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Comment by oldtownroad | Hacker News Reader

Netflix used their magical tech money to compete with studios in a wildly unprofitable way. Netflix churns out hundreds of thousands of hours of content each year at heavy, heavy losses, because they can afford to burn money to force the studios to the table. If we imagine a world in which streaming platforms were only ever licensees and not producers, it’s easy to imagine the status quo could have continued indefinitely. Netflix are a studio, Netflix is responsible for many of their own show creators having zero royalties — look at the squid game financials!

Netflix are not an innocent tech company doing the best for consumers in the face of big bad Hollywood. For all of Hollywood’s flaws, it was a simple business: make something, make money off it, repeat. Netflix brought the Silicon Valley funny money into the picture and threw everything out of whack.

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First Netflix as a company is profitable so it’s hard to say they’re losing money on producing content or not.

Netflix owning the content it’s producing means they can use it to help retain customers indefinitely. It’s a very difficult value proposition to accurately calculate because in say 2025 they could stop streaming and still have a revenue stream from licensing their content to other platforms.

Netflix has been profitable for a long time according to GAAP standards. But for years they were borrowing more money than they were making.

I think you have this somewhat backwards, though? Netflix keeps getting taken to the table to renegotiate terms that they would not have to do if they were sending DVDs. If the big studios say no, Netflix has to stop streaming their shows. Pretty much period.

Studios did originally take them up on some early license agreements that were very time limited to see the market. And they kept terms that were basically identical as some of the terms they use for syndication, which Netflix agreed to as they don't want to share too much data, for fear of things.

Not shockingly, at the table between studios and Netflix, the actors and writers are not represented. Getting that corrected does make sense to me. I'm not entirely clear that having residuals tied to actual streams will actually benefit as many as the current discussion hopes.

> Netflix churns out hundreds of thousands of hours of content each year at heavy, heavy losses, because they can afford to burn money to force the studios to the table

Then that's just the cost of acquiring content, not a total loss. I'm not comfortable labeling it a loss because it supports user retention _and_ acts as force to draw in other content providers.

It sounds like Netflix discovered a superior business model to the film studios and outcompeted them with a vertically integrated product that started from distribution and then moved to production, while the legacy studios did the inverse.

I largely agree with you but imo this is a bad example

> their own show creators having zero royalties — look at the squid game financials

The economics of Kdramas (which is what Squid Games is) are different from that of American productions [0]. Netflix for example doesn't give residuals but is able to pay the entire production team way more than what Korean studios like Lotte, Myung, etc are able to with residuals.

A similar story happened with the rise of KDramas btw. In the early 2000s, JDramas became expensive when production houses like Sony started upping their pricing, which lead networks across Asia to start selecting cheaper dramas, which back then was Korean.

A similar shift is starting to happen again with the rising popularity of Chinese and Thai dramas (at least in ASEAN) which I feel is largely due to how their rights are now significantly cheaper than KDramas.

Imo, a similar shift also happened in OTT content in the US. Look at the "popular" (ie. Social media buzz) shows recently. It's either back catalogue shows like Community (#sixseasonsandamovie) or much cheaper produced European or Canadian shows like Kim's Convenience, Schitt's Creek, Downton Abbey, Peaky Blinder, Outlander, etc.

[0] - https://factsanddetails.com/korea/South_Korea/K-Dramas_Telev...

> If we imagine a world in which streaming platforms were only ever licensees and not producers, it’s easy to imagine the status quo could have continued indefinitely.

That'd have been great, but they studios decided they wouldn't license their content to them. Instead they went off to make their own streaming services, with their content exclusive to it. They effectively forced Netflix to start making content, or face an empty catalog.

There is a reason some governments previously blocked studios from owning theaters. It leads to goofy behavior.

For more in that "goofy behavior" line, it is mind boggling that the Netflix exclusives of Daredevil and other Marvel shows are no longer viewable on Netflix.

> Netflix churns out hundreds of thousands of hours of content each year at heavy, heavy losses

Netflix is quite profitable, so this is clearly not true in any meaningful way.

A lot of their productions are very niche. I mean, Bojack Horseman... absolutely good show, beloved by its fans and more than worth a binge, but was it actually mainstream much outside of the Mental Health Twittersphere?

The worst thing for Netflix is, for none of their original shows they managed to pull off "outside" draw: merchandise/swag outside of hoodies and coffee mugs, books, spin-offs and most importantly fan fiction.

I say this as a fan, but to be precise it’s Millennial Mental Health Twittersphere.

Doesn't squid game qualify?

What is the source of the Netflix (a public company) magical tech money?

> Netflix churns out hundreds of thousands of hours of content each year

Uhh, how much content do you think Netflix is making?

There exists 8760 hours in a year.

To produce "hundreds of thousands of hours of content each year" would require producing almost 23 hours of content for every hour in the day. Every single day.

From its creation Netflix has only produced around 1500 original shows. Give a few hours per movie and maybe 10-50 hours per show depending on episodes and seasons.

No where close to hundreds of thousands of hours of content even since their inception.

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