Netflix is at the forefront of the streaming revolution, and co-CEO Ted Sarandos is doubling down on the company’s commitment to its unique deal-making terms and its strategy for limited theatrical releases. During Netflix’s recent Q3 earnings call, Sarandos addressed industry speculation head-on, reaffirming the company’s approach to licensing agreements and its focus on enhancing subscriber value.
Netflix’s Unique Dealmaking Terms
For nearly a decade, Netflix has relied on a cost-plus licensing model, which has been vital to its success. Here’s how it works:
- Full Production Budget Coverage: Netflix covers the entire production budget for films and series.
- Profit Bonuses: Creators receive an additional 10% to 20% bonus, providing them with profit while maintaining budget control.
- Exclusivity: Netflix secures syndication and international rights, keeping titles exclusive to its platform for years.
This model contrasts sharply with the traditional deficit-financing approach used by conventional TV networks, where creatives share in backend profits if a project becomes a hit. However, with streaming giants like Netflix and Amazon Prime dominating the landscape, many creators are missing out on the long-term income from syndication runs.
The Shift in Creative Compensation
Despite the upfront fees that Netflix offers, many in Hollywood are feeling the pinch. The loss of ongoing revenue from successful titles is significant. Sarandos addressed these concerns directly, stating:
“We think we have the right model and we are not looking to change it.”
Creatives Prefer Upfront Payments
Sarandos believes that most creators prefer the upfront payment structure that Netflix pioneered. He highlighted:
- Risk Mitigation: Netflix assumes financial risks, allowing creators to focus on crafting quality content.
- Attracting Top Talent: This model attracts the best in the business, ensuring that Netflix continues to deliver high-quality productions.
While Netflix is open to bespoke deals when talent shows interest, Sarandos noted that these arrangements are rare. Most creators favour the security of upfront payments over potential backend profits.
The Limited Theatrical Release Strategy
Another hot topic during the earnings call was Netflix’s limited approach to theatrical releases for its original films. Sarandos defended this strategy, emphasising:
- Focus on Subscription Business: Netflix is committed to being a subscription entertainment service, and its model is proving successful.
- Pop Culture Engagement: The company uses popular titles to create buzz and drive subscriber engagement, often preferring to release films directly to its platform rather than in theatres.
Sarandos stated, “Our top 10 films that premiere on Netflix all have over 100 million views, among the most-watched films in the world.” This indicates a clear strategy to enhance consumer value without making them wait months to view trending titles.
Promising Q3 Results
Following a strong Q3 earnings report, Sarandos promised double-digit revenue growth in 2025. He underscored Netflix’s role in bringing filmmakers the largest audience for their films:
- Global Reach: Netflix provides filmmakers with access to a vast audience, maximising their films’ potential.
- Support for Creative Vision: The platform helps creators craft their best work, ensuring high-quality productions that resonate with viewers.
Conclusion: Netflix’s Future in Streaming and Film
In an ever-evolving media landscape, Netflix’s commitment to its deal-making terms and limited theatrical releases signals its strategy to maintain a competitive edge. As the streaming giant continues to innovate and adapt, it remains focused on delivering value to its subscribers while supporting the creative community.
