How Does Netflix makes money - Business model of Netflix

Pratyusha Srivastava Pratyusha Srivastava
Jul 8, 2021 6 min read
How Does Netflix makes money - Business model of Netflix

What comes to your mind when you think of the best web series? YES, your guess is absolutely right! It's Netflix that comes to our mind whenever we think of watching fascinating web series or movies. Netflix is our first choice above all. Β Streaming through Netflix is very convenient and has gained enormous popularity among users in a very short duration of time.

And when it comes to the Business model, Netflix fits best for the example of the company that has modified its business model dozens of times and received terrific success and fame.

Netflix was started as a business company that rents boxed products through mail services to its customers worldwide. And now, the company is providing on-demand entertainment to its users in order to meet global needs.

Few decades prior, Netflix launched its unscripted genre along with various English language formats. This was a great success because of the light-hearted cooking competition. The company also launched local versions in Mexico, Spain, France and Germany. After the success of this notion, Netflix provided other versions too based on the user's convenience.

About Netflix
Where does Netflix operate?
Key Services of Netflix
Target Audience of Netflix
Business Model of Netflix
What is Unique about the Netflix Business Model?
How does Netflix Make Money?
FAQ

About Netflix

Netflix is counted among the most successful entertainment mass-media companies. The company was founded in 1998 with a service of renting boxed copies of shows, movies, video games and other forms of entertainment, via standard mail services to its customers.

The startup was a great success, then the founders thought of taking it to the next level by introducing tons of advanced technologies. And that's how Netflix modifies its business model. The company went from mailing boxed copies to providing access to its customers for streaming their favourite content at their utmost convenience.

Today, Netflix holds the most advanced video streaming services that have brought major advantages to its business model and revenue. The company has developed a software application through which under subscription packages of different ranges, they allow the users to stream any content they want. Netflix is known to be the world's 9th largest internet-based company by revenue.

Where does Netflix operate?

Netflix is a subscription-based video streaming platform, which as of 2021, have over 208 million subscribers. Among which 74 million are from the United States and Canada. Netflix is served worldwide excluding some restricted places such as Syria, Mainland China, North Korea, Crimea. The restrictions are because of US sanctions.

Key Services of Netflix

Netflix provides some very intriguing customer services. But the most exclusive ones are video streaming and on-demand video (Watch Now) streaming services. When these streaming services were launched, they allowed the subscribers to stream one dollar spend per hour, on the monthly subscription. Later in 2008, this was modified and the subscribers were allowed to stream unlimited with no further charge.

In 2016, Netflix introduced the online streaming feature. This allowed subscribers to save up the media on their devices (Android and iOS) in high quality to watch even without an internet connection. Moreover, it also brought Netflix Party Services where people could watch Netflix's programs together.

In 2018, Netflix introduced the "Skip Intro" feature which allows the subscriber to skip the intros of the show while streaming. Then in March 2021, Netflix launched a feature that warns the user for sharing their account passwords with others.


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Target Audience of Netflix

Netflix is known as the world's leading online television platform which crosses the hundred million members count in over 190 countries.

Netflix mainly targets the males and females of the age group of 17-60 along with an income value of $30,000 or more. The targeting in Netflix is based on psychographics but not on demographics.

Business Model of Netflix

The business model of Netflix is based on subscription packages. The Netflix platform is developed to please the audience across the globe and that's why the catalogue covers hold different assortments of movies, web series and shows of all genres, preferable for all ages. Netflix's value proposition is entirely based on its on-demand service whenever you want. It shows high-quality videos and distinct variety.

Netflix offers the best video streaming experience to its users. Along with the technology investment, the company also prioritizes the content offerings. It analyzes its customer's behaviour and provides them with a personalized experience.

When Netflix was started, it didn't have a prominent cost structure which resulted in poor cash flow. But they improvised this issue as the new business model demanded a big investment value. Today, The company's big cash flow includes:

  • purchasing content and rights,
  • recommending through AI,
  • producing shows,
  • Amazon AWS and technology,
  • data centres for streaming content
Revenue generated by Netflix
Revenue generated by Netflix

What is Unique about the Netflix Business Model?

Netflix business model is proven to be one of the most successful business models across the globe. But here the question arises, What's so unique about the business model of Netflix? Well, it's the on-demand video subscription model or SVOD model. In this model, the subscribers pay to get access to the media content of Netflix on a monthly basis. Hence, the subscribers of Netflix are the major source of revenue.

However, Netflix does not offer any free offers like those on Spotify and others. With the incredible media content, the users do not have any other options but buy the monthly subscription package. With the ad-free media services by Netflix, users get total convenience. Moreover, Netflix also offers a DVD rental for a subscription basis. This is also widely preferred by people.


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How does Netflix Make Money?

As we have discussed previously in the article, Netflix's main source of revenue is its subscribers as the business model is based on the on-demand video subscription plan. And with this in knowledge, Netflix has over 180 million subscribers. And that is a fancy number.

However, many surveys also recommend that Netflix could increase its revenue from advertising but the company declined as it could lower the user's experience for the platform.

Today, Netflix offers three kinds of subscription packages which we have discussed below:

  1. Basic Package: Access to unlimited movies and Shows available on any device at the lowest price. It does not provide HD content and allows only one screen at once.
  2. Standard Package: Two screens are available along with HD quality video.
  3. Premium Package: The top plan offers media in ultra HD quality and allows four screens at once.

Conclusion

The Business Model of Netflix is entirely based on its users. It tries to catch as many audiences as it can. Basically, the entire revenue is based on the user's subscription purchasing. And with the era of binge-watch, Netflix is receiving a great level of success. Started with such a small business, today Netflix has achieved remarkable heights of success and there's a lot more on its way.

FAQ

What is the revenue of Netflix?

The revenue of Netflix is 2,500 crores USD in 2020.

Who is the founder of Netflix?

Netflix was first founded in August of 1997 by two serial entrepreneurs, Marc Randolph and Reed Hastings.

Who is the CEO of Netflix?

Ted Sarandos is the CEO of Netflix.

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