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Business Operations Business Models

How Does Netflix Make Money (Business and Revenue Model)

The Netflix business model

How Does Netflix Make Money?
Here’s what you should know:
  • What is Netflix, and how does Netflix work?
  • How does Netflix make money?
  • Streaming Membership Fees (Subscription)
  • DVD-by-mail Service
  • Netflix’s profit and revenue
  • What is the Netflix business and revenue model?
  • Netflix’s funding and market cap
  • Netflix’s Subsidiaries, Acquisitions, and Exits

How does Netflix make money? Here is a full, in-depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the Netflix business model, their year-over-year revenue, and how Netflix works.

What is Netflix, and how does Netflix work?

Netflix is a streaming service provider and production company that allows paying customers to watch TV shows and movies online.

Founded in 1997 by Reed Hastings and Marc Randolph, Netflix began trading on the Nasdaq on May 23, 2002, under the symbol “NFLX”. Since that time, Netflix now has over 209 million monthly paying members using their service.

How Netflix works is: Users must first choose from one of their paid subscription accounts to stream anything on Netflix. Once done, customers will gain access to a library of more than 5,000 titles that add up to roughly 36,000 hours of content to stream.

Some of Netflix’s competitors include YouTube TV, Hulu, Amazon Prime Video, Disney+, and other streaming service companies.

Netflix App in Apple App Store | Netflix Business Model | How Does Netflix Make Money?
Source: Apple App Store | Netflix

How does Netflix make money?

According to Netflix’s Q2 2021 Shareholder Letter, Netflix has over 209 million paid memberships with an average monthly revenue per paying membership of $10.91.

So how does Netflix make money off of all those paying members?

Below is a breakdown of how much money Netflix makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 2 ways of how Netflix makes money (in 2021):

Netflix has a revenue model that makes money in two (2) ways – streaming membership fees and Netflix’s DVD-by-mail service.

#1. Streaming Membership Fees (Subscription)

Netflix makes the majority of its money from monthly streaming membership fees. In fact, $24.76 billion or 99% of Netflix’s total revenue came from streaming membership fees in 2020.

Netflix offers three (3) tiers for their streaming subscription service: Basic, Standard, and Premium. All of which offers its own set of perks like the number of screens users can watch Netflix on at the same time, HD, Ultra HD, and more.

As mentioned above, Netflix has over 209 million paying members with an average monthly revenue per paying membership of $10.91.

Netflix Subscription Cost:

  • Basic: $8.99 per month
  • Standard: $13.99 per month
  • Premium: $17.99 per month

Note: 99% of Netflix’s total revenue came from streaming membership fees in 2020.

#2. DVD-by-mail Service

Another subscription service Netflix offers is its DVD-by-mail service, which brought in $239.4 million of revenue for Netflix in 2020.

Since Netflix’s beginnings in 1997, before streaming. Netflix began as a DVD rental business. Today, they still keep this service alive and have more than 100,000 DVDs available to ship.

Netflix’s DVD service offers two (2) tiers: Standard and Premier. The only difference being that Premier offers 2 disks out at a time, while the Standard plan allows 1 at a time.

Netflix DVD Pricing:

  • Standard: $7.99 per month
  • Premier: $11.99 per month

Netflix’s profit and revenue

In 2020, Netflix reported $25 billion in revenue.

Note: Because Netflix, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Netflix’s publicly released financial reports, including annual reports, through  Netflix’s investor section on their website.

What is the Netflix business and revenue model?

Netflix makes money through a few revenue models that they combine within their company, they are:

  • Subscription based business model
  • Mergers & acquisitions (M&A) business model

Netflix’s funding and market cap

According to Netflix’s Crunchbase profile, Netflix has raised $3.1 billion over 11 rounds and has a market cap of $261.29 billion as of September 2021.

Netflix’s Subsidiaries, Acquisitions, and Exits

To date, Netflix, Inc. has made a total of 2 acquisitions, 3 investments, and 1 successful exit.