Q&A with Netflix Executives About the Future of Content

It's a good time to be Reed Hastings, Netflix CEO and co-founder, who announced his service would be available around the world at his CES keynote address on Jan. 6.

In 2016 Netflix will release 31 new and returning original series, two dozen original feature films and documentaries, stand-up comedy specials and 30 original kids series -- all of which will be available at the same time to members everywhere. Netflix has more than 70 million members, now in 190 countries, who can watch more than 125 million hours of TV shows and movies per day.

We sat down with Todd Yellin, vice president of product innovation at Netflix, and Sean Carey, vice president of content acquisition at Netflix, at CES 2016 to discuss the long-term implications of this major announcement and what TV will look like in the future.

 

MA: What will Netflix in 130 countries look like?

Sean Carey: The content offering will have all our originals with a few minor exceptions, so "Jessica Jones," "Daredevil," all the Marvel series and all our great comedies like "Master of None," all of our great dramas like "Bloodline" and all of our action shows like "Marco Polo," so there will be a big focus on original content offerings. On top of that we'll have a lot of licensed content that we had success with in other territories, like shows like "Suits" from NBCU. We'll add content every day from this day forward, so we like to say that the content today, the day of the launch, is the worst it will ever be because it'll always get better and better as we add more content. In fact in all of our territories, the content doubled in the past year, and we anticipate that happening year after year.

 

MA: Can we talk about original programming you're developing for international audiences?

Sean Carey: We're currently in production in 10 territories and that ranges from shows in Canada to movies in Cambodia. So we really try to find storytellers in every corner of the world. We will continue to find opportunities to do that by producing globally like we have in Mexico and Brazil, and we anticipate doing it in Korea and other places where we know there are great local storytelling and great creative talent.

 

MA: Are actors jumping at the opportunity to work with you, especially with the success of shows like "House of Cards?"

Sean Carey: Any creator that has the opportunity to share their story with the world. Our platform enables that and releases the shackles of very rigid commercial break type formats.

Todd Yellin: A revolution is underfoot. Three and four years ago, when we met with people like Kevin Spacey and David Fincher, they didn't really quite get the Netflix proposition, but they were great early partners. Now they've become fantastic advocates for Netflix around the world.

 

MA: China was the one country where Netflix didn't launch yesterday. What's the strategy for entering that market?

Todd Yellin: In China, the big companies like Alibaba are offering streaming services, but they're advertising supported for their subscriptions. There's no other business model that we know of.

 

MA: Will you make an ad-supported model specifically for the Chinese market?

Todd Yellin: There's no reason to go ad-supported in China. We're really supportive of a pure video experience. And so honestly, we're allergic to advertisements at Netflix. It's not part of what we do because it would disturb our content creators if we started dividing up their stories with commercial breaks and interruptions. China is very unique, and we're doing a lot of work there, and will hopefully will launch in the near to middle-term future.

 

MA: Will we ever see Netflix anywhere else?

Sean Carey: The core to our business model is you can only see our content on Netflix. If we did that it would limit our growth.

 

MA: You've had some difficulty gaining access to global licensing deals for reruns and original series. What will you do now that you're in 130 countries?

Sean Carey: The Fox and Disneys you were mentioning are organized in a way to optimize regional P&Ls (publishing and licensing) so that's a legacy infrastructure that we're sort of throwing a wrench into, so in so doing we've had to up-level conversations to people that run the organizations, not the territory managers to license rights for shows globally. So you can imagine that's a difficult process, but it's one we've been successful at. So we've already worked with every major studio to license a show at least globally or near globally. So examples of that are "How to Get Away with Murder" from Disney, "Last Kingdom" from NBCU, "Better Call Saul" from Sony, so this year we knew we were going global, and ahead of that fought to license content globally and we will continue to do that going forward. It's likely to be slightly easier since we are global now, because before we were trying to get them to give us rights to territories we didn't yet have.

 

MA: Are you concerned about households being able to stream Netflix seamlessly in countries where Internet isn't great?

Todd Yellin: If you look across the world, whether it be in the U.S. or Asia or any place else, year over year, broadband has improved, increased and there's lots of governments and private companies that are investing tremendous sums in wiring people up in better and better ways. Fiber is being laid all around the world. The Indias and Brazils of the world are getting better and better. The ability to stream more robustly in 4K has outpaced us, and there's been a rapid increase in infrastructure.

 

MA: As a broad trend, Netflix is changing what consumers want. Consumers are noticing how annoying ads are now more than ever before. What's going to happen in the future with ads? 

Todd Yellin: It won't be all subscription with ads. Advertising-supported definitely has a future. The reason I think that is because having been someone who's worked on personalization and putting the right content in the right person at the right time, online ads are becoming more and more sophisticated. Eventually, I don't know if this is going to happen in five or 20 years, but advertisers are going to know I need a car, and when I see a commercial, it won't feel like an ad nowadays. It will feel very high utility, and I'll be glad that I'm getting that content. That will take a long time, but steps are being made now as targeting advertising gets better and better.

Sean Carey: Traditional networks are becoming Internet television networks, acknowledging that that's our future. How advertising fits within that is what they're addressing now. And certain things will be better in a live experience that won't be as relevant in a subscription model.

 

MA: In the future, will you ever do a live stream, of say, The Emmys?

Sean Carey: I doubt it. Those moments are all about aggregating eyeballs at one specific time, and that's not what our platform is built for.

Todd Yellin: We love to experiment and try things at Netflix. Chelsea Handler is an experiment for us. We're very excited about it, but the Chelsea show will air hours after we shoot it. It's not going to be live, but it's something we haven't done before. Will you see a lot more of that in the future? It's an experiment. Let's see how this one goes.

Sean Carey: We don't expect a lot of people will watch it three hours after it's been put up. We expect it to be watched for weeks and months after.

 

MA: Let's talk about bundles. What's going to happen in the future, when people want unbundled television but they might also want a broad offering?

Sean Carey: There's pressure on the bundle, and how the networks deal with that is anyone's guess. But clearly the networks are recognizing they have to be Internet television networks, and what form the bundle takes in that environment remains to be seen.

Todd Yellin: It's exciting that there's been a lot of unbundling going on, and we helped catalyze that. It's really been moving fast over the last year, and suddenly we've been seeing a tipping point.

 

MA: Have you ramped up your efforts to build better algorithms for greater personalization, especially now that your catalog is doubling in 2016 and doubling the year after?

Todd Yellin: The more content you have, the more personalization is important because no one wants to go through hundreds of titles to figure out what they want to watch. The typical consumer looks through 40 or 50 titles, a few rows, and then they'll pick. Within three or four minutes they're going to hit play. Netflix isn't about putting personalization in your face and saying "this is recommended for you." In fact, if you look, a study of the Netflix user interface, whether it's in English, Chinese or any other language, we don't use the word "recommended." What we do is we bubble up to the top of the user interface the titles you're most likely to like. So for example, a row of TV thrillers, Netflix probably has many dozen TV thrillers, but a typical member is only going to look at 5 or 10, so even though you'll get TV thrillers, what's first, second and third in your user interface might be 40th, 41st and 42nd in yours. And your TV row might be bottom, and yours might be the third from the top, and some rows people don't even get. We're doing this all behind the scenes because a consumer doesn't care about complicated mathematics when they want to melt into their upholstery and forget about that hellish day at work and watch something great.