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Why the Netflix Strategy Is Great for Netflix But Terrifying for Subscribers

By Dustin Rowles | Streaming | October 17, 2017 |

By Dustin Rowles | Streaming | October 17, 2017 |

Netflix announced yesterday that it would releases 80 news films next year, which sounds insane. How is anyone supposed to keep up with that many films? Why is Netflix spending so much money on movies of mixed quality that probably won’t be seen by the majority of its subscribers?

Think about it for a minute, however, and it all starts to make sense.

Over on Uproxx, it is my duty to keep a running list of the 50 Best TV Shows on Netflix and the 43 Best Netflix Original series. That 43 will soon be 45 once I add Mindhunter and American Vandal, and that list doesn’t even include docuseries, kid shows, or most animated fare. And here’s the thing: In the last year or so, the 50 Best TV Shows list is starting to include a lot of the Best Original Netflix series. It’s not just that Netflix produces a lot of great TV shows; it’s also that they’re no longer paying to license a lot of great shows (just last month, they dropped 30 Rock and Friday Night Lights, among others).

But here’s why that strategy makes so much sense. When Netflix makes a TV series, it becomes their show. It belongs to them. They pay once upfront for a season of TV, and residuals are paid to actors at a much lower rate, plus there are no additional licensing fees. It’s essentially a one-time cost. So, let’s say it cost $80 million to produce a season of Mindhunter. That’s a lot. On other hand, it costs about $45 million to license the full series of Lost every year. So, yes, while it might cost $240 million to create three seasons of Mindhunter, it’s roughly the same cost as licensing Lost for 5 years. And the thing about Mindhunter is, after three years, they never have to pay a penny again. Meanwhile, they can probably make 3 seasons of Love and a season of American Vandal for the same cost as licensing one year of Scrubs ($26 million).

In other words, they have to pay every single year for Friday Night Lights, but they only have to pay once for Orange is the New Black. Over the long haul, it makes a lot more sense to produce original content rather than license another network’s content.

What that means, however, is that eventually the 50 Best TV Shows on Netflix will be indistinguishable from the 50 Best Netflix Originals. The difference is, they won’t have to pay yearly to license those series; they’ll own them. It may take another 5, 10, or 15 years, but eventually, it will be cheaper to own the 50 Best Series than it is to license the 50 Best Series.

Likewise, releasing 80 new movies in 2018 sounds insane, but how insane is it, really? Have you seen the movie titles available on Netflix? There’s a lot of Redbox-level shit on Netflix that they pay to license. Why spend $250,000 (or whatever) every year to license Deathgasm when Netflix can pay $1 million one-time fee for the next It Follows and that movie will stay on the service forever. If they produce 80 movies a year for 5 years, then they have a catalogue of 400 movies, and they won’t even think about licensing films anymore. By that point, if you want your small movie to be seen, you have no choice but to sell your movie to Netflix, because there’s no other game left in town.

Meanwhile, for Netflix, they got us right where they want us! They got us locked in. I mean, sure, Friday Night Lights and 30 Rock and Scrubs are gone, but did anyone drop their Netflix subscriptions? Absolutely not! People just keep cutting that cord, watching less Speechless and more Atypical, and before you know it, you haven’t even heard of 90 percent of the new cable and network shows, much less miss them. You say to yourself, “Oh, I’ll catch that when it arrives on Netflix,” but guess what, buddy? It’s never coming, because Netflix already spent that money on a season of Disjointed.

But soon, Netflix TV shows and movies will be all you know, because Netflix will eventually start advertising its other comedies ahead of its latest new show. We’re all gonna get trapped inside the Netflix ecosystem, and the next Scrubs or Justified or 30 Rock won’t be coming from ABC, or NBC, or FX, it’ll be coming from Netflix. And look: Peak TV! There’s too much TV. You can’t watch it all, and if all else is equal, why not just stick to what’s on Netflix? You can watch the 30 great new shows of 2022 on Netflix for $18 a month, or you can pay $100 a month to watch a different 30 great shows on cable. Seems like a no brainer. I mean, hell, even as a TV critic, there have been times where I’ve thought about giving up everything else and just focusing on Netflix original content, because God knows there’s enough there to keep me occupied.

And then, before you know it, Netflix has a monopoly, and you’re fine with it, because it’s cheaper, and the goods are great, until Netflix decides to cut costs because they’re $100 billion in debt, but by then, FX and AMC have been run out of town. The town square is empty because everyone is running out of the the WiFi highway to watch shows that have been outsourced to China. And now Netflix is WalMart, and you’re bingeing on the frozen pizza-bagel equivalent of a TV show, season 12 of Real Rob. Instead of watching IT, you’re watching Stitches: The Hobo Clown.


And that’s the day that Netflix will own all of us.

Welcome to the new world order.

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Dustin is the founder and co-owner of Pajiba. You may email him here, follow him on Twitter, or listen to his weekly TV podcast, Podjiba.