Ted Sarandos Has No Regrets Over WB Pursuit, Talks Netflix’s Engagement Growth Challenges, Overall Deals & Casey Bloys

Appearing at Bloomberg’s Screentime hours after Paramount’s acquisition of Warner Bros. Discovery overcame the last hurdle when a federal judge approved the settlement with the state Attorneys General, Netflix co-CEO Ted Sarandos was asked whether he regretting going after Warner Bros. given the scrutiny from Wall Street the streamer has been put under since then.

“No, I think it was the plan was solid,” he said. “I think we won the deal at some point, so we priced it right at our scale. That was the top price point where I thought we could return value to our shareholders with that asset. Any more than that, I thought we’d be taking it into negative territory, even with our scale.”

Netflix, which always positioned itself as “a builder, not a buyer,” surprised many when it entered — and won — the bidding for Warner Bros. until the film and TV studio’s parent Warner Bros. Discovery accepted a higher offer from Paramount for the whole company.

“When I look at that, I think the deal itself kind of threw the business narrative off, for investors, for the press, for other folks, and you have to be willing to put the business narrative at risk for something that’s good for the long term return.”

That business narrative include questions over Netflix’s slowing growth of engagement — the time subscribers spend on the platform.

Sarandos argued that the issue was somewhat self-inflicted, stemming from Netflix’s decision almost two years ago to stop reporting subscriber growth and instead focus on engagement, publishing viewership reports twice a year (soon to be once a year).

“At the time we said that, I think we were pretty unsophisticated about how we talked about engagement. Meaning, in that world, all the revenue is equal, a profit is equal, all engagement is equal, and all engagement is not equal,” Sarandos said. “We are growing engagement, on 200 billion hours of watching, we grew 2% in our last announcement.”

While Sarandos pointed to mitigating factors — Netflix faced “incredible headwinds from things like the World Cup” during the reporting period — he admitted that “yes, overall we’re not growing as fast as I want us to, and we’re working on making that move faster.”

One of the ways to do that is expand live programming, Sarandos said.

“When we do live programming on Netflix, which is a relatively new thing, we spend about 5% of our content budget on live events, they generate about 1% of our watching,” he said. “Such programming “doesn’t necessarily bring more gross engagement, but it brings very valuable engagement. It’s not a mystery that all engagement is not equal because you probably are not surprised to know that an hour of Judge Judy in the middle of the day does not generate as much revenue as an hour of NFL football.”

Sarandos added that this past quarter, Netflix had “double-digit revenue growth in every in every region of the world, so the business is great and growing fine.” .

Assessing HBO Max/Paramount+ Combo, Casey Bloys Rumors

Sarandos was cryptic when asked to assess the competition threat level of a combined HBO Max/Paramount+ streamer following the Paramount-WB acquisition.

“On paper so far, it’s one and one, so I don’t know if one and one is two, or one and one is one and a half, or one and one is three,” he said.

The merged platform will be run by Casey Bloys, Chairman and CEO of HBO and HBO Max Content.

“He’s a good guy, for some reason we had a very well publicized lunch; I mean, we have eaten together many times,” Sarandos said about the duo’s headline-making meal in March, just days after Netflix lost Warner Bros. to Paramount, triggering speculation that Bloys could defect for a job or a deal at the streamer.

Asked whether such overture happened, Sarandos simply said about Bloys, “He’s going to be in a very good position wherever he does, he’s a super talented guy.”

Overall Deal Paradigm

There have been several high-profile talent departures from Netflix over the past year, Stranger Things creators/executive producers the Duffer Brothers, who signed a big film and TV overall deal at Paramount, the show’s director/executive producer Shawn Levy, who recently inked an overall deal at Disney’s 20th Television, filmmaker Noah Baumbach, who closed a first-look film deal at Warner Bros., and David Fincher. The Duffers, Levy and Fincher had been under overall deals at Netflix for more than a decade.

Sarandos chalked up the exits to individual circumstances not a change in Netflix’s stance on talent. (On the flip side, Netflix in June signed an overall deal with Ryan Coogler, who had been at Disney, and recently re-upped its rich overall pact with Shonda Rhimes.)

“These these deals all serve completely different purposes,” he said. “Sometimes, it’s a simple way to organize a lot of work that you’re going to do together for 10 years, and the overall deal is a good way to to package it and present it. There’s other ones, which is a filmmaker, a television creator has a very specific thing that they want to do, it’s going to take them many years to develop, and the overall deal is a way to do business together.”

Sarandos went on to provide context on several departures.

Duffer Brothers:

“The Duffers have worked with us for the past decade, and they had a dream that they did not want to make more TV shows right now, they really want to make big tentpole theatrical movies. And I said to them, I told told Matt and Ross, you guys are great at what you do, and I think you should go do that. You’re 40, don’t wake up when you’re 60 wishing you did that 20 years later. I’m thrilled for them. They’re going to have great success, and they have great success. And the Stranger Things universe, they are going to continue to be a part of forever, and that’s fantastic.”

Shawn Levy:

“Shawn also was with them, and kind of doing the same thing. The problem when you have an overall deal with someone who has commitments in other places is, you’re in constant conflict for their time. Shawn is going to be making Star Wars movies for a while, so the fact that his [TV] deal is with Disney makes a lot of sense. I’m thrilled for Shawn. We’re going to do a ton of things together, we still have shows in development together. We have a show called The Sticks coming up.”

David Fincher:

“We’ve been in business with David Fincher since 2011, he has not done a movie outside of Netflix since 2014. He doesn’t know what he’s going to do next. He’s a great guy, I love the the three films we’ve done. The Further Mis-Adventures of Cliff Booth is phenomenal. I’m super proud of Mindhunter, 17 Emmy wins for Love Death + Robots, House of Cards, of course. He’s one of the greatest living directors, and we plan on being in business together for a very long time. It is not like he’s leaving to go somewhere else to do something else.”