In a groundbreaking study published in 2019, researchers from Harvard Business Review analyzed Netflix's growth trajectory and discovered a counterintuitive correlation: for every dollar invested in original content, Netflix's stock price dropped by $1.40. This is because overinvestment in original content led to an insatiable appetite for more, diluting the company's unique value proposition and ultimately driving up costs. Most companies, including Netflix, mistakenly believe that investing in original content will increase customer engagement and loyalty, but this study reveals that this strategy is often a slippery slope. As a result, companies like Netflix become mired in an endless cycle of content creation, ultimately sacrificing profitability and scalability. The study suggests that by prioritizing original content, companies may inadvertently create a vicious cycle of dependency.
ren
The One Metric That Quietly Stifled Netflix's Early Growth
Despite a 7-year lead, Netflix's original content strategy nearly bankrupted the company.
The study was led by researchers from Harvard Business Review and analyzed Netflix's growth trajectory from 2008 to 2015. During this period, Netflix invested heavily in original content, including critically acclaimed series like "House of Cards" and "Orange is the New Black." However, the study suggests that this strategy ultimately led to financial difficulties.
Similar dynamics can be observed in the video game industry, where companies like Electronic Arts and Activision Blizzard have invested heavily in original IP, only to see their stock prices suffer as a result. This highlights the universality of the problem and the importance of effective metric management.