Netflix has been around for nearly two decades now, and yet most of us still do not understand how does Netflix make money. Well, look no further; let’s find out!
An interesting conundrum of modern forms of entertainment is the fact that a whole library of content is at the tips of our fingers for a paltry fee every month. But a closer look and severe scrutiny can remove the blinds over what is now a trillion-dollar industry.
This might seem like the start of a life-changing documentary series on Netflix itself, but rest assured, the truth is pretty simple.
Let’s find out how Netflix makes money, and how much of it the service actually generates!
A Story Of Innovation
Netflix is one of those ideas where you think to yourself, “Why didn’t I think of this?”. Regardless, being one of the most successful streaming services to date, revolutionizing the entertainment industry, and introducing several award-winning original TV shows to the world are some of the things we can attribute to Netflix.
When the company was started in 1997 as a mail-based rental service for DVDs, nobody could have guessed that it would topple over the entire industry and introduce a new standard.
Jumping ahead into the future, we had already seen what original shows could do with the power of Netflix; introduce themselves to audiences they didn’t know even existed, rake in immense profits, and turn TV stars into bonafide A-list superstars. Examples include Aaron Paul, Noah Centineo, and many others.
And this started with the acquisition of Breaking Bad in 2010. This was the turning point in the history of the American giant, propelling both the show and the service into global scrutiny. With competitors such as Hulu, Amazon, and Apple lagging far behind, Netflix had its moment of absolute control by the mid-2010s.
This also was down to the approach that they took. Netflix was marketed the same way Amazon, Uber Eats, and Doordash were; a service you could enjoy from the comfort of your two-bedroom apartment for which you had to otherwise leave this comfort altogether and spend time outside.
Consumers no longer had to worry about waiting in lines until their favorite show aired, they could just watch whatever they wanted at their own convenience.
How Does Netflix Make Money, And How Much?
Stats will tell us a mind-boggling story. With 223 million subscribers and counting, Netflix is one of the most profitable video streaming services to exist. And it has the quality on hand, too. Shows such as Stranger Things, Breaking Bad, and Narcos cater to a variety of audiences with a variety of needs.
But how is that profit made with so much funds being allocated for original shows to be developed and movies to be licensed?
Here’s how.
The Netflix business model is divided into 3 very specific categories and 4 demographics.
The categories are Domestic Streaming, International Streaming, and Local DVD rentals.
The demographics, on the other hand, are North America/Europe, Middle East/Africa, Latin America and Asia Pacific.
While this might be a broad segregation, advertising is usually heavily targeted to the demographics of specific countries within a region. Original shows appear and are heavily advertised for those specific regions, which has seen unprecedented success.
From all of this, Netflix makes money two ways – Subscription fees and DVD rentals.
Netflix Subscription Strategy
If you haven’t been living under a rock, Netflix has a subscription model which, according to the company, makes up the bulk of their income. This is divided into three parts with varying rates and benefits which correspond to the bracket that they are in.
The divisions are Basic, Standard, and Premium. Basic does not offer you HD or multiple screens for viewing, but Premium opens the floodgates, offering you ultra HD and four screens on which you can stream simultaneously.
DVD Rentals
Remember the service that Netflix started in 1998? It is still their secondary source of income. Netflix is the biggest DVD rental service in America, covering services that are not available on the website and from competing tv channels.
With DVD rentals, however, there are two plans – Standard and Premium, each offering equally climbing benefits as their streaming subscription counterparts.
How much does Netflix make every year?
Hitting the 2-billion-dollar mark by Q1 2016, Netflix has only gone on and increased their profits multifold in the last six years. This year alone, the mega-corporation has hit more than $24 billion in revenue, which is as astonishing as it sounds.
But this is only a continued trend from last year, which saw the company make a revenue of over $30 billion.
With the pandemic hitting hard, it was actually a boon for services like Netflix, shooting them farther forward into the future than even their wildest advisors would have expected, competing with the likes of the video gaming industry. And that is no joke at all.
As the world started staying in and increased their binge-watch time, Netflix can fairly be projected to make several more billions of profit.
And even with competitors such as Disney+ and Amazon Prime getting their own foothold in the industry, Netflix’s forward-thinking approach to the market has made sure that they maintain the lion’s share.
Even with the several controversial decisions that they have made thus far, it can be said that these will do little to stifle the massive growth that has become the staple as well as the industry benchmark.
As they say, the only way is up, and there is nothing such as bad publicity.
If you enjoyed this read, you can find ways to watch geo-blocked content on Netflix here, and the best 3D movies on Netflix here. Have fun!
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