How does the Netflix business model allow them to spend hundreds of millions of dollar on producing original movies and translate that to profit?

Question

For example, just announced is “The Gray Man” which Netflix is producing for $200M. Since the vast majority of the people who will watch it already have Netflix subscriptions how does Netflix actually make profit off this movie?
It’s not like it will encourage someone who’s subscription expires months after to hang on because of that one movie so where is the gain?

In: Economics

Answer 1

If they didn’t pay to develop it, they’d have to pay others to license content. They have more control and ownership if they produce it, can optimize what they choose to produce based on analytics they get from their viewers’ habits.