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Comment by nitrogen | Hacker News Reader

Until recently, streaming customers have had their subscription prices subsidized by subscriber growth.

This makes no logical or arithmetic sense. How does adding more watchers improve profitability if each viewer has the same associated costs? The code is written. You just need content. Either each viewer pays enough for the content that viewer sees, or they don't. If the content

Say what you will about the cable companies (and they really do suck) but their pricing was not entirely a result of monopolistic practices

The cable companies own a lot of the content companies though.

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I disagree with the idea that subscriber growth is subsidizing anything as well. There are probably some grandfathered subscriptions but Netflix can just set a time limit for those discounts. If Netflix is losing money from grandfathered subscribers then it would be better to just cancel their subscriptions. If they don't cancel the subscription then the loss they are making is a user acquisition fee/marketing fee and not a subsidy.

The content owners were probably willing to take less as they assumed fewer subscribers.

> How does adding more watchers improve profitability if each viewer has the same associated costs?

Because each additional viewer does not cost the same as the previous one. Why would you assume that?

Past the point of ROI on marketing spend, every new viewer adds the same burden on infrastructure and licensing, do they not?

Netflix does not pay a license fee per viewer. They generally negotiate multi-year deals that are priced in advance at fixed rates. Whether one person or a million people watch a show, Netflix pays the same licensing fees.

Plus, a Netflix membership is like a gym membership. Some users watch a lot more content (and cost more in terms of infrastructure) than others. Much like at a gym, all subscribers pay but only some cost as much as they pay. If a gym only charged people who showed up, the fees would need to be much higher.

If every subscriber cost more than they brought in, Netflix would have gone flat broke years ago. There is a reason shareholders wanted subscriber growth and got spooked when it slowed.

The business values customers at a certain $ value. The negative cash flow of low prices is compensated by the value of the customers that get brought in.

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