Dive Brief:
- Netflix has put its Chief Content Officer Ted Sarandos in charge of its marketing operations, according to a letter to shareholders released around Q1 earnings.
- Sarandos will spearhead the search for a new CMO for Netflix following the retirement of Kelly Bennet, who held the position for seven years. The new chief marketer will report directly to Sarandos.
- Netflix announced the change as it reported reaching 148.9 million subscribers worldwide and 60.3 million in the U.S. for the quarter. In the letter to shareholders, Netflix acknowledged the pending debut of rival streaming services from Apple and Disney, noting that both "companies are world class consumer brands and we're excited to compete."
Dive Insight:
Netflix continues to realign its marketing structure as it hunkers down for more competition in a streaming market that it has been the dominant player in to date. Putting Sarandos, who has lead content strategy at Netflix for nearly 20 years, at the top of the marketing chain could be a pragmatic move as the service looks to grow the value of its originals and rely less on offerings from other media brands. Chief among those brands is Disney, which is gearing up to launch its own streaming platform, Disney+, later this year at a lower subscription price than what Netflix charges.
On top of investing more in original programming, Netflix is also becoming a heavier hitting marketer, with marketing costs growing 65% in 2018 to $2.37 billion, with much of that spending propping up originals, according to Variety. Marketing costs are expected by analysts to hit nearly $2.9 billion in 2019.
Similarly, Netflix could be feeling greater pressure to build out a stronger brand as its field gets more crowded. Outside of dedicated streaming services, social media companies including Google's YouTube and Facebook are dabbling more in premium video. Facebook late last week said that Netflix CEO Reed Hastings would not be nominated for reelection to its board of directors, according to CNBC, with some industry watchers viewing the move as a response to the social network's growing investments in video content. For now, Netflix is not sounding any alarms about the approach of both Disney and Apple — arguably far larger business threats — onto its turf.
"We don't anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings," the shareholder letter reads.
Sarandos having a larger role in marketing operations additionally comes as Netflix attempts to diversify its content in a potential bid to rely less on streaming and garner more industry credibility. Earlier this month, the company made its first foray into radio through announcement of a "Netflix Is A Joke" comedy channel on SiriusXM. There are plans to publish a free print journal with the working title "Wide" that will tout Netflix's marquee programs and talent in the run-up to the Emmy Awards, Bloomberg reported. Netflix is reportedly also in discussions to acquire the Egyptian Theatre on Hollywood Boulevard, which would mark its first brick-and-mortar theater location.
Amid the shuffling of Netflix's marketing leadership and approach to content, there have appeared to be some growing pains behind the scenes. The company axed its entire global brand marketing team around the announcement of Bennet's departure, Adweek reported in March. The scope of employees impacted by the dissolution of the unit, which formed in 2017, and the exact reasoning behind the decision were unclear.
