 Reasons Why’ played everywhere, it’s being watched proportionally as much in France and Germany as it is in the U.S.”
Netflix produces 12 original shows in Japan, and has 12 anime projects in production. “The largest anime audience is the collective audience of the U.S. and France that are actually bigger than Japan,” he said.
Those Netflix algorithms. Sarandos credits recommendation algorithms with the ability to make shows travel. “People trust it and it localizes itself automatically,” he said. “So we’re not using American viewing behavior to predict in Germany. It’s just focusing on great storytelling.”
Of course the algorithms are top secret, but Sarandos says they look at “factors,” not age and sex. “If we have a big audience for shows like this,” he said, “do we have other shows for that audience? People who watch Netflix for television primarily watch Netflix. For movies, there’s a bunch of other outside influences. So we’re serving different needs. Romantic comedies overperform on Netflix because people are always looking for them.”
Don’t let Sundance fool you: Netflix is for the mainstream. Overseas, its early adopters are like its first stateside subscribers: younger males. “There is a long tail, but it needs a big head,” Sarandos said. “Making arthouse films and Sundance movies on its own can never be a sustainable big business. But the economics of it are the same. We can draft off a bigger business, so people come in for something else and you have their attention and, ‘Oh, I want to see this new thing.’ You don’t know the star or the director, you just know the premise, and you have this algorithm that they are putting in front of you that you trust, so you try it.”
Movie-lover Sarandos would like to believe that a Sundance grand-jury prizewinner like “I Don’t Feel at Home in This World Anymore” comes in to a Netflix subscriber via Adam Sandler or Angelina Jolie to help them break through. But does that critically hailed movie have a shot at year-end awards attention? It disappeared into the ether.
There’s more competition on the horizon as deep-pocketed Apple, Facebook and Google push more aggressively into entertainment. But Sarandos considers subscriber-supported Netflix to be in another space. “This is a big business and people are going to chase it,” he said. “If ad-supported video is a pure eyeball business, whatever gets the most viewing should win, whether it’s something you pay $10 million an hour for or something that was uploaded for free by the consumer.”
But both Netflix’s studio and Silicon Valley rivals boast one advantage that Netflix lacks: multiple revenue streams. So far Netflix has a good running start at growing customers in the streaming video business. The question is: Who can catch up?
To qualify for a Best Picture Oscar and not just for a Best Foreign Language Film Oscar, it needs to have a week-long run in a Los Angeles theater earlier than or simultaneous to its release on Netflix. This would be that run.
See it on the big screen! #AngelinaJolie's #FirstTheyKilledMyFather opens at #TheLandmark on September 15! Trailer: https://t.co/Ih4ll9tMbH— Landmark Theatres LA (@LTLosAngeles) August 23, 2017
Ahead of @TIFF_NET, @nora877's #TheBreadwinner (exec-produced by Angelina Jolie) gets set for a 2018 release date: https://t.co/2WrQZAIpvX pic.twitter.com/fLM1Nw7QHw— Irish Film Board (@IrishFilmBoard) August 23, 2017
Irish Animated Feature, The Breadwinner, Set For Irish Release on 25 May 2018
The latest feature from the Academy-Award-nominated Irish animation studio, Cartoon Saloon, The Breadwinner, which marks the directorial feature debut of Nora Twomey (co-director, Academy Award®-nominated The Secret of Kells) has been confirmed for release on 25 May, 2018.
The Breadwinner will receive its world premiere at the prestigious Toronto International Film Festival (TIFF) next month, screening in a Special Presentation at the festival.
The film, which is adapted from the children’s novel of the same name by Deborah Ellis, tells the story of 11-year-old Parvana, who gives up her identity to provide for her family and to try to save her father’s life. A story of self-empowerment and imagination in the face of oppression, The Breadwinner also celebrates the culture, history and beauty of Afghanistan with a cast that includes many performers of Afghan descent.