There’s no denying that Netflix is sitting on a treasure trove of user data, the scale of which is hard to conceptualize.
Last year,The Atlantic discoveredthat Netflix had 76,897 unique categories of movies – and that number has only gotten bigger since then.
And one of Netflix’s driving narratives is that this data gives it a “secret sauce” that makes it better at producing original content. It knew that you were going to like House of Cardsbefore it got made, which is part of the reason why Netflix can forgo the traditional “pilot” system and make entire seasons of shows before any have aired.
“We are just a learning machine,”CEO Reed Hastings recently said. “Every time we put out a new show, we are analyzing it, figuring out what worked and what didn’t so we get better next time.”
It’s easy to buy into this line of thinking, especially when it’s so easy to anecdotally name off Netflix’s hit shows like “Orange Is the New Black” and even newly-released “Narcos.” They just don’t miss!
But according to Morgan Stanley, this is wishful thinking. In an analyst’s note on Monday, Morgan Stanley cast doubt on Netflix’s “data edge” when producing original content.
“Netflix is like any other network, with hits and misses, and we do not expect its data advantage to provide it with a better batting average,” the note reads.
Morgan Stanley’s argument is that Netflix’s is advantage in original content, which it says will make up approximately 20% of spending in 2016, comes from its much larger global playing field.