The big problem Netflix faces in the long run is its production cost model. It's well known within Hollywood that Netflix basically went to market and announced

The big problem Netflix faces in the long run is its production cost model. It's well known within Hollywood that Netflix basically went to market and announced that it would pay 1.5x (or whatever) the going Hollywood rate for original material. Hence, it's actually absorbing all the cost inefficiencies of Hollywood and magnifying them. It's driving up prices and adding more inefficiency to the system. (FYI, Amazon is currently in town and doing the same). Their ostensible gameplan is to do this in the short run, in order to get a hit or two on their hands -- at which point they can start dictating terms, rather than being dictated to. This is similar to HBO's playbook, from back when it first entered the scripted development market. It's a very big gamble. It paid off for HBO, and in recent years it's been paying off for basic cable channels like AMC. But Netflix has a very different revenue model that is challenged by heavy, loss leading production costs. It's also starting to face a lot of competition for essentially the same service rendered to consumers. The question of whether this "can only be good" for consumers is a much thornier one. Economics suggests that more players in the distribution ecosystem will lower costs for consumers. And Netflix has already done a pretty great job lowering marginal costs of consumption. But Netflix isn't really disrupting anyone on the content side, at least not yet; that's largely because the studio system is really savvy about protecting itself from disruption.