How Netflix Business Model Is Making Revenue – Business Mavericks

Netflix, Inc. is an American OTT Video platform and production company headquartered in Los Gatos, California. Netflix was founded in 1997 by Reed Hastings and Marc Randolph.

Let us see some more fundamental things about Netflix before starting with the Netflix business model, Netflix revenue, subscribers base, and future goals.

Overview Of Netflix

Netflix was initially a DVD rental company and the first to offer a monthly subscription for DVD rentals, and later Netflix turned its business model to online streaming services in 2008. The company’s primary business is an online-based subscription streaming service offering a vast library of films and television series.

Netflix had 210 million paid subscribers from over 150 countries. The company offices were in Canada, France, Brazil, the Netherlands, India, Japan, South Korea, and the United Kingdom. Netflix is also a member of the Motion Picture Association, producing and distributing content from countries all over the globe.

How Reed Hastings Started Netflix?

The idea of starting Netflix came into existence when Blockbuster (a forgotten market leader in the 2000s ) charged Reed Hastings a late fee when he failed to return the DVDs to the Blockbuster store on time.

But his idea was different blockbusters charges fees for every single DVD. In contrast, Netflix charges customers fixed monthly charges for unlimited DVDs.

What is Netflix?

Netflix is an entertainment company that offers on-demand web shows, movies, and documentaries for a monthly subscription.

Netflix Founders and Its Team

Reed Hastings and Marc Randolph founded Netflix in 1997 with just 30 employees. But As of today, Netflix has over 12,000 full-time employees.

Note: Marc Randolph left the company in 2002.

Glance About Netflix Business Model

Netflix’s Business Model works on offering a massive library of movies and web shows to its customers through three subscription plans called Basic, Standard, and Premium; each has its advantage and disadvantage.

Also, Read Netflix SWOT Analysis 2022

Netflix Business Model

1. Key Partners Of Netflix

• Netflix has over 35 partners across the entertainment business, which is the main reason behind Netflix’s vast library of movies and web shows in different types of genres for subscribers to binge.

• It has partnered with Google, Oneplus, Samsung, Sony, and other companies to offer a built-in Netflix application in Android TV OS, Oneplus mobiles, and Sony & Samsung Televisions.

• Netflix also partnered with gaming-aligned companies like PlayStation, Wii, and Xbox.

• It is also partnered with one of the biggest streaming rival prime video parent companies Amazon to host its data on AWS.

• Its recent partnership with Netflix is with local broadband companies Airtel and Jio.

Also, Read Other Companies Business Model Canvas Examples.

2. Key Activities

• Netflix has a stringent policy when hiring its employees, and its plans to retain some of its best employees to offer the best user experience to its customers.

• Maintain the existing customers and also, at the same time, increase its customer base by entering new markets.

• Negotiations with production houses and content producers to license and produce its content.

• Developing its pricing strategy to ensure its pricing is affordable to acquire new customers.

• Complying with local government laws.

3. Key Resources

• I am a big fan of its 

  AI recommendation system

  , which accurately understands me and feeds me with the best suitable content I like.

• Developers at Netflix are aligned with better innovations to give its customer a better user experience.

4. Value Prepositions 

• its users access their content 

  24/7

   until they pay for it without interruption.

• High-quality content

• users can use its platform anywhere in the world, a conveniently

• massive library of movies and web shows on different genres.

• Can access exclusive Netflix content without any separate fee.

• Netflix profiles offer a personalized user experience for every profile admin creates. 

  Max 4 profiles

• Cancel anytime if you don’t need it ( no questions asked ).

5. Customer Relationships

• Netflix is one of the few global brands that interacts with its customers through social media. Also, Netflix has been named the most active brand account across social media platforms.

• Best User-Friendly Experience, 

  Customers don’t need technical knowledge to use its platform. Anyone can use its platform seamlessly without any hustles.

• We can contact Netflix for any problems in your account through its support system via email, web portal, live chat, and telephone.

6. Channels

• Online streaming through the website

• Streaming through Mobile and tablet apps

• Streaming on TV Apps and Gaming consoles

7. Customer Segments

• Netflix platform is few among other streaming platforms which offer a massive library of movies and web show genres for its subscribers to select from.

• Netflix offers both adult and family content to attract family audiences also.

• Netflix has a separate user profile for the child, offering only child-curated shows and movies.

8. Cost Structure

• Purchase of movie and web show rights from the production companies

• Producing exclusive content ( only available on Netflix )

• Datacenter ( Amazon Web Service )

• Research, patent, and newer Technology developments.

• AI Recommendation system

• Employee salary ( Sometimes Bonus )

• Marketing

9. Revenue Streams 

Netflix’s only revenue stream is from subscriptions.

• Monthly subscriptions

   fees with three different pricing options in the global market (US Market Pricing options Basic – $8.99/month, Standard – $12.99/ month & Premium – $15.99/ month)

Also, Learn How Cure Fit Business Model Works for An Indian Fitness Startup.

How Does Netflix Make Money?

As mentioned, Netflix earns only through subscriptions from its customers.

Many Analysts suggest Netflix adopt a hybrid business model as YouTube and Hotstar do. But Netflix declined to adopt it due to the bad user experience, one of their primary value proposition mentioned above.

Netflix Revenue, Profit, and Valuation:

Netflix Revenue For 2017-18 (FY18 ): In The Financial Year 2017-18, It Earnings stood at $15.794 Billion. An35.08% growth from the last financial year

Made a Profit of $1.211 Billion.

Netflix Revenue For FY2018-19 ( FY19 ): In The Financial Year 2018-19, It Earnings stood at $20.156 Billion. A 27.62% growth from the last financial year

Made a Profit of $1.867 Billion.

Netflix Revenue For FY2019-20 ( FY20 ): In The Financial Year 2019-20, It Earnings stood at $24.996 Billion. A 24.01% growth from the last financial year.

Made a Profit of $2.761 Billion.

Netflix Revenue For FY2020-21 ( FY21 ): In The Financial Year 2020-21, It Earnings stood at $26.392 Billion. A 23.31% growth from the last financial year.

Made a Profit of $3.759 Billion.

Note: Netflix’s profit is less due to Bad cash flows.

How Many Subscribers Does Netflix Have:

• Netflix has over 210 million subscribers around the world 

  and

• Netflix has a presence in 190 countries.

• Netflix’s Market Cap is over $200 Billion.

• Netflix is spending $17 Billion to produce original content in 2021.

Netflix Future Goals

• It is rumored to enter streaming services like Spotify, Youtube Music, etc.

• Also, as per the latest reports, Netflix is looking to enter the 

  gaming business

  .

Conclusion

Netflix is the largest OTT company globally and the 9th Largest internet company in the world in terms of Revenue. But Netflix needs to enter music and other businesses to stand in front for a long time.