Netflix’s Sarandos: ‘Retention key to subscription model’

Despite being seen as a disruptive force to the established pay-TV industry, Internet streaming entertainment service Netflix shares some of the same concerns as existing players, according to Chief Content Officer Ted Sarandos, who also highlighted as significant distinction.

Sarandos told delegates at the FT Digital Media Conference 2013 in London that in terms of subscriber and subscriber retention, there was “a direct correlation” between, usage and engagement and retention. “It’s all about keeping the customer happy and keeping their attention. Retention is key to any subscription model,” he suggested.

Netflix’s move to original programming with shows such as House of Cards had given rise to what he described as “a divergence from that metric”, revealing that the company was getting brand affinity points for programmes that people may not actually have seen, but were nevertheless supportive of such initiatives.
He drew attention to the many instances where renewal of carriage deals often resulted in brinkmanship between content owners and operators. “That’s a business that fortunately we don’t have to participate in any more,” he said.

According to Sarandos, Netflix was being more selective about the content it acquired, which had previously been predominantly library content. Going forward, he suggested that prices paid would relate to actual viewing, paying a premium for a show that performed well rather than acquiring all inventory available from a partner. He warned that consumers get confused where what he described as “non-exclusive bulk” was available from several online video sources.

Exclusivity was becoming “an important piece of the puzzle,” he confirmed, adding that Netflix’s appetite for non-exclusive programming was “rapidly going to zero. We are willing to pay more on an exclusive basis.”

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