If it feels like you can never find anything to watch on Netflix, then this might come as a surprise.
As the above chart from Morgan Stanley shows, Netflix spends more on content than just about anyone else in its peer group. (Unfortunately, the analysis did not include FX, the channel owned by 21st Century Fox that Netflix now considers a rival.)
Yet Netflix has only really had two major hits to show for that spend (House of Cards and Orange is the New Black). Contrast with HBO, which has churned out Game of Thrones (which alone is estimated to cost up to $70 million a season to make), True Detective, Silicon Valley, Girls, Veep…the list goes on.
The difference lies in Netflix’s massive streaming library, which is estimated to contain up to 60,000 titles. Most of Netflix’s content costs go toward that. By way of contrast, HBO’s internet service HBO Go contains up to 1,400 titles a any given time.
Netflix only spends around 10% of its budget on originals, and chief content officer Ted Sarandos has pointed out that, while those series do generate buzz for the company, they also constitute a negligible percentage of viewing hours on the service. About 70% of viewing on Netflix is old seasons of TV shows, and 30% is movies, Sarandos recently said.
For suckers like me that pay for HBO, and get current seasons of hit shows from channels like AMC (Breaking Bad, Mad Men), Netflix might not always seem like the most compelling of products. But Netflix has always argued that it is complementary to traditional television, and it’s relatively cheap compared to most people’s cable bills. As Morgan Stanley found, price is just as strong a motivation for people to subscribe.