Ted Sarandos is happy the twin Hollywood strikes are over — but the Netflix co-CEO claimed the streamer didn’t see significant “interruption” in its ability to launch original series and films.
“We are mostly just thrilled that the strikes are behind us. I’m really excited about that,” Sarandos said, speaking Monday at the UBS Global Media and Communications Conference in New York.
Sarandos, who was among the studio CEOs at the bargaining table for the contentious WGA and SAG-AFTRA negotiations, commented about the post-strike environment, “It’s one of those times when nobody says, ‘We have too much content.'” But, he continued, “We didn’t really have much interruption in our delivery to customers.”
“Not that COVID was good for anybody, but it did give us muscle for delivering content in an uncertain time,” the exec said.
In 2024, Netflix is gearing up to launch new seasons of “Bridgerton,” “Cobra Kai” and “Emily in Paris,” Sarandos said, while later this month the streamer is set to bow Zach Snyder’s first “Rebel Moon” film (which the exec called the filmmaker’s “Star Wars”) as well as Oscar contender “Maestro,” the Leonard Bernstein biopic from Bradley Cooper.
That said, during much of 2023, Netflix saw original productions delayed by the now-resolved WGA and SAG-AFTRA strikes. In October, the company told investors its cash content spending for the year will be about $1 billion lower than expected due to the strikes; that is helping Netflix boost free cash flow for full-year 2023 to about $6.5 billion (up from the prior forecast of $5 billion).
Overall, Netflix is still targeting a $17 billion content budget for 2024 on a cash basis, Sarandos said. “You’ve seen the steady march-up of our content budge [commensurate] with our growth,” he said. “We think the $17 billion level aligns with our growth.”
Two areas of focus for Netflix in terms of new original projects are feature animation and local-language unscripted programming (such as four-part docu-series “Beckham”), Sarandos said. He noted that since Nielsen began tracking streaming, eight of top 10 of most-watched movies are animated. Last month, Adam Sandler’s “Leo” scored as the biggest animated film debut on Netflix to date. There’s “plenty of appetite” for animated movies, Sarandos said, saying Netflix will augment its animation slate in partnership with David Ellison’s Skydance starting next year.
Sarandos said Netflix has seen new opportunities open up in licensing movies in recent years. He pointed to the company’s U.S. pay-one window distribution pact with Sony Pictures Entertainment (under which Netflix recently added titles such as “Spider-Man: Across the Spider-Verse” and Jennifer Lawrence comedy “No Hard Feelings”) and Universal Pictures/Illumination (which includes “The Super Mario Bros. Movie”). In addition, Denis Villeneuve’s 2021 film “Dune” from Warner Bros. is now streaming on Netflix.
“It’s the more natural state of the business,” Sarandos said. “The unnatural state was the forced vertical integration.”
In addition, he said, bringing a film or show to Netflix’s global platform can supercharge a given piece of content. Sarandos cited the case of “Suits”: The legal drama, which co-starred Meghan Markle, “didn’t make a lot of noise” when it aired on USA, he said, and previously had been streaming on Hulu and Amazon Prime Video. After Netflix added the show, it zoomed to the top of Nielsen’s streaming charts. “Everyone was talking about it,” Sarandos said. He noted that “Suits” creator Aaron Korsh had pitched a spinoff of the show and “everybody passed, including us” — but now it’s in development. Next year, Sarandos joked, “you’ll probably see a bunch of lawyer shows.”
Meanwhile, Sony is making a new “Karate Kid” movie with Ralph Macchio and Jackie Chan, which Sarandos asserted was because of the popularity of the “Cobra Kai” series on Netflix. It was “IP that failed elsewhere,” he said of “Cobra Kai,” alluding to the fact that it was formerly a YouTube original.
For Q4, Netflix forecast a net subscriber gain similar to the third quarter, when it added 8.76 million globally, to stand at 247.15 million as of Sept. 30. The industry-leading subscription video streamer projected year-end quarterly revenue of $8.7 billion (up 11%) and net income of $956 million (vs. $55 million a year prior).
“[S]treaming is a good business. It’s just a hard one,” Sarandos said.
Per the company’s third-quarter 2023 shareholder letter, Netflix — in addition to “creating movies and series that members will love” — is aiming to increase average revenue per subscriber through three initiatives: paid sharing (trying to convert password-sharers into paying customers), growing its ad-supported plans, and by adjusting the mix of pricing and plans (e.g., recent hikes on Basic and Premium tiers in some markets).
Regarding the company’s paid-sharing rollout, Sarandos said, “We’re completely satisfied with the pace of it.” Netflix needed to introduce it on a country-by-country basis, to adjust the terms of the password-sharing program based what would work best in individual markets, including given regulatory requirements, he said. “It was good to take it slow. That’s why we didn’t do it one fell swoop,” he said.
Sarandos also took a swipe at rival streamers. As Netflix is adding content and “adjusting prices every little step of the way,” he said, “Our competitors seem to be reducing content and raising prices.”
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