Inside the Binge Factory Netflix Is Hiring Everybody In & Out of Hollywood To Make More TV Shows
What do you think about gas in the tank for the long term?” asks Cindy Holland, Netflix’s vice-president of original content. It’s a Tuesday morning in May, and Holland and a handful of her direct reports are meeting in the 14th-floor San Junipero conference room of the company’s Hollywood headquarters. They’ve come to discuss renewal decisions for two existing shows, the Drew Barrymore–Timothy Olyphant zombie comedy, Santa Clarita Diet, and the recently launched remake of Lost in Space.
As Holland goes around the room, she stares at a laptop screen filled with the memos her team has prepared. She notes the mixed reviews for Lost in Space. “Do we care?” Not that much, it turns out. The show is renewed for a second season.
As they discuss story lines and other creative matters, there’s talk about “completion,” i.e., how quickly subscribers are moving through episodes to the end of the season. Holland quizzes the room about how the shows are doing internationally and if they’re under- or overperforming in certain territories. Someone mentions that Barrymore and Olyphant traveled to the Philippines to promote season two of Santa Clarita: “It’s the first time we took a show there,” she says, adding that the promotional support seemed to pay off: “We’re really, really excited about the fact that it’s traveled globally.” There’s enough gas in the tank, they decide, for a season three.
The conversation moves on to new projects, including Away, an unannounced drama from creator Andrew Hinderaker (Penny Dreadful) and executive producers Jason Katims (Friday Night Lights) and Matt Reeves (Cloverfield) that revolves around an international group of astronauts on the first-ever mission to Mars. “Do you have a clear sense of who is that core fan base?” Holland asks. “I feel it’s a pretty global show in terms of the cast and the diversity of players,” says one executive. “But I also think because there’s that epic love story at the center, it’s going to attract a female audience.” “You probably also get the sci-fi audience as well, right?” Holland says. “I don’t think we’re going to get a hard-core sci-fi action audience,” the executive replies. “That’s not what this is.”
Also on the agenda is a not-yet-announced limited series. There’s a brief debate over which of Netflix’s many content “verticals” it will fall under. “It’s kind of a hybrid between series and film in terms of the biopic nature,” one executive says. “Right now, it’s projected somewhere between period romance and the black-film vertical,” says another. Adds someone else, “It doesn’t fit squarely in either, so we think there’s a nice in-between.”
The meeting ends in less than an hour, and the futures of four of the roughly 1,000 original titles Netflix plans to make (or acquire and distribute) this year are a bit more certain.
Netflix’s overthrow of television’s old business model began just seven years ago. That’s when the Silicon Valley company best known for mailing DVDs in little red envelopes outbid AMC and HBO for the rights to a drama from director David Fincher, a remake of the British mini-series House of Cards. It was a big deal at the time, both because of the money Netflix was spending ($100 million for two seasons) and because it was the first hint of the streaming platform’s ambitions to evolve beyond a digital warehouse for other conglomerates’ intellectual property.
House of Cards is airing its final season this fall, and Netflix now makes more television than any network in history. It plans to spend $8 billion on content this year. “I’ve never seen any one company drive the entire business in the way Netflix has right now,” says Chris Silbermann, managing director of ICM Partners and agent for Grey’s Anatomy and Scandal creator Shonda Rhimes, who moved her production company to Netflix last year.
TV has gone through major transformations in the past — cable and Rupert Murdoch’s Fox toppled the hegemony of the Big Three broadcast networks in the 1980s, for instance — but this leap dwarfs all others. Netflix doesn’t want to be a streaming, supersized clone of HBO or FX or NBC. It’s trying to change the way we watch television. Whether it can do that while turning a profit is another matter, given the more than $6 billion in debt it’s amassed during its expansion. But Wall Street seems optimistic: In recent weeks, its overall market capitalization has at times grown past $150 billion, surpassing Disney to become the most-valued media company in the world.
CEO Reed Hastings and tech entrepreneur Marc Randolph launched Netflix in 1997, rolling out its DVD-by-mail service the next year and introducing the all-you-can-watch subscription model in 1999. The service has offered streaming since 2007. But it was the company’s move into original content that has upended so many norms of the TV business: Netflix doesn’t waste millions making pilot episodes of shows that will never air; instead, almost every project it buys is purchased with the intention of going straight to series. It invented the idea of binge-releasing — dropping full seasons of shows all at once, rather than doling out episodes week-to-week, as TV had done since I Love Lucy. Instead of selling its content to international partners, Netflix has eliminated global middlemen and set up shop in over 190 countries, allowing it to debut a new season of an American animated series (BoJack Horseman) or a German thriller (Dark) around the planet, all on the same day and at the same time. It has replaced demographics with what it calls “taste clusters,” predicating programming decisions on immense amounts of data about true viewing habits, not estimated ones. It has discovered ways to bundle enough niche viewers to make good business out of fare that used to play only to tiny markets.
And shareholders have given it the money to poach the top showrunners from ABC (Rhimes) and FX/Fox (Ryan Murphy), committing upwards of $400 million to deny those networks their biggest hitmakers. It’s greenlit series from the past two Oscar-winning directors (Damien Chazelle, Guillermo del Toro) and today’s most successful producer of network sitcoms (Chuck Lorre, whose next show for the service stars Michael Douglas and Alan Arkin). Netflix has also handed out paychecks worth, in some cases, more than $20 million to a constellation of stand-up stars (Chris Rock, Dave Chappelle, Ellen DeGeneres), signed the next generation of talk-show hosts (Michelle Wolf, Hasan Minhaj), and given a new home to older ones (David Letterman, Norm Macdonald). And last month, it announced a deal with Barack and Michelle Obama to make TV shows and movies.
“The first word out of everybody’s mouths in meetings is, ‘How do we deal with Netflix?’ ” says one longtime TV-industry executive. “‘How do we compete with Netflix? What are they doing?’ ” Disney’s pending purchase of much of 20th Century Fox’s film and TV assets — which has prompted a counterbid by Comcast, parent company of NBCUniversal — is in no small part a reaction to the rise of Netflix. Robert Iger, Disney’s CEO, wants the added scale 20th Century Fox’s assets will bring as he prepares to launch Disney’s own direct-to-consumer streaming service next year. The proposed AT&T–Time Warner merger is similarly designed to help AT&T take on Netflix.
Mysterious though it may seem, Netflix operates by a simple logic, long understood by such tech behemoths as Facebook and Amazon: Growth begets more growth begets more growth. When Netflix adds more content, it lures new subscribers and gets existing ones to watch more hours of Netflix. As they spend more time watching, the company can collect more data on their viewing habits, allowing it to refine its bets about future programming. “More shows, more watching; more watching, more subs; more subs, more revenue; more revenue, more content,” explains Ted Sarandos, Netflix’s chief content officer. So far, it’s worked spectacularly well: Netflix has gone from around 33 million global subscribers before House of Cards premiered to over 125 million today. Wall Street analysts have predicted Netflix could flirt with 200 million subscribers by the end of 2020; by 2028, one Morgan Stanley analyst has said, 300 million is possible. “The thing that keeps me up at night is scale,” says Sarandos. “It’s a mind-boggling amount of programming that’s being produced here. How do we keep scaling it?”
One answer is cultural. “I’m building a team that’s oriented as saying ‘Yes’ in a town that’s built to say ‘No,’ ” Sarandos says. That’s not just New Age–speak. It’s practical. To stimulate volume, Sarandos and Holland have put in place an extraordinarily decentralized development and production pipeline, one that allows Netflix to operate like ten or 15 semi-independent entertainment companies — whose output all happens to be distributed by a single service.
“Two layers beneath Cindy have full greenlight” authority, Sarandos says. “The only way that we can do what we do at the quality and volume we’re doing it is to give power to my executives to make those choices.” One agent I spoke to told me that translates to at least “five or six” scripted-development executives he can pitch knowing they have the authority to make a project a reality. The heads of Netflix’s other big divisions — international, unscripted, documentary, stand-up comedy — are similarly able to give an idea the go-ahead. “Most of my team have more buying power than anyone has selling power in Hollywood. My direct-report team can greenlight any project without my approval. They can greenlight it against my approval!” says Sarandos.
I ask Sarandos to give me an example of something that’s gotten made over his objections. He cites What Happened, Miss Simone?, the documentary from director Liz Garbus. Lisa Nishimura, Netflix’s VP of original documentaries and comedy, was a big proponent of the film, but Sarandos wasn’t convinced. “We fought about it for six months,” he recalls. “She came in once or twice a week to say why she had to make this movie, and I would tell her that it’s too expensive, and music docs don’t play very big. She’d come back and explain to me why this isn’t a music doc. She was 100 percent right and I was 100 percent wrong. That was an incredible movie, and as soon as it started delivering, I felt like it was a big miss for me to have held it back that long.” Sarandos was similarly iffy on American Vandal, last summer’s comic mockumentary that ended up being a word-of-mouth hit. He kept telling the development team he didn’t think it made sense; they made it anyway, and now Netflix is working on a sequel.
Lower-level executives aren’t completely free agents. “They have some budget constraints,” Sarandos says. “Somebody who typically can greenlight a $3 million show, but has a $10 million show [under consideration] — they’re going to check first. Cindy will bring things to me that seem [riskier] and be like, ‘Hey, this is why we’re going a bit further on the limb with this one.’ ”
“This [idea] that if you have volume, you can’t have quality?” says Holland. “I think it’s convenient for people who are limited by time slots or budget. If you can have one network that has a dozen shows and they’re good quality, why can’t you have the equivalent of four networks with a dozen shows each? Why can’t you have more than that? We have the ability to support a larger number of artists than most people can.”
While there’s still room to grow domestically, Netflix’s biggest opportunity for scale is overseas. On a Monday morning in April, I attend a meeting run by Erik Barmack, head of the company’s international-originals team, where a couple of wall-mounted video screens show the names of various staff phoning in, as well as a live feed from the Amsterdam office. Netflix has a division devoted to acquiring foreign programs from networks like the BBC, but Barmack oversees the production of original non-English-language shows made for Netflix outside the U.S., including Dark (Germany), Ingobernable (Mexico), and 3% (Brazil). A number of Netflix American-made originals are popular outside the States — “As a percentage of total watchers, as many people watch 13 Reasons Why in India as watch it in the U.S.,” Sarandos tells me — but in order to compete and grow in foreign markets, Netflix believes it needs to offer subscribers stuff made in their own countries, by local artists.
Netflix’s international push is grounded in lessons the company has learned from its expansions into genres once thought to have limited appeal to American audiences. Big numbers in niche categories prompted Lisa Nishimura, VP of original documentaries and comedy, to suggest the company start making content in those areas. “We started to ask, ‘Is it really niche, or have the distribution channels for those categories been historically disaggregated, making it difficult to actually get scale and momentum and word-of-mouth and all those things that help to grow audiences over the course of time?’ ” Nishimura says. “On the documentary side, people pointed to box office to say, ‘See? It’s tiny.’ What I contended was, that was a reflection of how many people watch a documentary on Friday night in that particular moment in time, not the potential of the actual audience size for the documentary if you made it easily available.”
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