Netflix Business Model (2023) | How does Netflix make money

Last Updated: Feb 3, 2023

Company: Netflix, Inc.
Co-CEO: Ted Sarandos & Greg Peters
Year founded: 1997
Headquarter: Los Gatos, USA
Type: Public
Ticker Symbol: NFLX (NASDAQ)
Market Cap (Feb 2023): $ 162.95 Billion
Annual Revenue(FY22): $ 31.6 Billion
Profit |Net income (FY22): $ 4.49 Billion

Introduction to Netflix, Inc.

Netflix, Inc. happens to be one of the most successful entertainment mass-media-companies of all times. Netflix, Inc. originally began its inception in 1998 by providing services to customers through means of mailing out physical copies of movies, shows, video games and other forms of media through standard mailing system.

Through its successful startup and the rapid changes that technology introduced over time, Netflix converted its business model. They went from physical copies handouts to allowing customers streaming their favorite contents from the comfort of their own convenience.

Today, the platform has advanced to streaming technologies that have elevated and improved Netflix’s overall business structure and revenue. The platform provides its viewers the ability to stream and watch a variety of TV shows, movies, documentaries and much more, through means of using a software application.

Since Netflix converted to streaming, it is the world’s ninth-largest internet company by revenue, ranging its presence at a global scale. The following is a compilation that comprises specifications of Netflix’s business canvas model and its core operations.

Business Model Canvas of Netflix

1. Netflix’s Key Partners

Netflix has built more than 35+ partners across the media business. Netflix today has millions of different types of genres for subscribers to select from and enjoy watching.

LG and Sony for
Built alliances with Smart TV companies likeandfor new emerging markets and several other aspects.
Netflix has set an alliance with Wii, X-Box, PlayStation and many other brands in the gaming industry. Netflix built partnerships to provide and cater its “gamer-clients” with an entertainment video game.
Netflix joined forces and partnered with Dish, Tivo and other TV network companies.
Netflix crucial phase of converting the business from mail-in-system to streaming, Netflix established a partnership with Apple , Android, and Microsoft
Finally, Netflix joined the network and big data providers like Google and Amazon . (Amazon was accompanied to promote Netflix listings and subscription options)
integrate its streaming service
Netflix recently partnered with Samsung to furtherwith Galaxy smartphones. In exchange, Samsung users will benefit from Netflix’s original shows and special bonus content.
To expand in West Africa more aggressively, Netflix partnered with

Nigerian filmmaker Mo Abudu

, the owner of Ebony Life TV. This partnership will enable Netflix to create new content targeting consumers in West African nations.
Japanese anime creators
Netflix has ramped up its expansion into anime originals by partnering with six

CLAMP, The Kindaichi Case Files

, Mobile Suit Gundam, Goth, Mardock Scramble, and Thermae Romae.

2. Netflix’s Value Propositions

Netflix strategizes methods and aims to provide the best customer experience by deploying valuable propositions.

Here are a few of what Netflix idolizes:

Users can stream 24-7, minus the ads!
View shows & movies in high-definition
Stream content conveniently anywhere without going to a DVD store or theatre
Get unlimited access to TV shows and movies
Access to exclusive Netflix’s original movies or shows
New signups can avail a 30-day free trial (1 month free of services)
Contract-oriented but can cancel at any time!
Access locally-produced and culturally-relevant content
Receive algorithmic recommendation for new items to watch
Avoid commercials ads- Some people like looking at commercials and other advertisements and some people avoid them.
At Netflix, users have the flexibility to either turn on notifications and suggestions or keep them switched off.
Netflix “user profiles” gives leverage for users to personalize their user account and preferences. The User profiles allow the “admin-user” to modify, allow or ever restrict certain users
Sharing accounts options is one of the rarest features a movie platform can provide. Sharing accounts feature on Netflix allows spouses, friends or even groups to share an account with specific filters and preferences already set.
Netflix solves the issues with theaters and mainstream media that frustrated most consumers. The company promises to solve the problems of its target with four simple words – Watch Anywhere. Cancel Anytime.

Image Source: Statista

3. Netflix’s Key Activities

Hire and retain software and tech geeks
Maintain and expand its platform on the website, Mobile apps, TV apps.
Produce, acquire and license Netflix’s original content to expand its video library
pricing strategy
and subscription model

Develop itsto ensure affordability and new customer acquisition.
enter into the new market
.

Develop a roadmap to
Ensure great user recommendation to retain current customer base.
Build and secure a partnership with Studios and content production house
Negotiate the deals with Studios, Content providers and Movie production houses
compliance to censorship, specifically for minors and children. Netflix has always promoted and operated within the boundaries of censorship.Comply with the laws (laws as per to State or Region/country), maintaining, specifically for minors and children. Netflix has always promoted and operated within the boundaries of censorship.
Supporting

disadvantaged communities

and other ideological issues that are important to its customers.
Building local communities and economies that support the development of its

local original content

.

Image Source: Statista

4. Netflix’s Customer Segments

The Netflix platform is designed to offer a vast collection of different types of genres for subscribers to select from. Their collection (movies or shows) are designed appropriately for
Everyone, who is interested in watching movies, TV shows and documentaries – and honestly who isn’t?
Although Netflix offers content for children and adults alike, Netflix aims to promote Family-friendly, educational and entertaining content to help capture the better interests of families.

Image Source: Statista

5. Netflix’s Customer Relationships

Self-Setup Made Easy

Netflix platform was originally designed to ensure that it is simple and easy to use.
Developers of the Website ensured to associate elements and themes that serves and promotes friendliness and provides a self-setup

Exceptional Customer Experience

Netflix provides customer services through means of the website portal, email inquiries and users have the option to reach a representative directly, by telephone and live chat.

Online Live Chat Services

Netflix
Users have the option to opt-in to a live chat session with arepresentative.
Users can directly chat with a Netflix representative to ask questions and support related inquiries.
Request for discounts and other special promotional deals that they may qualify or offer such user or subscriber.

Social media

Channeling major advertisements, deals, and other promotional deals through Social media channels and other relative platforms to help gain the high attraction of customer and new sign up users conversions.
LinkedIn
Social media is also used to inform and update individuals that operate or are familiar with the Netflix platform. Such platforms may include Facebook , Instagram, Twitter Snapchat etc.

Netflix gift Cards

Part of the subscription plan, all users will be geared to receive special promotional discounts and other gift cards to avail.

6. Netflix’s Key Resources

Software developers

Software developers at Netflix are at constant innovation
Design and enhance to help create a better customer-user experience

Recommendation system (algorithm)

Artificial intelligence and selection preference sequence technology helps developers design and build the recommendation algorithm system for its users.
Some data are based on “new releases,” or internal data that identifies user watch selection and the most viewed.
Provides users with relative results based off of frequent searches

7. Netflix’s Channels

Through Netflix’s channeling sequence, users and interested users can access Netflix platform from one or more of the following;

Online streaming through the website
Streaming through Mobile apps
Streaming on TV Apps and Gaming consoles
Mail delivery for DVDs

8. Netflix’s Cost Structure

Major purchasing rights establishment (TV shows and movies)
Cost of producing movies
Cost for providing personalized recommendations, R&D and artificial intelligence
Subscription maintenance cost
Internet Service Provider (ISP) such as Comcast
Paid-Connection deal withto stream Netflix data at high speed.
Infrastructure (data centers) cost of streaming content
DVDs and mail-related shipping costs
Employee salary distribution (customer service, Engineers, etc.)

Image Source: Statista

9. Netflix’s Revenue Streams

It wasn’t until 2007, when Netflix launched “streaming” services through Netflix subscription plans, that it attained significant revenue streams and additional revenues.

Monthly subscriptions fees with three different price options In US market (Basic – $8.99/month, Standard – $12.99/ month & Premium – $15.99/ month)
Netflix has established a global presence with international streaming to expand its customer base.
Upselling opportunities – Upgrade from Basic to Premium Plan etc.
Money-making movie studio with Netflix original shows like fuller house, house of cards, etc.

Image Source: Statista

How does Netflix Make Money?

Netflix was a platform which started as only offering an extensive collection of movies, shows and dramas (925 listings) through the mail-in-delivery system. It wasn’t till 2007 when Netflix has decided to convert their business structure from mail-in-system to streaming content based on subscriptions. Before launching online streaming in 2007, Netflix revenue on average summed at annually at around $997 million.

Subscription-based Business Model

Netflix has over 230 million members from over 190 countries (as of Dec 2022)
In fiscal year 2022, Netflix generated $31.6 billion annual revenue from both the United States and international regions.

Important partnerships

One of the most influential tactics implemented was its ability to build alliances with a wide range of movie producers, filmmakers, writer, and animators to receive content and legally broadcasting the contents required aligning licenses.
To make the Netflix platform and its streaming possible, setting the partnership between Internet Service provider was also crucially important.

Technology (

Monolithic architecture

)

Technology platforms allowed “streaming” accessibility to become convenient and unique and during their conversion year in 2007, not a lot of media companies offered such, which made the platform greatly attractive.

How does Netflix Make Money?

Conclusion

During the early year in 2000, Blockbuster was offered to purchase Netflix and all of its assets for only $50 million.

As of feb 2023, Netflix is worth $163 Billion in market cap value. Perhaps, it isn’t really about what a company sells, rather, it’s about how a company sells or promotes its products.

Through Netflix’s powerful technological tactics, innovating the accessibilities has helped to increase customer/user experience positively. Netflix implemented in several areas that helped to capture the global market.

References & more information

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