Netflix says it's competing with Pokemon Go, not ABC sitcoms

Netflix has to have big hits if it's going to survive, according to the company's head of content, Ted Sarandos.

At a recent roundtable with The Hollywood Reporter, Sarandos explained why while defending Netflix's $120 million Baz Lurmann show.

"We have a one-on-one relationship with our subscribers," he said. "If you don't like what you're watching on Netflix, it's just one click and cancel. So we have to make noise. Part of our business mandate is we're making 'event television,' and it ain't cheap. So we have to take those big swings every once in a while. We're not competing against ABC sitcoms, we're competing against Pokemon Go, we're competing against the $200 million blockbuster movies."

Sarandos said that Lurmann's "The Get Down" was not a "runaway budget," and that Netflix knew from the get-go that it was going to be expensive, but spectacular.

Netflix is releasing 600 hours of content in 2016, and not all of it is high-budget extravaganza. But Sarandos' comments highlight how necessary a few can't-miss hits are to stop people from canceling.

In its last quarterly earnings, Netflix put out disappointing subscriber growth numbers in the US due to higher-than-expected cancellations. Netflix blamed it on media chatter surrounding its price hike, but having shows that everyone is talking about is one way to make sure people keep paying, even if the subscription is two more dollars per month.