Netflix‘s success can be difficult to quantify. The streaming platform has, in a relatively short amount of time, come to dominate the entertainment industry, fundamentally changing the way we consume TV. With multiple Emmy and Golden Globe awards for original TV drama, thanks to shows like House of Cards and Orange is the New Black, Netflix is now moving further into the tricky territory of movies. After making headlines at this year’s Cannes Film Festival thanks to controversy over theatre-owners’ opposition to their inclusion with competition entries Okja and The Meyerowitz Stories, the company is hoping to get a foot in the Oscar game for the first time with awards hopefuls like Dee Rees’ Sundance hit Mudbound. Add to that a strong presence at this year’s San Diego Comic Con, where Bright and Death Note made waves, and things seem to be going pretty well. Netflix even recently announced that their worldwide subscriber numbers topped 100 million this year. Truly, it seems like Netflix could be heading for a golden age.

The only problem is that Netflix’s business model is somewhat suspect. A recent report from Bloomberg revealed that Netflix Inc., currently valued at $78bn, had a “negative free cash flow of $2.1 billion in the 12 months ended June 30 and is on the hook to pay more than $13 billion in the next three years for its entertainment programming.” To put it simply: Netflix is in a ton of debt, and is continuing to build up more debt in order to pay for its content.

That’s a shocking figure to see under any circumstances, but especially for a business that’s prided itself on seeming financially invincible. This is the service that happily spends over $100m on new TV series like The Get Down and The Crown, drops $12.5m for one film at Sundance (Mudbound), and paid the stars of the Gilmore Girls reunion around $750,000 each per episode. That’s the kind of money that most networks just don’t have or aren’t willing to spend; even HBO had to make sacrifices thanks to expensive flops like Vinyl. For many years, Netflix has worked hard to maintain the aura that it has money to burn and is willing to spend big to get results.

Jonathan Nancy and Steve from Stranger Things Will Netflix Ever Actually Make Any Money?

It’s only been in the past couple of months that we’ve seen that impenetrable façade begin to crumble. Netflix canceled no fewer than three original shows in as many months – The Get Down, Sense8 and Girlboss. This wouldn’t be notable at other networks, where shows are canceled without much thought, but up until that point it had taken Netflix five years to cancel the same number of series. Both The Get Down and Sense8 were expensive dramas to produce, with The Get Down becoming the most costly TV show ever thanks to a rumored average price of $16m an episode. Girlboss was a cheaper affair but didn’t gather the critical or audience interest to justify a second season.

Netflix seems all too happy to maintain massive debt if the investment is worthwhile, and for these three shows that didn’t seem to be the case (although Sense8 is getting a one-off finale episode after fans protested its initial cancelation). Marco Polo, Netflix’s first attempt at a major big-budget drama, left viewers cold and was canceled after two seasons, allegedly resulting in a whopping $200m loss for the service. Few networks would ever let a failing show that expensive run long enough to accumulate that kind of loss. Netflix’s lack of released data detailing how many people actually watch their original content means we can only speculate what makes or breaks a show or film for them.

Many of those costly gambles have brought positive attention – The Crown and Stranger Things are set to be Emmy darlings this year – but if those $100m shows aren’t bringing in enough subscribers to justify the cost, how does that balance the books? By contrast, a traditional cable network like HBO can spend tens of millions of dollars on a show like Game of Thrones or Westworld and offset that cost through various methods. Like Netflix, subscribers are their main source, but they can also sell those shows worldwide to dozens of countries, then make extra cash through DVD sales. Netflix is almost exclusively reliant on subscribers and everything is distributed worldwide through that channel, with DVD availability kept limited (you can buy a box-set of Orange is the New Black but not Stranger Things or BoJack Horseman).

Next Page: Netflix Goes to Hollywood

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