Is Netflix’s Costly Business Model Proving To Be Unsustainable?
Netflix subscribers got a bit of a shock over the last couple of weeks, as the streaming service - [...]
What It All Means
When you break those numbers down, you'll discover the sad fact that Netflix could start losing money soon.
The initial boom in subscribers, while Netflix didn't have many original programs, set the company up for success. However, since the shift toward original series, Netflix is spending too much and its revenue can't keep up.
Think about the subscription system here. At some point, there are no more subscribers to be had. Even if every person in the world had a subscription, there is still a limit.
Sure, Netflix could always bump up the prices, but that would cause uproar if not done correctly. If they raised the prices to keep up with the growing cost of programming, people will go somewhere else. Netflix certainly has cornered the market, but they will need to be careful if they want to hold on to it.
This is why Netflix has started cancelling shows. The last three to get canned - Sense8, The Get Down, and Marco Polo - were all incredibly expensive, and there wasn't a lot of return on investment, despite the fact that they were quality programs. However, there are cheaper shows that are bringing in more revenue and award recognition. House of Cards and Orange is the New Black are prime examples.
So, if a series is expensive and doesn't provide immediate results, don't expect Netflix to keep it around very long.
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