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How Netflix Decides How to Spend Your Money

Dave Parrack 31-10-2016

Why does Netflix make the original shows it makes? And buy the classic movies it buys? It’s all about the joy. Your joy. At least as far as Netflix founder and CEO Reed Hastings is concerned.


Netflix has evolved massively from the DVDs-by-mail company it was when it started. It now focuses primarily on streaming, has expanded (almost) everywhere around the world, and even makes its own original content 13 New Netflix Originals You'll Be Watching in 2016 Netflix has released a lot of original content -- including House of Cards, Orange Is the New Black, Narcos, and Master of None -- but 2016 is slated to be Netflix's most exciting year yet. Read More .

Netflix has already shrunk its catalog to make room for original content Netflix Removes 50% of its Catalog to Fund Original Content Have you noticed the Netflix catalog getting smaller in recent years? We now know the number of titles available on Netflix has been halved since 2012 to fund original content. Read More , and the company has a vague plan to have 50 percent of its catalog be original content in the future. So, what is this obsession with producing original content all about?

The Wall Street Journal recently asked Hastings to explain the economics of greenlighting a show. To which he replied:

“We’ll collect this year about $8 billion of customers’ money. We say that money’s in trust to create joy. We have to turn that into the most joy possible. We look and we say, for every show, if a show cost $100 million, how much joy, how much viewing did it create? If it costs $50 million or $200 million, of course you want different amounts of joy. So we look at it as how much joy can we create of your money. And if we turn it into joy effectively, then you’re happy and you tell your friends and we grow.”

Not Everyone Loves Netflix’s Original Content

Valuing content by how much joy it brings to subscribers seems a good rule of thumb. It can, of course, also be applied to existing content Netflix buys in. However, original content is clearly of the utmost importance to Netflix now, as it’s shows such as Narcos, Making a Murderer, and Stranger Things that differentiates Netflix from its competitors.

Not everyone loves these new shows though, and some subscribers are actively turned off by this obsession with original content. After all, original content is always going to cost more to produce than existing content costs to acquire.


Our comments sections on previous Netflix articles are filled with people stating they have cancelled Netflix because of the dwindling size of its catalog. And this could be a problem for Netflix in the future, especially if Netflix keeps raising its prices Is Netflix Worth The Money? There are more people who don't subscribe to Netflix as those who do, and that swathe of the population wants to know if they're missing out on anything. Is Netflix worth the money? Read More .

What do you think of Reed Hastings equating content with the potential joy it brings viewers? Do you appreciate Netflix’s focus on original content? Or would you prefer a larger catalog of classic movies and television shows? Please let us know in the comments below!

Image Credit: Jenny Cestnik via Flickr

Related topics: Media Streaming, Netflix, Online Video, Television.

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  1. David
    November 4, 2016 at 6:06 am

    Larger Catalog of classic movies!!!