Yes, in the long run producing their own content will be cheaper. Mid-term buying proven content will probably come out at around the same price as producing new content that the viewers may or may not like. They have better viewer analytics and better ways to globally monetize the content than traditional content producers though.

Netflix sees that math every single month, and charge more that $5, and can always raise their rates again. They have something better than cash, they have recurring cash payments.

Also, Netflix is running less debt than its hollywood contemporaries who have no such subscriber base, no industry leading tech, no well-oiled IT machine, and no massive pool of user data showing the intensely valuable and intensely detailed interactions between hundreds of millions of people and their content with a decades head start on the competition.