There's one big way Netflix is actually spending less money on content

Maya Kosoff

Netflix CEO Reed Hastings

Netflix has said it will spend $5 billion on content in 2016, but there is one important way it will actually spend less, according to analysts at Merrill Lynch.

In a note on Tuesday, the analysts wrote that the price Netflix spends on content per subscriber will likely decline in 2016. Netflix recently completed the bulk of its international expansion plan, which put it in every major country in the world except for China.

Complimentary Tech Event

Transform talent with learning that works

Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

Netflix's international expansion has worked to push content costs per subscriber down, even as the total spending on content has ballooned, driven by factors like the company's increased focus on original shows.

Here is a chart from Merrill Lynch that shows Netflix's spending on content, in both absolute and per subscriber terms:

Bank of America Merrill Lynch

One reason Netflix might be able to spend less per subscriber on content is because its shows and movies have international appeal.

Netflix's CPO, Neil Hunt, tells Business Insider that the company believes the variations in show preferences within countries are greater than those between countries. This means that a show considered "niche" can still find audiences all over the world. If this is true, it suggests that Netflix's international expansion can greatly improve the value for its users relative to cost.

Basically, Netflix will be able to wring more and more value from its shows. Hunt pointed to Narcos, which he said was a monster hit all over the world.

With Netflix's international expansion complete, Merrill Lynch thinks Netflix will be able to cut costs per subscriber, while, if Hunt is correct, providing them the same (or better) value.