The video above is Behind the scenes of THR's cover shoot featuring Ted Sarandos and Nicole Avant, President Barack Obama's $500,000 power couple.
Ted Sarandos’ High-Stakes Gamble to Save Netflix
The chief content officer is placing the future of his company on a single high-stakes bet: original programming.
A man waving around money in Hollywood does not want long for attention: usually the talent comes to him. One Saturday morning early last year, Ted Sarandos went to the talent. The chief content officer of Netflix is an atypical Hollywood player. He’s 47, gregarious, polite, well liked, and shy about dropping names. But as Netflix has grown from a fledgling DVD-by-mail service into the largest streaming video platform on the planet, Sarandos has become the single largest buyer of movies and TV series in Hollywood. What brought him to the office of David Fincher last March was a desire to start making his own programming from scratch.After two Academy Award nominations for best director, Fincher was shopping a television project, a political thriller about a conspiratorial congressman. With Kevin Spacey playing the lead, it was the kind of high-gloss, Emmy-shoo-in series that viewers expect to find on HBO. Sarandos wanted it to premiere on Netflix. He knew Fincher was likely to greet him with skepticism—Netflix had zero experience in TV development, and even the companies that did, fail at launching shows all the time. But Sarandos also had money, and, more important, an appetite for risk. He gave Fincher’s proposed House of Cards an unheard-of commitment—two full seasons, before a single frame had been shot, at a rumored price tag of $100 million. “There’s a million reasons not to do this at Netflix, and I wanted to give them one rock-solid reason to do it,” Sarandos says today. “I wanted him to understand that this wasn’t a toe in the water—that we were really moving forward on original series, and that we were going to do it well by not doing what everyone else does.”Fincher bit, and in the next year Netflix went on to acquire four more original programs. One has already debuted; the rest stream in 2013. Sarandos promises that more are on the way They had better be good. Other Internet video services are beginning to create original content, too—Hulu debuted its first series in February, and Amazon began soliciting projects this month—but nowhere are the stakes higher than Netflix, which last fall lost 810,000 subscribers and $12 billion in value when a plan to split its DVD and streaming products in two went haywire. Creating hit original series is crucial to restarting Netflix’s subscriber growth, the figure that Wall Street analysts examine before all others to determine the health of the company.Whether it works depends on someone The Hollywood Reporter recently described as “the man everyone in Hollywood wants a meeting with.” Having a fat wallet is no guarantee you can make a hit show, of course. But it will make things fun to watch. For Sarandos, professional life now includes meetings with Steven Spielberg and dinners with Sean Penn. But his career began in a strip mall. As a teenager, in Phoenix, he talked his way into a job at one of the first video-rental stores to open in the state of Arizona. He wrote out receipts, alphabetized videocassettes, and often locked up early, when the very last tape had been rented. Before long he was managing the store, then several others; a planned transfer from community college to Northern Arizona University never happened. Instead Sarandos dropped out and began an orderly climb up the home-video-industry ladder. The local rental chain’s supplier, a videotape distributor called ETD, offered him a job; soon he was running its Phoenix warehouse. Then Denver, then half the United States. If you rented a movie from Blockbuster west of the Rockies before 1998, chances are good Ted Sarandos helped get it to you. In 2000, Netflix was a fledgling DVD-by-mail service in Los Gatos, Calif. It had only just begun to sell paid subscriptions. CEO Reed Hastings read in a trade publication about an innovative revenue-sharing deal that Sarandos had pioneered, and began courting him to take over the startup’s licensing department. Sarandos declined, repeatedly. By then he was an executive at Video City, a chain in the middle of a painful 300-store merger, and felt he was needed there.Hastings wasn’t having it. “Well, Mother Teresa needs you in India feeding starving children. Why aren’t you doing that?” he asked one night over the phone, as both men recalled. Sarandos took the job. Early victories—like convincing DVD manufacturers to change the paints they used so that discs wouldn’t chip in the mail—turned into nine-figure deals with movie studios. From its earliest days, Netflix’s business model has been a cycle of momentum: more paying subscribers means more revenue for more content, which means more paying subscribers. But by 2010 Sarandos was beginning to notice that Netflix’s suppliers were getting stingier, demanding that their titles stream on rival platforms, or declining to sell to Netflix entirely so that they could do the streaming themselves. HBO had always refused to make its programs available; then, in early 2011, Showtime balked at renewing a deal for Californication and Dexter.