Next TV: Sarandos Says Netflix Knew 'House of Cards' Was a Hit in Week One

Content chief also rips traditional TV for ‘becoming a b-to-b business,' touts consumer focus, data mining and programming exclusives

By Dade Hayes -- Broadcasting & Cable, 3/21/2013 4:48:09 PM

It didn't take Netflix long to deem House of Cards a hit.

A week after the show launched Feb. 1, in fact, according to the company's chief content officer, Ted Sarandos, who shed light on Netflix's game-changing operations at B&C/Multichannel News' Next TV Summit on Thursday.

B&C editor-in-chief Melissa Grego wasn't deterred by Sarandos' polite dodges when asked to back up his characterization of Cards. Netflix is famously secretive about its data, having spent years refining and analyzing it to help reduce subscriber churn and gain leverage in content negotiations. House of Cards launched all 13 episodes at once on Feb. 1, a milestone in the evolving history of bulk viewing, and didn't have Nielsen ratings or transaction data to reveal, meaning it was anybody's guess how the show was performing.

"Seven weeks in, and we're still talking about it," Sarandos said. "It's in the culture."

While he tiptoed around specific numbers and wouldn't talk budgets, he threw plenty of cold water on a recent report by a CAA agent purporting to lay out budget figures and other financial metrics. "Uncharacteristic and ill-informed," he said. CAA would "know individual client deals but not the overall budgets."

The key to Netflix's economic modeling is "demand forecasting," Sarandos said. Those forecast models account for endemic interest in key elements (in this case, the original U.K. House of Cards, star Kevin Spacey and director David Fincher) and assesses buzz and critical perception. It all has to yield a consumer value proposition and a return on the hefty programming investment. Even so, Sarandos said, Cards had an easier road to success on Netflix than it would have on another platform. "The networks, even after the magical act of creating a great show, they have to find the right night for it," he said.

"They have to buy the right billboards. Not only do we know the pool of people that's already interested, but if you were going to hate House of Cards, we didn't do anything to get it in front of you. It's highly targeted."

To underscore his points, Sarandos gestured to a topic that has dominated the week's news: late-night TV's talent roundelay. "Leno, Fallon -- it's interesting to talk about but it's literally only a couple million people watching these shows," he said. "Carson took those shows to his grave. People are not talking about those shows anymore."

Asked by Grego about Netflix's potential to keep growing beyond its current level of about 25 million domestic subs, he returned to the idea of customer focus and a customized, user-friendly experience -- commodities, he said, that are in short supply in the rest of the TV world. "Unfortunately for consumers, TV has become mostly a B-to-B business. No one is trying to keep viewers happy; they're trying to keep buyers happy.... Internet TV is to TV what cable was to broadcast TV, a positively disruptive force."

Because it is built on a new paradigm and isn't encumbered by increasingly pricey bundles laden with sports rights and other fees, Netflix has plenty of upside ahead of it. "Premium TV households are at about 50 million," he said, "mostly because they sit on top of a lot of cable."

Sarandos did let his guard down slightly when he was asked about whether there was any program he wished he had on Netflix. "Modern Family," he said without hesitation. (USA long ago sewed up those syndication rights.) He said he was "mixed" on the chances for a reverse-"off-net" syndication deal whereby House of Cards could go to a linear network in 2017. "We will see how we feel about it in four years," he said.