The Netflix Problem:  The Price of Prestige

Every time we turn around Netflix has paid out big dollars for someone’s show.  Indie and beginning filmmakers drool at the thought of Netflix buying their show.  Even though Amazon offers a better financial return than Netflix, it doesn’t have the popular stigma that a “Netflix” show does.

Part of that is because Netflix shows are continually in the running for awards.  91 Emmy nominations this year alone for show’s like “Stranger Things,” “House of Cards,” and “The Crown.”

While its current valuation by Morgan Stanley as of March 2017 stands at $11 Billion, Netflix generates about half the profit per hour viewed of traditional TV Networks.

What’s the price of prestige?

The question is how long can Netflix sustain their model of shelling out big bucks when it has $3.34 Billion in debt obligations and $15.3 Billion in content obligations, and about half of that wasn’t reported on their last statement according to a report in Variety.

While the general public is not going to know what Netflix’s target subscriber number will be before it begins to scale back, the bad news is that it’s safety net in this situation is the price of subscription.  Raising the subscription price by $1 would raise $1 Billion incrementally a year from when it chose to do so.

The reality is that eventually Netflix will raise its prices and cut back on programming.  Let’s face it, the shows that are most successful are the ones that have been built totally in-house.  Tack on to that, that there are several companies prepping to release actual viewership of these shows that to-date have been unavailable to anyone outside of Netflix.

There are still a few years before this happens, but it will happen.

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