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 – known for not cancelling its original programs – brought the axe down on Sense8 and The Get Down.

You may think that these are just two shows, so it’s not that big of a deal, but the numbers say that the problem goes way deeper. The numbers say that we could be looking at a major financial problem for Netflix.

According to SeekingAlpha.com, Netflix’s business model for original programming may not be sustainable for very long.

The streaming giant’s content obligations – meaning the money that is spent on original programming each year – rose by 42% since 2010. In that same time frame, the company’s revenue has only risen by 24%. The total content obligations have now grown to total $15.3 billion.

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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1 Night (2016)

13 Going on 30 (2004)

Amor.com (Love.com)

Arrow: Season 5 (2016)

Burlesque (2017)

Catfight (2016)

Catwoman (2004)

Chingo Bling: They Can’t Deport Us All

Days of Grace (2011)

Devil’s Bride (2016)

Full Metal Jacket (1987)

How the Grinch Stole Christmas (2000)

Intersection: Season 2 (2016)

Kardashian: The Man Who Saved OJ Simpson (2016)

Little Boxes (2016)

Mutant Busters: Season 2 (2016)

My Left Foot (1989)

Off Camera with Sam Jones: Series 3 (2015)

Playing It Cool (2014)

Rounders (1998)

Spring (Primavera) (2016)

The 100: Season 4 (2016)

The Ant Bully (2006)

The Bucket List (2007)

The Queen (2006)

The Sixth Sense (1999)

Vice (2015)

West Coast Customs: Season 3 (2013)

Yarn (2016)

Young Frankenstein (1974)

Zodiac (2007)

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Comedy Bang! Bang!: Season 5, Part 2 (2016)

Flaked: Season 2 – NETFLIX ORIGINAL

Inspector Gadget: Season 3 – NETFLIX ORIGINAL

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The Homecoming: Collection (2015)

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Blue Gold: American Jeans (2017)

Headshot (2016)

Three (2016)

Tunnel (2016)

War on Everyone (2016)

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TURN: Washington’s Spies: Season 3 (2016)

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Suite Française (2014)

Avail 6/7/17

Disturbing the Peace (2016)

Dreamworks’ Trolls (2016)

Avail 6/9/17

My Only Love Song: Season 1 – NETFLIX ORIGINAL

Orange Is the New Black: Season 5 – NETFLIX ORIGINAL

Shimmer Lake – NETFLIX ORIGINAL FILM

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Black Snow (Nieve Negra) (2017)

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Sword Master (2016)

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Quantico: Season 2 (2016)

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Grey’s Anatomy: Season 13 (2016)

Scandal: Season 6 (2016)

The Stanford Prison Experiment (2015)

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Shooter: Season 1 (2016)

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Disney’s Moana (2016)

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Baby Daddy: Season 6 (2017)

Young & Hungry: Season 5 (2017)

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American Anarchist (2016)

Free Rein: Season 1 – NETFLIX ORIGINAL

GLOW: Season 1 – NETFLIX ORIGINAL

Nobody Speak: Trials of the Free Press – NETFLIX ORIGINAL

You Get Me – NETFLIX ORIGINAL FILM

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No Escape (2015)

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Chris D’Elia: Man on Fire – NETFLIX ORIGINAL

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Knuckleball!
Las mágicas historias de Plim Plim: Season 1
L’Auberge Espagnole
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The Hustler
The Little Rascals
The Prince & Me
The Teacher Who Defied Hitler
The Three Musketeers
The Way of the Dragon
This Is Spinal Tap
Two Step
We Are the Giant

Leaving June 6

Private Practice: Seasons 1 – 6

Leaving June 8

Xenia

Leaving June 9

4:44: Last Day on Earth
Farewell Herr Schwarz
Free the Nipple
Remote Area Medical
Secrets: The Sphinx
Tough Being Loved by Jerks

Leaving June 14

Bob the Builder: Season 1
Boys Of Abu Ghraib

Leaving June 15

The Lazarus Project

Leaving June 16

Jane Eyre

Leaving June 19

Daddy’s Home
Grand Piano
The Right Kind of Wrong

Leaving June 23

Jimmy Goes to Nollywood

Leaving June 24

Agent F.O.X.
Breath of the Gods
Dragon Guardians

Leaving June 29

CSI: NY: Seasons 1 – 8

Leaving June 30

Killer Couples: Season 1
Killer in the Family: Season 1
Murder Files: Season 1
Murder on the Social Network
My Online Bride