I believe the limitation being referred to is that they're bandwidth-constrained -- encoding for streaming needs to strongly favor size over quality.

Netflix needs a movie to be 500MB whereas torrents can happily be 2-8GB

Or 50GB, for some torrents 4K torrents.

I've heard from Netflix people that they re-encode their entire library every month. They are continually improving their encoding and storage tools so the streaming bandwidth/quality savings dwarfs the costs of re-encoding.