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Programming has a fixed one-time cost to produce while subscription revenue scales with number of subscribers and is recurring. This means that as Netflix grows

Programming has a fixed one-time cost to produce while subscription revenue scales with number of subscribers and is recurring. This means that as Netflix grows, they can keep producing more expensive content and grow their catalog faster. There is a feedback loop here: The same money spent on content has higher ROI the bigger the subscriber count is -> the more/better content they produce, they more subscribers they can get -> the more subscribers, the more money they get to play with. The mix of lower and higher-end content probably makes sense because the low end content is cheap to produce and caters to people with niche interests, or people who watch constantly and just want something new to watch.

trimbo 7y ago
This assumes the Disney back-catalog strategy makes sense in the digital age. Pre-VHS, Disney would re-release movies in theaters. They could re-release Fantasia, or Cinderella, or whatever, and still make money in theaters in the 1970s. But, there wasn't that much content to watch at that time. You had live TV or movies. That was it. Today there is more on-demand content out there than I could watch if I lived a million years. Do you think "Bright" will keep subscribers 10 years from now for Netflix? Just as an example: "Band of Brothers" and "The Wire" are two of the best things I've ever watched. Would I _keep_ an HBO subscription forever after I've watched them? No...