This is true if you want to be the biggest streaming service, but I don’t think it’s true for HBO.

One of the potential flaws in Netflix’s strategy is whether they will have to keep investing heavily in content in line with price increases.

The other, which I would not say is a flaw, but merely going to opposite direction by only producing a few, high quality shows is a differentiated offering from Netflix.

If you have economical access to a bunch of OK mainstream content, it's reasonable to put all your wood behind just a few arrows. You won't get a big hit every time but you can increase your odds by lining up the right people and opening a fat checkbook. And those few hits may be enough to get people to renew.

But if your licensed content is mostly drek, you have to create filler content yourself, even if it's mostly just OK.

I don't disagree with this, but it's important to acknowledge that "drek" for you might be someone else's niche interest. Sure, some TV is just objectively bad (low production values, whatever), but easily-dismissed shows like Sugar Rush and movies like the Christmas Prince series have legitimate audiences who find them interesting and engaging.

One of the most significant and under-acknowledged strategic differences between Netflix and a traditional TV network is that they're not limited by a schedule— they don't need to pick just one show to put in that key Sunday night primetime slot, and they don't need to look at what they're "up against" in the same slot on the other networks. Their only practical limit is budget— ergo, a strategy of lots of niche, long-tail appeal type content makes a ton of sense.

All good points. There's a flip side to the schedule aspect too. Traditional broadcasters also need to fill up slots even if they know they don't have anything great to fill a hole. Which I expect was one of the drivers behind reality TV; you might as well fill the hole with something cheap if you don't expect a scripted show to be at least a reliable audience draw. (And I expect scripted shows are less predictable as well.)

(By "drek," I was mostly thinking of old second-tier and third-tier sitcoms and the like. I'm actually a bit surprised there isn't more of this sort of content; perhaps it's the tension between having lots of content and basically burying your tier-1 content with a bunch of mostly "crap.")