Netflix handed a pleasant surprise to Hollywood when in announced that it is committing to spend its $6 billion annual budget for original productions in California rather than chasing tax incentives in other states and countries. Ted Sarandos, Nexflix’s chief content officer, explained the decision this way.  “[It’s] verytough on families and eventually it grinds on the talent,” he said. “Shooting in LA is an investment in the quality of the show.”

Encouraging as this may be, it shouldn’t be viewed as the leading edge of a trend. The Netflix business model is very different from other content providers. It’s proved itself willing to spend whatever it takes to establish an insurmountable subscriber lead to head off growing competition from other subscription services, and it’s willing to accept lower profits to accomplish this goal. The commitment to LA production will make it that much easier to attract A-list talent who will appreciate working close to home.

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