Introduction
Before we delve into the various revenue streams that contribute to Netflix’s income, it is important to understand the underlying business model. Netflix is a subscription-based streaming service that provides its users access to a vast collection of TV shows, movies, documentaries, and original content, which can be watched over the internet on any device that supports the Netflix app. The company’s strategy is simple – to provide a convenient and affordable entertainment solution to its audience. With a monthly subscription, users can access Netflix’s content, and the company generates revenue from these subscription fees.
However, the subscription-based revenue is only the tip of the iceberg. In this article, we will explore the various ways Netflix makes money.
Subscription Fees
Netflix’s primary revenue stream comes from its subscription fees. The company has a variety of plans that cater to different users’ needs and budgets. As of July 2021, these plans include:
- Basic – $8.99 per month, one screen, no HD.
- Standard – $13.99 per month, two screens simultaneously, HD streaming available.
- Premium – $17.99 per month, four screens simultaneously, HD and ultra HD streaming available.
Subscription revenue accounted for 93% of Netflix’s total revenue in Q2 2021. Netflix also provides new users with a one-month free trial; however, these free trials have been decreasing due to the company’s decision to stop offering them in certain markets.
Partnerships
Netflix has partnered with several big players in the entertainment industry, benefiting from the collaborations in various ways. For starters, these partnerships attract a larger audience to Netflix and provide the streaming giant with valuable content to fill their catalog. In turn, these content deals have helped Netflix retain subscribers and generate additional revenue.
Some of the recent partnerships with Netflix include collaborations with Disney and DreamWorks. It resulted in Netflix obtaining the rights to stream Disney and DreamWorks movies. These content deals were critical to Netflix’s early success and kept the subscribers streaming.
Original Content
One of the main reasons for Netflix’s massive success is its own original content. Investing in creating unique and original content, such as House of Cards, Stranger Things, and Narcos, has helped the company distinguish itself from its competitors.
The company’s strategy is to produce its original content and have ownership of the rights, which not only increases its library, which in turn attracts new subscribers but also generates revenue from licensing its content. This has been a significant way for Netflix to make money, and it accounts for a substantial sum of its revenue.
Merchandise Sales
In addition to streaming, Netflix has taken advantage of the different markets by selling merchandise. Netflix’s online store opened in 2019, selling various items related to its shows and movies, including clothing, toys, and home goods. Netflix’s online store has expanded to 31 countries, contributing to its revenue stream outside of the subscription fees.
DVD and Blu-Ray Sales
Although Netflix has built a reputation as a streaming service, its original business model when it first launched was a DVD-by-mail rental service. However, over the years, streaming has become the primary focus for the company, and yet DVD and Blu-ray sales remain a part of their revenue stream.
Netflix continues to sell physical copies of some of their older and exclusive content, such as Stranger Things and House of Cards. These physical copies generate revenue, especially from collectors who wish to possess hard copies of their favorite shows and movies.
International Expansion
Netflix’s major aim is to expand to every country in the world. Currently, the company has expanded operations in over 190 countries across the globe. Although subscription fees remain the primary revenue generator, Netflix’s international efforts have boosted business by introducing new revenue streams.
International expansion has been a big growth driver for the company as it offers the viewers local and beloved international shows and movies. This has helped Netflix gain strong traction in countries where it is a latecomer.
Advertising
As of now, Netflix follows an ad-free business model. The company believes that it can generate enough revenue by selling its services and creating original content without the need to include advertisements. Instead, Netflix aims to increase subscription fees over time to generate more revenue.
However, in a bid to find new revenue streams, there has been some potential change in Netflix’s stance on advertising. In 2019, the company tested running ads on its platform for its other shows, but the experiment was discontinued. It is uncertain if Netflix will venture into the ad-based model in the future, but it remains worth watching for Netflix watchers and stakeholders.
Conclusion
Netflix has accomplished significant success in the streaming world, becoming the go-to platform for watching movies, TV shows, and documentaries. Subscription fees remain the primary revenue generator, but Netflix has been working on various other ways to keep the dough rolling in. The company’s partnerships, original content, merchandise sales, DVD and Blu-Ray sales, international expansion, and potential ad-based models are different revenue streams that make up Netflix’s income. Understanding these different revenue streams is important for both the subscribers and stakeholders to appreciate the various investments, collaborations, and strategies the company undergoes to keep providing quality content and increase their value.
