As an example: the original Police Academy movie had both quality and a large audience. The rest of the franchise was increasingly cringy and saw, I assume, declining viewership.

The reason why Netflix should care about quality and not just eyeballs is that it's a leading indicator: Police Academy II may well have had a larger audience, surfing on the coattails of the first installment. But that's not a sustainable strategy, and unlike the producers of Police Academy XI, Netflix can't just leave the husk and find a new home if it ruins its brand.

So for Netflix, it's not just important to get many people to watch something. They also need to come away from the experience with a wish to repeat it. There may well be more to the experience than mere enjoyment, as well: I feel like there is a sense of "quality" I get when watching something that is distinct from my enjoyment, and that I am more likely to remember it, and fondly so, if I find that quality.

All that suggests a few ideas that mere viewership wouldn't: Netflix would try, for example, to keep me from watching something that I end up despising, and especially if I do so because I consider it "low-quality". You can do reality TV even if your audience has more Ivy League credentials than a New England Hospital, but you better make sure it has a chance to become a pop-cultural phenomenon, like, say, a show about interior decorating that neatly fits into a wider trend of minimalism.