Let's start this article about  Netflix by citing a television program that isn't even on Netfix.

It's Saturday Night Live. Last weekend, they did a spoof Netflix commercial that made fun of just how much original content the streaming service is buying and producing. Literally everything that's pitched to them, according to the parody.

It's funny, but it's also true--the first half of a brilliant content strategy--one that a top Netflix executive basically just laid plain this week. (The video is embedded at the end of this article.)

700 new shows

Think of this as a virtuous circle (opposite of a vicious circle). It sort of goes like this:

  1. Netflix spent an estimated $12 billion on new programming for 2018. They're at the point where they're introducing 700 new original shows and movies in 2018. 
  2. Of course, you don't get to pick and choose which Netflix shows you subscribe to: you get the whole bundle or nothing at all. So, the halo from a super-successful effort like Stranger Things, or House of Cards (once upon a time), or To All the Boys I've Loved Before convinces people to sign up. But when shows go bust, they don't drag things down.
  3. Total subscriber numbers are nuts: 137.1 million subscribers worldwide, and 58.4 million in the U.S. And while Netflix only has to release the viewership numbers it wants to release--there's no independent Nielsen estimating how many people watch each show, for example--the viewership numbers it does release are gigantic. 

All of that preamble brings us to the secret weapon, if you will, that Ted Sarandos, Netflix's chief content officer, talked about this week at UBS's 2018 Global Media and Communications Conference in New York: appealing to artists' sensibilities, and even vanity.

Because of the sheer size of the Netflix subscriber base, and the fact that its algorithm can deliver content to the members most likely to want to watch it, Netflix can turn in truly stunning total audience numbers for some new shows.

The individual episode numbers don't matter much for Netflix (compared to what they'd mean for an advertiser-supported business model), but they're a gigantic attraction for top Hollywood talent. 

200 million viewers

Take the actor Kurt Russell, for example, who stars as Santa Claus in a new Netflix movie, The Christmas Chronicles, which debuted on the streaming service on Thanksgiving Day.

During its first week, Sarandos revealed, Netflix subscribers watched the movie more than 20 million times. That's two and a half times the population of every man, woman, and child in New York City.

To put it in further context, The Big Bang Theory, the top rated show on network television, averages 18.6 million viewers. And, if a theatrical release attracted 20 million theater goers, it would be looking at a massive blockbuster, $200 million opening weekend.

"[W]e don't talk about ratings a lot," Sarandos said, adding, but "Kurt Russell said it's the most impact he's ever had from a movie ... even in his successful career, he's never had that many people see one of his movies in the first week ever."

Content leads to audience which leads to more content

So, think about that cycle: Netflix started creating its own content in 2013, with House of Cards. It wins awards. More people sign up. It doesn't necessarily care if any particular show is a big broad success, but it creates more and more content--enough to appeal to almost anyone.

More and more people subscribe. That means occasionally they can have a truly massive hit like that 20 million first week showing with The Christmas Chronicles. That gives the talent who work with it some of their best ever successes, which in turn leads them to create more new content with Netflix.

You could probably figure it out, and many people have. But it's something else to hear someone like Sarandos simply lay it all out like this. Because when you listen to the strategy this way, it sounds both deceptively simple and surprisingly brilliant.

Here's the SNL short I mentioned above.