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
Taking a quick look at their subscriber numbers:
They almost have 200 million subscribers, if we use $10/month/sub as a nice round number we have $2000 million a month. So $200 million is barely 10% of a month’s revenue.
While a movie like that won’t produce a big load of new subscribers it helps keeping old ones.
If netflix doesn’t provide originals then there would be no point to keep a subscription as most of the movies on there are also provided by other services.
So these originals keep the subscriptions going and maybe new ones coming.
Edit: also as others have pointed out. Previously this wasn’t possible and resulted in enormous debt. This money, and probably future debt as well, is used to produce content to increase subscriber numbers to such a point where it’s self sustaining.
As it seems the numbers look better for Netflix now and debt may go down in the future (or not).
Edit2: typos
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