Tyler Perry and Netflix's Ted Sarandos: Amplify the untapped audience

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My father was a subcontractor and he built houses. He would come home every week and he'd make eight hundred dollars. But I'd watch the man who owned the house sell it for eighty thousand dollars. And I always wanted to be the man who owned the house. If this doesn't work, we will have terribly overpaid for one title on Netflix. But if it does work We could fundamentally change the direction of the business.

Those are the voices of entertainment giant Tyler Perry and Netflix co-CEO Ted Sarandos. I'm Reed Hoffman, partner at Craylock. Co founder of LinkedIn. And host of Masters of Scale. And we have a very special episode for you today.

All about cultural impact. I had the pleasure, not long ago, of sitting down and speaking with Tyler and Ted. both of whom are extraordinary scale leaders. Each has helped create enormously successful businesses and in the process redefined our culture. For Ted Sarandos, the journey to on demand movie streaming began as a video store clerk.

Where his recommendation algorithm came from his own movie watching. As he said, Tyler Perry's quest to tell stories to people who look like him now includes the largest film production studio. In the United States. Our conversation, which took place live at the Masters of Scale Summit in San Francisco. Illuminates key lessons of scale and the broad impact that entrepreneurship can have.

It's also About seeing beyond conventional wisdom. Learning from your team. And expanding your customer base. Tyler and Ted have done more than tap into culture.

They have each in their own way helped create new trends that have redefined it. Stay tuned for my conversation. With Ted Serrandos and Tyler Perry. Please welcome to the Masters of Scale stage.

Netflix ko seo and chief content officer Ted Sarandos. Actor, director, and producer Tyler Perry. And our own pioneer in residence. Reed Hoffman. So thank you so much for joining us.

One of the things that both of you have done in building Amazing institutions, amazing products. influenced and made cultural zeitgeists.

Say a little bit about why it is that cultural impact, that cultural creation, that cultural participation is part of what motivates you and your teams and Tyler, why don't we start with you? Well, for me I didn't enter the business thinking zeitgeist.

What I wanted to do was establish just tell stories that people who came from where I came from, who looked like me, felt like me, wanted to see. And I found myself on stage uh performing live performances three hundred plus a year to thirty thousand people from the beginning of my career where there were thirty people in the audience to thirty thousand every week. And realizing that as I'm doing this, there's such a hunger and a need, and I'm exhausting myself in trying to go from city to city all across the country to meet so many people. So there comes the pivot to television and film. But for me It was about recognizing the need that the hunger for the story. And I think that with a lot of audiences and a lot of businesses, if you could recognize the need, if you could recognize the hunger for what your audience our customers are looking for that

Heads it straight on the right direction. Yeah. Yeah, and I was just saying I don't think you can do Zeitgeist on purpose. Think it's one of those things that comes from great storytelling that's authentic and

True to the folks you're trying to talk to. could be an enormous population, or could be a rather small population. It's just a Getting into what people love. It starts with doing it well and doing it authentic and doing it real. Maybe I would be corrected by TikTok, but I don't think you can make a viral video on purpose. You got set out to make a viral video and make it connect. People can see right through it. So I do think that the storytelling has to be real and authentic, and this has always been true of mass media. People want to talk about it.

I remember hearing Ron Howard talk about the drive home test. Uh when you w see a movie and then you'll even if you really enjoy it, all the plot holes have gotta be fixed so that when you're driving home you don't go, Hey, that doesn't make any sense. If you do it all well. People not only want to see it over and over again. They take great pride in helping you discover it too.

It's a quality test more than anything else. Both of you saw the original the Hollywood system that existed and realized there were huge gaps. Huge needs. The game could be played so much differently. What was that gap that you saw and then how did you Build

Evolve, pivot into it. For me, just uh being on stage, my audience was to research. There were no formal algorithms, I didn't have a TikTok brain. You know, I was just trying to gauge it by if I told a joke and the audience, I'm like, okay, great, that works. If I told the joke and it went to far, I'd hear rumble in the audience, so they were all educating me all along the way on everything that I was I was learning on stage. So as I moved into television and film and understanding that there was such a need for not only representation of people of color, just so that people could see themselves on television, so important that our children would see black faces. I grew up seeing very few black people on the air. television and the exposure and the amount of seeing people do well and having a clear understanding of what that meant to me, I wanted to be able to do that for other people. So as I was going into film and television and and growing my business in that sense, I was keeping all of that in mind that it wasn't just about the stories that people were resignating and relating to. You know, I was talking about faith, family, and tragedy and things that they're universal things, but in very specific ways to my audience. So it was about that, but it was also about the understanding of

All of us being one. one unit, one system, one culture dealing with very common issues and it was also this the most educational thing for me in the understanding of I didn't go to college, but I could pay for everybody's college in this room ten times and the mistakes but hold on. Let me let me finish my thought. Let me finish my thought. in the mistakes that I that I learned that I that I made.

Mm-hmm. Uh. Yeah, for me I've learned everything that I use today at Netflix. Working in a video store. You gotta tell that. Working working in a video store. How working uh some something like a blockbuster, right? So you work in a video store. Pre blockbuster, pre blockbuster.

You had a mullet and you smoked a lot of pot. I told you I have beautiful feathered hair. Beautiful feathered hair. Long feathered hair. Okay, great. New TikTok, feathered hair. Let's do it. But this door there was some serendipity in my life which has that We grew up pretty Or

We barely kept the lights, the water, and the gas on at the same time and never the phone. So it was weird that my mom, who was never very good with money bought a V CR before anyone I knew had a V CR. We had no use for a V CR. Like I said, half the time the power was off. But um but my mom really uh whatever it was, she saw something in me that I didn't yet. And again by complete Block. The second video store in the state of Arizona opened up a block from my house.

So I would walk over and we'd talk to the owner all the time and he was this fascinating guy. was a ex air traffic controller in Chicago Airport who hated his job. for obvious reasons, a very high pressure job and he's a very mellow dude. And he had read in a magazine somewhere that the big business opportunities of the eighties would be yogurt shops and video stores. And he said, I hate yogurt and I love movies. So

He cashed in all of his money, moved to Phoenix, opened a little video store, had about nine hundred tapes on the shelf. I was I'm I walked in there, I would spend all my free time back and forth in there. It became my part time job was working in the store. It could just be you just accept everything as the status quo.

But I was curious about why it was things did and didn't work. I was getting into this situation where I had obscure taste for a kid from Phoenix So I knew that there was a John Sayles and I knew there was a a Spike Lee and those movies did not exist in Arizona. If they did it all, it was for one week at one theater called the Valley Art Theater, that I would have to take a bus, you know, an hour to go see this movie. And it was there for four or five days and gone. And then literally gone from the culture. Thought wow, this is the calling of the video store is to

Art film and documentary and foreign language film and smaller films. And I think struggle to understand why they didn't work everywhere. These movies were great.

For me I saw Spike Lee's she's gotta have it the first time. And I remember thinking, what is this? It's in black and white, and sometimes the music's louder than the dialogue and they walk it, but they their feet don't touch the ground. But it was really an awakening of what cinema could be. I was confused when I saw it, but go ahead and it's part of the Zeitgeist. And it turns out that those movies are great and there are plenty of people who like them, just not enough in the five mile radius that our store served. So the trade radius of that video store, there just wasn't enough people who were open to that kind of entertainment. So the stuff that works was pretty mainstream. So you basically if you had the back then a video to rent cost about a hundred bucks to put on the shelf.

And we always had more movies than budget, so you had to pick what to program and those movies got pushed by the side,'cause it was easy not to put them on the shelf. But I figured out. The bigger the trade rate is, the more likely you can make that stuff work. So little niches can be big businesses if there's enough people to serve. So the reason why these art films and foreign language films and they work well in New York and LA is just the population density. But I joined Netflix back in the early nineteen ninety nine when I first met Reed.

Hastings. And and then the two when I I joined in early two thousand, so twenty two years ago, we were just mailing D V Ds around. But it solved the trade radius problem. Yeah. That we mailed all over the country so you could serve every taste.

There was a real business in these movies and people if they had the opportunity to choose them and find them, they'll want them. They just were never served to them because they maybe didn't live in a dense enough neighborhood. So I worked behind the counter and I had a weird sense of memory, but now my memory's almost shot. But when people come in and say, I like this or I didn't like this, I would kind of tick. Dick Tick.

And I figure out okay, well if you like movies like this, you're gonna like this one because I remember these and the stores are empty all day, so you watch everything. So I really did have a good database, I guess. But it the it was more nuanced than algorithms are now in a way because You could say easily that if you like Pulp Fiction, you probably would like Rashimon. But everyone who likes Rushman doesn't like pop function and vice versa. But you get a sense of people like this, don't like this.

But That doesn't scale much of me behind the counter. So to me like uh all those things all started behind that video story. We still today it's all about consumer science and taste based algorithm and scaling, how do you budget how much to spend on a product'cause understanding what the potential size of the audience is, all those things. I learned in the video stores we kinda perfect it in the old net national D V D business, which prepared us for where we are today. So Tyler, when you started seeing this

massive trade radius. From Netflix. What did that make you think and see for What kinds of projects that there was such a gap in the culture that you could start doing and you could start partnering and then how did you guys start working together? Well the first thing is as I

I was always told. By Other companies that movies with black stars are Black people don't trade internationally, they don't travel internationally, they don't do very well.

I remember Will Smith invited me to tour with him. when he was doing seven pounds and I I went over with him and went to all these different countries. He's like Tyler, these countries are small. They're smaller than Texas. You've just got to go in and work every market. I was like, Okay, great, I'm gonna do that. Go back and say I'm excited, like well we could go here to we go to Italy and we'll and I'll work it and no no black people So immediately upon the release of my first film with Netflix was Fall from Grace, and then the Medea uh one that we did watching it be number one in so many countries blew my mind. I'm like wow so all of this information that had been told to me through all these years had been wrong. And it was just nobody would invest in it or scale up to it. So to have Netflix adds the wind in my back for that. And even for a Jasmine movie that we just released, which was a total pivot for me. It was really exciting to have a company that

gets it and understands it also has all the information and the data that could tell you, hey, this is where you over index here. Look at this country, look at that country, look at that country. Oh, I've got to get some visiting going on. So it's really it's really been amazing to have that wind at my back, for sure. Let's stop a minute at Jasmine Blues, because this is a very special project. This has been an idea for a while. This has been in a long birth process. Say a little bit about it. Yeah, I wrote it in nineteen ninety five after I couldn't afford to go to theater. So I would always sneak in at intermission. That's why people would tell me all my movies all seem like one act,'cause I would only see the second act. But I but I um got a chance to meet August Wilson after one of his plays. I think it was Two Trains Running. And I was telling him about the show that I had done and how people were saying it's Chitlin Circuit, which is a circuit where black people traveled when they couldn't get into white establishments during Jim Crow, and it wasn't as highbrow or sophisticated as other things. So I was telling him that and he encouraged me to just go home and write what's in my heart. And I went home and I started writing Jazz Man that very night. And that was in nineteen ninety five.

took twenty seven years to get made and wouldn't have gotten made without this guy bringing everybody Netflix. So that was a full dream come true for me because it's a period piece. It's set in the forties. It's a departure this from the way I shot it to the whole story. And I needed the support of someone like a Netflix who has that All of those algorithms to say this is where we think this is work. This is how it's gonna do, and this is what we know uh the audience will love about it. So having the uh company with all of that information at the touch of a button is really great,'cause I got my information from like grandma on the street. You know, I'm just like, what'd you think of the movie? Oh baby, you need to work on that a little bit. But to have all that information is very helpful. I think it just goes to the conventional wisdom is Often wrong, but it is incredibly powerful. And it usually comes down to somebody said it a long time ago and nobody challenged it. Yeah. I had a funny unrelated story, but

Tony Bennett, I'm a big fan and friend of Tony's and Ten years ago. He did a show in Paris. And my wife and I went to the show. And after the show I said, surprised that I thought that Tony Bennett would be a huge

Draw in France. And I talked to him after the show and he said, This is the first time I've ever performed in Paris. I said what? And he goes, Yeah, in the sixties the record label told me I was an American act. So they never booked me or sold me or promoted me outside of the US and I never so it was ten years ago. Yeah, just ten years ago.

Which even speaks to theaters. There are a lot of theaters in certain different parts of the country that when you talk about those movies like Spike Lee movies that go there for five days and gone, and you had to take a bus to see it, like a lot of my movies wouldn't play in certain theaters because they didn't want to attract the audience that I attract to those neighborhoods. So it was always a challenge and I was dealing with so many things. So again, to have Netflix and streaming it's Oh yeah. Oh yeah.'Cause trade radius and it's direct to the people. Yes, exactly. Yeah. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity.

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Before the break. We heard Netflix's Ted Sarrandos and Tyler Perry talk about define conventional wisdom. as they each remade the entertainment industry zeitgeist in different ways. Now Ted shares two crossover moments.

Netflix's growth. And Tyler. talks about how he used a non-Hollywood approach to jumpstart more diverse talent. Together. They provide inspiration.

For what's possible when you build a new ecosystem with deep cultural impact. Note. The read we're talking about in this next clip. is Reed Hastings, co founder of Netflix and a previous guest on Masters of Scale. One of the other things that

Ted you and Netflix and Reed all really surprised, I think Silicon Valley with was, oh, we're gonna do original content. We're like, oh, we're tech you you could part, you're tech people. So say a little bit about the genesis of it and then what are the insights bringing to it that allow such amazing things as My son would get a big kick out of me being called the tech person, by the way. Exactly. But I'll tell you back then we had built the business. I I met Reed in nineteen ninety nine and he had this Audacious statement. Which was someday the internet's gonna get so fast and so cheap that all filmed entertainment is gonna come into the home on the internet. This was in October of nineteen ninety nine.

And at that time zero entertainment was being put into the home on the internet. And it seemed pretty implausible at the time. Because of dialogue. Exactly. Someone emailed me a video clip, took me a week to open it up. But that was it. But that was the vision from the beginning. We used to keep this graph of the cost of postage to mail the D V D around and the cost of bandwidth and they were going like this and we said as soon as they get right there, as soon as they cross, that's when we're gonna start streaming. And if we stream any sooner, we'll waste money because no one will be able to watch it. And if we wait too long, someone's gonna beat us to it. So that was the big crossover point that we had.

And we had to license content to stream. It was just junk that the studios hadn't otherwise sold. No one understood what the digital right was yet at that time. So we started little by little getting better and better. We gave it away for free if you got the DVD service. And we figured someday the streaming will be good enough that we'll be able to break it out. And we did this to deal with stars where we got Disney and Sony movies in and Got better. We got this weird loophole in the pay TV licensing. where you could get foreign language film documentaries, they were all exempt from the pay T V deals. So if you had HBO had the Warner Brothers deal and Warner put out a foreign film, I could buy it.

So the first time we did it was La Vienne Rose, amazing movie. Pan's Labyrinth from Guillermo Del Toro. All these movies were passed on otherwise by the students. You feel it? So for us kept getting better and better. And everyone's talking about it saying, look, the more people watch, the longer they stay, they tell a friend, so we need a lot of content. And I said to Reed at some point. If we're right about this thesis. All these places that are selling us their content will not sell us their content anymore because they're gonna compete with us.

And at the time we were doing great. The business was running fine. And then we said we'll do a visual content eventually. And I said, look, it's just something we're gonna have to get good at and I don't know exactly what the entry point is. But we knew we had to do it, that if we waited too long that we get beat. And what did you what were the very first things you did to start? Total opportunistic. The very first deal we did for original show on Netflix was House of Cards.

I thought we've gonna do this. Let's not do it in a way that after it doesn't work, we'd say, Oh, we didn't try hard enough, it wasn't big enough, wasn't ambitious enough. Let's go all in on something that everybody wanted. So at that time it was one of the more Competitive. pieces that was not there.

How do we compete with HBO and AMC and FX and everyone who was going after that show? We'd never created or released an original anything, give them what for me was a bad deal and for them was a great deal. So we just went in and said like I'll give it two seasons. No notes? And the only thing we say is that you have to put your name on it.

Yep. And by the way, those names were David Fincher, who had never directed television before, Bo Willemon, who was nominated for an Oscar at that time. So the big risk for us was a very important thing. I looked at the business. I looked at What would happen if it didn't work? The kind of risk reward analysis was if this doesn't work, we will have terribly overpaid for one title on Netflix. We're kind of at risk all the time of that. But if it does work, we could fundamentally change the direction of the business. Yep. So that felt like a good switch.

That's really great. Can I just give an example of not pivoting? Yes. Of course. Blockbuster. Yes. I mean this is happening and and Blockbuster's not pivoting. Can you imagine CEO going, Oh, we're good. We don't have to worry about that. Oh, the internet streaming. It's never gonna happen. So Yeah, yeah. And then all that unconventional wisdom.

The biggest show in the history of the world, includ in and the history of Netflix, is Squid Game, a Korean drama that caught fire around the world. Mostly it's because how do you scale, scale, scale? That's the thing that keeps me up at night. How do you scale? For me it's a lot about distributed decision making. If we didn't have an unbelievable team led by Min Young in Korea, who's deep in the creative culture in Korea, knows those storytellers and knows that market, they would not have recognized what everyone else missed in Korea, which was that

Who is being pitched. For about twelve as a movie. Turned down by everybody in Korea. And our team recognized oh it's just not a movie. It's a T V show.

And why don't you take some time and go out and redevelop those scripts? And he did and came back and it was an incredible phenomenon. And this was in the world of people in America don't want to watch subtitles and dubs and nobody knows a Korean actor and all these things and just defied everything if the storytelling is true and authentic and great and has some sort of connection. One of the things I love about the Global. Trade radius.

The bringing entrepreneurs from everywhere is that then you can have this kind of undiscovered gem. And this is one of the things that, for example, you in Atlanta go, well, yeah, I understand that Hollywood has all this network advantage. I am going to build this company here. And I'm gonna take a different approach to ownership. Describe that I think that's a particularly important thing people understand how that plays. Well my father was a subcontractor and he built houses and he would come home every week and he'd make eight hundred dollars and everybody everybody would be so happy he made eight hundred dollars, but I'd watch the man who owned the house sell it for eighty thousand dollars. And I always wanted to be the man who owned the house. That ownership

was always and in watching Oprah's owning her talk show, I thought what does that mean to own it? So as I started in the business, I knew ownership was going to be very, very important because everybody at one point was talking Oscar so white, Oscar so white, and while people were talking about Oscar so white and trying to fight for a seat at the table, I was down in Atlanta building my own 'Cause I didn't want to be in a position of feeling like I have to fight when I have a huge audience that's follow me that love what I do, they'll be my focus. And if I can make this strong enough and I can build the studio strong enough and introduce as much diversity as I can coming up through this portal in Atlanta, everybody will have to pay attention. And to see so much diversity happening in Hollywood right now, and to see all these mandates of people getting opportunities and chances, I'm really, really excited. And I think a lot of that started with having a And teach.

People how to do these jobs and know them well enough so that when they got into these Hollywood systems and onto these shows, they were ready to go and ready to build. So those things were very, very important to me. The ownership, the building this ecosystem, the giving people opportunities who've never had chances to be in this business and to watch them thrive. It's been really, really exciting for me. Amen. Tyler Ted. Thank you so much for joining us. Thank you. Thank you. Thank you. It's great.

Yeah. We hope you enjoyed this special episode about impacting culture and that you apply the lessons and mindset Tyler Perry and Ted Sarrandos express as you pursue your own entrepreneurial journey. Remember that when you see a gap in needs. In the marketplace.

And when you can see a different way to play the game. that the change you can deliver can truly be transformational. I'm Reid Hoffman. Thanks for listening. Hey there, it's Jill Slesinger. I'm launching a new show. It's called Money Moves, and your money is going to move.

We're gonna help you make better financial decisions. We're gonna call out the BS you're finding all over social media. We're gonna give you actionable guidance to make your financial life clearer, less stressful. We're gonna answer your financial questions and take the mystery out of your financial life. Follow and listen to Money Moves with Jill Schlesinger wherever you get your podcast. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely. From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there.

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