I'm guessing that the definition of "better" changed at some point, perhaps when they went from 1-5 stars to +-1 thumbs.

In Netflix's early years, I was confident that their classifier's goal was to predict my future rating for a given video. I.e., it was part of a larger system designed around my viewing pleasure.

Around the time they switched to thumbs, I started suspecting the classifier was being used to manipulate me towards optimizing Netflix's profitability, instead of my viewing pleasure.

Why not? Every big platform that I know of has eventually done this with either 1p or “sponsored” content (Google, Amazon, Apple, etc.). In this case their incentive would be to push their own content above 3p content. What matters to them is their revenue, not maximizing the accuracy of their recommendations model.

Giving a boost to first party content is very different from making it "just worse".

As has been mentioned before, there is at least some motivation for doing so. One, it means their originals don't rate below third party titles (as far as we can tell), and two, as they lose content the average rating of what's left will likely fall.