Here’s Why Netflix Keeps Canceling Their Shows

Netflix has been driving many viewers crazy in the last year or two with its renewal and cancellation decisions. In an age when media announcements make the entertainment business feel very transparent, many fans feel like they are watching their favorite shows get dropped and their least favorites picked up in real-time. However, like it or not there is some cold logic behind Netflix‘s strategy in this arena.

Netflix has broken many hearts with recent cancellations, particularly with its original material. Shows with die-hard fan bases have been canned with little notice, leaving those viewers feeling cheated. It is hard not to be resentful as, at the same time, the streaming giant pays out huge licensing fees to keep old shows like Friends in its catalog.

Of course, this all comes down to dollars and cents at the end of the day. This can be heartening, as it makes the industry feel like a meritocracy — or, at least, more than it was under the Nielsen ratings system. Yet many niche gems are lost as collateral damage.

In addition, many fans feel that Netflix misses opportunities to take other factors into consideration. In the case of the One Day at a Time reboot, for example, fans were overjoyed to see a working class Latino-American family portrayed in a sitcom. To them, this representation was worth sticking to, even if it meant enduring a season or two of lower viewership. Conversely, some suggested that canceling the show alienated an entire audience, hurting Netflix in the long run.

Much of this is speculation, as Netflix is notoriously secretive about its viewership data. However, some whispers from inside the company and the burgeoning streaming industry, in general, have given us hints about how and why Netflix decides to cancel its original shows.

Here is everything we know about the strategy so far.

Variety

For Netflix, there is more value in variety than longevity, argues Showbiz Cheat Sheet. The company keeps its subscribers hooked with a seemingly endless catalog, not by making them come back for the same show year after year.

By the end of the second or third season, the fan base for a given show has likely stagnated and stopped growing. Therefore, it is a better use of Netflix’s money to invest in a new show that could hook new viewers than to keep servicing that same established audience again and again. As heartbreaking as it is, this is believed to be one of the philosophies behind the companies allocation of funds.

Exclusivity

Another powerful precedent working in Netflix’s favor is its exclusivity clause with original shows. According to a report by Deadline, the standard contract for a new original program at Netflix includes a clause preventing the show from moving to another service or network should Netflix decide to cancel it. In most cases, this clause is in effect for at least two or three years, after which it would be considerably harder to drum up interest in a canceled show.

This prevents other outlets from turning one of Netflix’s best strategies against them. Some of Netflix’s biggest successes have come from “rescuing” canceled shows at other networks — Lucifer, Designated Survivor, Arrested Development and others.

By making sure original shows cannot easily go elsewhere, Netflix cuts down on its competition and makes itself the only game in town for fans of that series.

Efficiency

Another sad supposition about Netflix’s strategy is that its original shows get more expensive the longer they go on. Naturally, after two or three years of success, the cast and crew of a series would expect raises, and the creators might ask for bigger budgets to take the production to new heights.

However, if that investment is not likely to lead directly to new subscribers, it is hard to imagine Netflix happily shelling out for the rising price of the show.

Netflix reportedly structures its shows to give pay raises to the cast and crew every season. Within a few seasons, this can take a show that costs hundreds of thousands of dollars to make well into the millions. For some shows, however, Netflix has cut the check.

Exceptions

There are a few notable exceptions to the strategy outlined above, as some may have already noted. Netflix has heavy hitters in its arsenal that have gone well beyond the dreaded three-season cut off, in spite of the cost. For these, other factors have won out.

This summer, Orange Is the New Black finally came to a close in its seventh season, with a total of 91 episodes. It is currently the streamer’s longest-running original show, and fans agree that it got its fair share of time on the screen.

Meanwhile, Stranger Things will be back for a fourth season, Netflix has confirmed. The nostalgia-driven thriller is one of the biggest shows in the world, let alone on the platform, so it’s no surprise that it exceeded the usual cut off. However, there are plenty of things that shows like this have that other originals don’t.

Awards

One factor that is easy to underestimate is awards. Stranger Things and Orange Is the New Black have both won Primetime Emmys, Screen Actors Guild Awards and Golden Globes. According to Showbiz Cheat Sheet, this has a quantifiable impact on viewership and subscriber growth, so Netflix values it highly.

Beyond that, awards help legitimize the service and the streaming industry in general, forcing late adopters to take it more seriously. Netflix is currently locked in a struggle to get its original films considered at the Oscars, and for TV, it likely needs to protect that ground as well.

Incentives

Another important distinction between the shows that live on for years and the ones that fall by the wayside is the simple question of whether they incentivize new subscribers. One of Netflix’s key metrics of success is subscriber growth, and if a show is not shown to have a marked impact on that number by Season 2 or 3, it has to go.

“At the core of their business is churn,” an industry insider told Deadline of this phenomenon.

At a certain point, a brand new show has a better chance of attracting new users than an existing one does. The exceptions listed above are unique in skirting that rule of thumb.

Ubiquity

This is thanks to their ubiquity. If you have watched, read about or talked about TV at all in the last few years, you have almost certainly heard about Stranger Things and Orange is The New Black. These shows are everywhere, and it often seems like everyone is watching them. These ubiquitous properties are bankable, and Netflix will pay whatever it takes to keep them that way.

This is the new form of what is often called “event TV” — shows that are universally popular that the world watches together in real time. Shows like The Sopranos, Lost and Game of Thrones have filled this role before. The difference in the age of streaming is that whole seasons go live all at once, so it compacts a season-long cultural phenomenon into a week or two of frantic binge-watching so as not to fall behind.

Competition

Finally, if Netflix’s cancellation and renewal practices seem cold-hearted, it is worth keeping in mind the competition the company is up against. Netflix was one of the first players in the game of TV streaming, and it got a solid head start — especially for a company that had just started up in a notoriously small field.

However, in recent years more contenders have risen up to vie for Netflix’s throne, and even more formidable contenders are on the way. This fall, Disney will launch Disney+, a new app with classic and original programming from the media giant that holds everything from princesses to superheroes to Star Wars.

There is also the upcoming WarnerMedia app, HBO Max, which will capitalize on the popularity of classics like Friends and Seinfeld, while offering new takes on beloved franchises. For comfort-watchers, this will scratch an itch that Netflix has drifted away from, and Netflix’s original shows have not had the years to become beloved classics of that caliber.

There is also Apple TV+, Hulu, Amazon Prime, YouTube and scores of other apps to contend with, and more are being announced every day. With monolithic forces like Disney preparing to overshadow Netflix’s strongest shows, and hungry newcomers like Quibi encroaching on its smaller, more experimental territory, it is no wonder that Netflix is staying focused on the bottom line these days.

Still, for customers, a little more competition in the industry is a good thing, ultimately. Beloved shows may come and go, but they still exist for however long they were made, and something new is always right around the corner. In the coming months, Netflix and the rest of the streaming industry will hit a bold new pace, and fans will reap the benefits.