Netflix Business Model Canvas [2022 major update]

Primary partners: Netflix has become much more self-sufficient in that most of their content is now self-created. Previously, they were far more reliant on favourable terms on licensing (and purchasing) content. This dependency has reduced quite a bit. Nevertheless, these should be considered primary partners.

1. Content/IP owners (studios / distributors): shows and movies that Netflix acquires or licenses from 3rd parties
2. IP holders: such as Marvel and others who can license their IP to Netflix for their own content creation. Some of this content has done very well. Even where Netflix creates their own content based on this IP, they are depended on getting acceptable terms with these partners . In addition, Netflix is entering into this space themselves with the acquisition of Millarworld.
3. Investors: Oddly enough, Netflix is still somewhat dependent on investors. Not so much on stock investors (though of course they dont mind a bump in their share price). But stock issuance is a negligible way to get cash in the door. But bonds still play a huge role. Sure enough, Netflix can always get cash in the door by issuing bonds. But it the interest rate (also called coupon rate) of the bonds play a role for the ongoing interest expense. This cash then is used to create content.

There is a fascinating financial lifecycle involved in Netflix’ key assets (being content) that we are explaining in great depth in the course. What’s more you will get a insight into the three major reports of public companies (Statement of Operations, Balance Sheet, Cashflow statement).

Content delivery partners: Need to also be considered as primary partners given the outsized importance and the strangely fickle nature of it. Ordinarily, one would think that these are infrastructure partners and thus of lower significance. Netflix consumed 15% of internet traffic in 2019 and close to 20% in the US. These are pretty staggering figures for just a single company. But they are and will be coming down with the emergence of many other streaming services. It shows however the importance of this infrastructure layer. You also note the difference to the Uber Business Model where we didnt include tech (or infrastructure partners) in the primary partners.

1. Internet Service Providers (ISPs): are essential to the delivery of the content in “real-time” to the end customer (and simultaneously to millions worldwide in case of new launches) via Netflix Open Connect standard. But there are tectonic shifts happening (in the US market) that may pose a threat to Netflix (note, the described Comcast and 21st Century Fox merger didn’t happen, rather Disney who are not an ISP bought major Fox assets. The described threats, however, are still simmering)
2. Regulators: Policies of the Federal Communications Commission (FCC), esp on the topic of net neutrality can have a crucial influence on Netflix (and the entire industries) trajectory, including swaying M&A (dis)approvals / anti-trust dealings of the FTC (here is one opinion piece – note the emphasis on opinion). We wouldn’t refer to them as “partners” but they are an important stakeholder. This area is – and always was – a heavily-lobbied space.
3. Amazon Web Services (AWS): Almost all of Netflix IT is hosted on AWS (from a functionality perspective but not from a content perspective). They also use Amazon’s Content Delivery Networks (CDNs). We wouldnt include AWS as a primary partner but it’s listed here for completeness sake.

Secondary partners: There is a micro cosmos of wider “partners” (stretching the limits of this term) and influencers whose opinion on individual titles can play a role (though nowhere as much as many of them may think of their “esteemed” views). The whole space is literally a vanity fair in which Netflix has fared surprisingly well for a tech company led by an engineer (a lot of the success in this field is probably to be credited to Ted Sarantos and others).

1. Prizes and film festivals: Strong promoters and influences in the industry can help get the word out, e.g. Film Academy (Oscars), Cannes Film Festival, etc. Netflix titles ran at the Academy Awards and won some prices anyway
2. Influencers: Magazines, TV shows and others covering the film industry can give free promotion (or criticism)
3. Filmmaker “guilds” and individuals: Directors, actors, writers and their guilds/unions are some of the most powerful players in the (US) film industry
4. Cinemas, Theatres: E.g. the ban on Netflix films at the Cannes film festival was a consequence of French cinema owner’s protest against Netflix practice not to show their content on theatre screens (but Netflix has recently made an interesting move in acquiring one of the title winners of Cannes)