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Since then, the issue has only worsened as free cash flow has fallen further.Since 2010, content obligations have grown 42% compounded annually while revenue has grown 24% compounded annually, per Figure 1. At the end of 1Q17, content obligations totaled $15.3 billion and have grown faster than revenue YoY in six of the past seven years. Netflix chief content officer Ted Sarandos recognized this issue when he stated "a big expensive show for a tiny audience is hard, even in our model, to iphone 8 case make that work very long." The realities of Netflix's costly business model are finally catching up to the firm.Figure 1: Content Obligation Growth Outpaces RevenueSources: New Constructs, LLC and company filingsCash Burn Compounds Obligation Growth IssuesAs Netflix's content obligations increase, its free cash flow (FCF) only grows more negative.
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