Can Netflix Survive in the New World It Created?

Ted Sarandos, who runs Netflix’s Hollywood operation and makes the company’s deals with networks and studios, was up first to rehearse his lines. “Pilots, the fall season, summer repeats, live ratings” — all hallmarks of traditional television — were falling away because of Netflix, he boasted. Unlike a network, which needs shows that are ratings “home runs” to maximize viewers and hence ad dollars, he continued, Netflix also values “singles” and “doubles” that appeal to narrower segments of subscribers. Its ability to analyze vast amounts of data about its customers’ viewing preferences helped it decide what content to buy and how much to pay for it.

Hastings and Sarandos realized that Netflix could become, in effect, the syndicator for these hourlong dramas: “We found an inefficiency,” is how Hastings describes this insight. One of the first such series to appear on Netflix was AMC’s “Mad Men,” which became available on the site in 2011, between its fourth and fifth seasons. Knowing from its DVD experience that customers often rented a full season of “The Sopranos” in one go, Netflix put the entire first four seasons of “Mad Men” online at once. Bingeing took off.

“When the folks at Sony said we were going to be on Netflix, I didn’t really know what that meant,” Vince Gilligan, the creator of “Breaking Bad,” told me. “I knew Netflix was a company that sent you DVDs in the mail. I didn’t even know what streaming was.” Gilligan quickly found out. “It really kicked our viewership into high gear,” he says. As Michael Nathanson, an analyst at MoffettNathanson, put it to me: “ ‘Breaking Bad’ was 10 times more popular once it started streaming on Netflix.”

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