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How Does Netflix Make Money? (Business & Revenue Model)

Published On May 7th, 2024 15823Media & Monetization
Discover More about OTT TV App

Want to know how Netflix succeeds to be the premium player of the OTT Industry and how does Netflix makes money through various business models and streaming partnerships.

Do you know that Netflix, the world’s largest, most well-known streaming service, has a market capitalization of $252.71 Billion (as of 2024)?

That is almost one-fifth of the size of Alphabet, which is Google’s parent company.

If all 260 million of Netflix’s paying subscribers would come together and make a country, it would be as large as Indonesia.

For context, it is marginally less than the United States’ population (330 million). 

Netflix’s revenue for 2023 was $33.7 billion. For context, it is almost equal to General Motors market capitalization. 

Clearly, Netflix is huge. But, how did it get so big?

How does Netflix make money or rather so much money?

What is Netlfix’s business mode?
We will learn all of it in the next few minutes. 

But, let’s start with the most basic question.

What is Netflix?

What is Netflix

Netflix is a subscription-based video-on-demand OTT streaming service. It has a wide variety of content like TV shows, movies, documentaries, and other original content. 

Netflix was founded in 1997 by two Americans named, Reed Hastings and Marc Randolph as a DVD-by-mail service. But, ironically and quite surprisingly Netflix has come a long way in the last two decades. It has digressed from its original business model of selling DVDs and it is currently one of the most popular streaming services in the world.
The fact that Netflix has 260 million paying subscribers from 190+ countries across the world speaks volumes about the enormity of the streaming service. 

Netflix Founders

How Netflix Works?

Netflix works like a big digital library with movies and TV shows that you can access via the internet. Let’s see how exactly Netflix works in simple terms, without any jargon. 

First, you install the app and sign up for a subscription. You can choose from a variety of subscription plans, including a basic plan that costs $8.99 per month, a standard plan for $13.99 per month, and a premium plan costing $17.99 per month. Subscription to a plan gives you access to all of their content library. 

how does netflix work

Once subscribed, you can use any internet-connected device, like a computer, smartphone, or smart TV, to log in to your Netflix account. 

When you’re in, you can browse through their catalog, search for specific titles, or explore recommendations based on your viewing history. 

And whenever you find something interesting to watch, you simply have to click either the play button to play it instantly or the download button to download and watch it later.

According to Netflix, the average Netflix user has rated roughly 200 movies, with about 4 million fresh ratings added each day.

Source: Howstuffworks

How Does Netflix Make Money?

Netflix makes money from the following sources: subscriptions, important partnerships, and ad revenue.

The Netflix subscription comprises three plans – standard with ads (1080p), standard without ads (1080p), and premium (4K+HDR).

After paying for the subscription, the subscribers gain access to films, exclusive shows, and other Netflix originals (which are usually for one month).

Netflix DVD rental business

A substantial portion of Netflix’s revenue comes from a single source — subscriptions. 

Almost 90% of all Netflix’srevenue ($35 billion in 2023) comes from subscriptions and strategic partnerships, while approximately 10% of it comes from advertising.As of 2024, Netflix has three subscription plans — Standard with ads ($6.99), Standard ($15.49), and Premium ($22.99) in the United States. Here’s a clear breakdown of Netflix’s subscription plans.

PlanStandard with ads (1080p)Standard 1080pPremium 4K + HDR
Monthly price$6.99$15.49$22.99
Video and sound qualityGoodGoodBest
Resolution1080p (Full HD)1080p (Full HD)4K (Ultra HD) + HDR
Spatial audio (immersive sound)Not includedNot includedIncluded
Supported devicesTV, computer, mobile phone, tabletTV, computer, mobile phone, tabletTV, computer, mobile phone, tablet
Devices your household can watch at the same time224
Download devices226
AdsA few ad breaksNo adsNo ads

How Much Money Does Netflix Make?

As seen above, Netflix made $33.72 Billion in revenue for FY 2023 alone. This is almost a 6.7% Y-o-Y increase from what it made in the previous financial year. 

In FY 2022, the streaming giant made $31.61 Billion in revenue. 

Netflix’s profit for FY 2023 stood at $5.4 Billion. This is nearly $1 Billion more than what it made ($4.5 Billion) in 2022.

What is Netflix’s Business Model?

It can be said that Netflix follows a subscription-based business model as nearly 90% of its total revenue comes from subscriptions. But, subscriptions aren’t the only way through which Netflix makes money. 

Apart from subscription revenue, Netflix earns money from strategic partnerships with companies and networks across the world by various interesting means. 

Let’s see them here.

netflix business model

1. Distribution Partnerships:

Netflix has a pretty diverse business model. It earns income through multiple sources. For instance, Netflix often partners with telecom companies, cable providers, and other media distributors. These companies give the Netflix app pre-installed as part of their bundled packages or add-on subscriptions. More often than not, these partnerships involve revenue-sharing agreements. As a result, Netflix receives a portion of the subscription fees paid by customers who access its services through these distribution channels.

2. Device Partnerships:

From time to time, Netflix enters into collaboration with OEMs like Samsung, and LG. This is to ensure that its app is pre-installed or readily available on their platforms. 

In some instances, Netflix may also enter into revenue-sharing agreements with device partners. This way it makes a percentage of sales or subscription revenue generated through their devices.

3. Content Partnerships:

Netflix is also known to engage in co-production or licensing agreements with other media companies, production studios, or content creators. 

You may wonder, why?

But, it is agreements like these that help the company acquire/produce exclusive content for its audience. Of course, these partnerships often involve revenue-sharing arrangements. Over here, Netflix pays a licensing fee or even shares a percentage of subscription revenue with its content partners.

4. Marketing Partnerships:

netflix revenue model

Netflix forms strategic marketing partnerships with other brands to promote its original content, special events, or subscription offers. These partnerships typically include co-branded marketing campaigns, sponsored content, or cross-promotional activities. 

They allow Netflix to expand its reach and attract new subscribers.

5. International Expansion:

In regions where Netflix is expanding its presence, the company may forge partnerships with local media companies, broadcasters, or streaming platforms. This is to navigate regulatory challenges, access local content, or leverage established distribution networks of the ever-evolving local talent pool. These partnerships may involve revenue-sharing agreements or joint ventures to penetrate new markets easily.

In all, strategic partnerships and tie-ups play a vital role in Netflix’s revenue strategy. They allow the company to increase its distribution reach, acquire compelling content, drive subscriber growth, and maximize monetization opportunities across multiple markets and platforms.

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What Does it Cost To Run Netflix?

Data says it cost $25.98 billion to run Netflix in 2022 — that is the operating expense of the streaming service. 

As high as it may sound, Netflix can actually afford to spend so much on its operations as its gross revenue stands at $33.7 billion in 2023. We all know that Netflix makes a lot of money from streaming. But it’s important to understand how they earn it and what expenses they have. 

It’s an open secret that Netflix earns a substantial portion of its income from subscriptions (more than 90% comes directly from paying subscribers). 

Let’s understand where exactly Netflix spends all its revenue.

What does it cost to run Netflix?
  1. Licensing Cost (Content Acquisition)

One part of the expense is paying for licenses to show films and TV shows that Netflix buys from other creators. They have to legally buy the rights to stream the content they want to watch. This cost can vary based on the popularity of the content.

  1. Production Cost

To cut down on licensing costs, Netflix started making originals — its own shows, films, and documentaries back in 2013. 

Without a doubt, producing its own content costs Netflix a huge sum. However, it helps them cut licensing costs in the longer run (as licensing costs are recurring in nature).

  1. Marketing Cost

Marketing expense forms a considerable portion of Netflix’s total revenue expenditure (although we are not sure about the exact breakdown). 

Netflix is after all a streaming service. It needs to advertise, run marketing campaigns to attract new users and compete with other streaming platforms (given the fierce competition from the likes of Disney+, Amazon Prime Video, Hulu, etc.). 

The marketing cost of Netflix typically includes paying for ads, partnerships with other companies, and offering free trials to new subscribers (yes, it is also taken as a marketing expense). 

All of these costs add up and impact how much money Netflix makes in the end.

  1. Research And Development Cost

 Netflix pumps so much money into research and development (R&D) every year. 

You see, the streaming industry is fiercely competitive. Investing in R&D helps Netflix to stay relevant — stay close to user preferences, like enhancing its offerings and giving more accurate, personalized suggestions for users. Have you ever wondered why Netflix always has near-zero stutters and super-fast loading times? It is the direct implication of what investing in R&D can do to the overall user experience. 

Additionally, R&D investment allows Netflix to — produce fresh, original content like Peaky Blinders, and Life on our Planet, maintain a likable, responsive user interface design, and improve accessibility features like audio captions and so on. 

It is this investment that has helped Netflix grow and stay ahead of the curve for more than two decades. 

  1.   Technology and Development Costs

These kinds of costs mostly include maintaining and improving streaming delivery systems and developing and updating apps for various devices. More importantly, it includes the cost of expanding the infrastructure to support the ever-growing user demand (imagine tens of millions of users opening the app at the same time). 

Plus, Netflix includes researching and implementing new technologies to enhance the streaming experience, like say, a higher video quality, better compression algorithms, and improved playback reliability. So, it’s a fairly expensive yet hard-to-overlook zone for Netflix.

The OTT business impact of Netflix 
  1. General Administrative Costs

Finally, we have the general administrative costs of running Netflix. Remember, Netflix is a massive global streaming service. It covers expenses for employees and other investments related to running the company smoothly. 

So, general administrative costs include everything from paying salaries to administrative staff to collaborating with other companies. 

It may sound too much for you, but all of these costs are a necessity. They are kind of non-negotiable for Netflix to operate effectively and outcompete rivals.

Conclusion

We hope you found an answer to the question, “How does Netflix make money?” as we come to the conclusion of this blog. 

In a nutshell, Netflix has a fairly diversified business model, although 90% of its revenue comes from just a single source — subscriptions.

And, if you’re a content owner or aggregator, looking to build your own Netflix-like streaming platform then there’s no better place on the internet than VPlayed. 

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While most OTT platforms in the market have monthly recurring payments or user charges, VPlayed only has a one-time licensing fee. It means the platform has no recurring payments and zero revenue sharing so you can keep all the money you monetized with you. 

And, above VPlayed is one of the very few, possibly the only platform that gives source code access. 

With a team of over 300 certified OTT app developers, we’ve successfully launched more than 200 white-label streaming apps. Our clientele spans 40+ countries, 5+ continents, and across 10 different time zones. 

Reach out to our team today and launch your Netflix-like OTT platform in 4 days or less. 

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Frequently Asked Questions(FAQ)

1. What Is Netflix And How Does It Operate?


Netflix is all about a video-on-demand service that lets members watch whatever they like such as TV episodes, movies, documentaries, and other content on a variety of Internet-enabled devices. The company also offers DVD rental options, in which it provides episodes and films on DVDs. When we learn about how Netflix makes money, we come to know about this extraordinary video-on-demand service that is built on a subscription-based concept, where users gain access with a monthly fee.

2. How Does Netflix’s Business Model Work?

Rather than collecting income from a single title, Netflix started their business with the strategy that’s subscription-based. As a result, what we notice indicates that the content assets, both licensed and generated, are examined in aggregate at the operating segment level. This online streaming service has its own app and may be accessed from a variety of other connected devices.

3. How Much Money Does Netflix Make?

Considering the cumulative growth of Netflix, a few figurative estimates right from 2019 to 2021 will let us know how they make money. In the year 2019, annual growth revenue is estimated at around $20.156B from 2018. Later in 2020, there seems to have a slight increase, gaining $24.996B from 2019. After that, service providers witnessed a sharp revenue rise of $29.698B in comparison to the preceding year.

4. Is Netflix Profitable?

Netflix, without a doubt, has a high-cost structure.  Predominantly, the firm had to invest heavily at the start of its present business model in order to achieve the type of video collection it wanted to provide its clients. So Netflix hasn’t always been able to swing high with money-making ventures. However, it does now. What surprises businesses imply that Netflix has managed to upkeep its profit zone of over a billion dollars in 2018, a 116 % increase over the previous year’s earnings.

5. What Is Netflix’s Plan For The Future?

In the upcoming weeks, Netflix has analyzed people having plentiful entertainment choices & which creates room for how well they can earn maximum revenue. They have planned to upscale money by offering new OTT features that are flexible for subscribers in countries like Chile, Costa Rica, Peru. Two members added with sub-accounts for a monthly fees will be the key takeaway.

6. How To Start A Streaming Service Like Netflix?

If you are also trying to launch a Netflix-like OTT app and establish yourself as the leading provider of binge-watching content to attract millions, you can get an independent streaming solution! Nothing less than having lifetime ownership with the white labeling feature from VPlayed could help you to scale up in the line of OTT. Other than that, perks like security protocols, marketing solutions, will potentialize further.

Vijay Amirtham

Blogger & OTT Expert at VPlayed. Interested in digging deep into video streaming media tools, and Love to blog, discuss and share views on the legal OTT app development' & latest technologies tips, and tricks. He's also passionate about photography loves to capture the pure essence of life.

47 Comments

  1. Noel says:

    Hello, We have a channel for our services, Streaming content to the users without monetizing it. Just now read the awesome piece about how does netflix earn money, I want to try like this. Can you please help me on this.

  2. Michelle says:

    Is it possible to estimate how much money does netflix make a month through the subscription alone? Need country wise statistics and distribution.

  3. Marie says:

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  4. Margot says:

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  6. Mallory says:

    I want to have my own streaming app for my church with 1000 listener for free and its good but I have to install their app and then get to my channel. I don want it that way. I want to be able to host it on my server and have my own app. I do not know how does this will work with you. Its really great to see how does netflix make money through the business models, I want to try something related to this. Thanks

  7. Raveena says:

    Informative article about Netflix business model and revenue strategies

  8. Jenny says:

    Its really informative blog to know about the Netflix business models and its money making strategies. Kudos

  9. MovieBuff says:

    It’s fascinating to see how Netflix’s revenue makes & grows high has skyrocketed over the years. As a movie enthusiast, I’m not surprised considering how much original content they’ve been churning out. It’s amazing how they’ve managed to capture such a huge market share in the OTT video streaming industry.

  10. Rayssa LEAL says:

    Netflix’s revenue model & this financial success truly reflects its dominance in the OTT streaming world. With their wide range of genres and user-friendly interface, it’s no wonder they’re raking in such impressive profits. It’s the convenience and variety that keep me coming back!

  11. Katie LEDECKY says:

    It’s clear that Netflix’s subscription-based model has been a game-changer in the OTT entertainment industry. Their consistent revenue growth is a testament to their ability to adapt and innovate. As a finance enthusiast, I’m interested in how their financial strategies contribute to their success.

  12. Kristof Milak says:

    The Netflix revenue models & figures are mind-boggling! I’m not surprised, though—I’ve lost count of the number of times I’ve binged an entire series over a single weekend. Netflix has changed the way we consume OTT entertainment, and their earnings reflect the impact they’ve made.

  13. Kaylee says:

    The technology behind Netflix’s subscription model & recommendation system, the user experience must be a big factor in their financial success. I’m curious to know more about the algorithms that keep us glued to our screens and contribute to their bottom line.

  14. Caeleb Dressel says:

    While it’s clear that Netflix is making money & huge profits in subscriptions, I’m also interested in how much they invest in producing original content. It’s not just about the revenue; it’s about their dedication to delivering quality OTT entertainment. Their investments in content creation seem to be paying off well.

  15. Flora Duffy says:

    Netflix’s subscription & revenue growth over the years shows how quickly OTT video streaming has become the norm. It’s not just about watching shows anymore; it’s a cultural shift in how we engage with media. I’m eager to see how they continue to adapt to changing viewer preferences.

  16. Neeraj Chopra says:

    It’s amazing to think about how much money we collectively pour into Netflix subscriptions every year. As a parent, I appreciate the family-friendly options they offer, and it’s clear that their diverse content library appeals to a wide range of audiences.

  17. Yulimar Rojas says:

    Netflix’s ability to retain subscribers is commendable. Their strategic marketing campaigns and constant content updates seem to be working like a charm. I’d love to know more about their customer retention strategies that contribute to their consistent revenue growth.

  18. Carlos says:

    The rise of Netflix demonstrates the power of digital disruption. As a media studies student, I’m intrigued by how they’ve managed to upend traditional media distribution & revenue models. Their financial success showcases the potential of OTT streaming platforms in the digital age.

  19. Vel murugan says:

    The informative article is about how Netflix makes revenue with mastering the art of monetizing content through its subscription-based model. By offering a vast library of movies, TV shows, and original productions, they attract millions of subscribers worldwide, generating significant revenue.

  20. Sundar Vanchesan D says:

    Netflix’s primary source of income comes from monthly subscriptions. By providing unlimited streaming access to a wide range of content across various genres and languages, they ensure a steady flow of revenue from their loyal subscriber base. Thanks for posting the article.

  21. Amit Kumar E says:

    Deep insights blogs, & One of the key ways Netflix makes money is by continuously expanding its subscriber base. As they acquire more customers globally, their revenue grows.

  22. Sanjay says:

    “Great article! Netflix also benefits from its pricing tiers. By offering different subscription plans at various price points, they cater to different customer segments, allowing individuals to choose the plan that suits their needs and budget.

  23. Ahmad Hassan says:

    “Great article! Netflix’s revenue model truly showcases the power of subscription-based services. With their extensive content library and the constant addition of original productions, it’s no wonder they have attracted such a massive subscriber base.

  24. Peter Odhiam says:

    “Thanks for shedding light on Netflix’s revenue generation strategies. The success of their original content is remarkable. By producing high-quality TV shows and movies that are exclusive to Netflix, they have created a loyal fan base and a competitive edge.

  25. Kennedy John says:

    I never realized the extent of Netflix’s revenue streams until I read this blog. Their subscription-based model and global expansion strategies are truly impressive!

  26. Waleed Elfeel says:

    Netflix’s focus on original content is a game-changer. It’s amazing how they invest in producing unique shows and movies that keep subscribers hooked and attract new viewers.

  27. SJ Denis says:

    Hey, Please let me know the pricing details for starting the next OTT platform like Netflix & also let me know if we can connect sometime to discuss this in detail how does Netflix make more money. We will be having technical questions as well so please pull in technical people in the demo/discussion.

  28. Charlotte says:

    We wanted to make our own ott platform with necessary functionalities like Netflix our videos on your video platform and showing that videos in our Android and iOS app. There should be an option to add integration and also mid-roll and pre-roll of videos features should be there.

  29. Isabella says:

    Hello, I want to build an OTT platform like Netflix with a subscription model. I am looking for a service where I can upload my movies and need to kanow more about how does Netflix make money. Please let me know the right options and prices.

  30. Harper says:

    We are going to stream our video in high quality and efficient way so we need to create the next Netflix with an efficient video player and content delivery for our service to earn more money like Netflix.

  31. Olivia says:

    Hi, I am interested in your solution to starting an ott platform on how to earn money with advanced features like Netflix. I would like to know more and watch a quick demo.

  32. Emma says:

    I’d like to get pricing to create a netflix ott platform that is just starting up. As an experiment and cannot live with their pricing model, Need info about migration too.

  33. Amelia says:

    I am needing pricing to start Netflix streaming platform & how it earns money. There I can manage and guidance on how to make money through Netflix platform for my service.

  34. Mia says:

    Good Day, My team and I are seeking to have our own ott platform similar to Netflix. We’d like to get your assistance and details about how to earn more money. Thanks

  35. Emmanuel says:

    It’s quite interesting to know about creating an OTT platform like Netflix, Need more articles on how Netflix earns money with OTT streaming platforms.

  36. Johnny Wade says:

    Geart article about how does netflix make money. Is it possible to create a netflix like OTT platform with customized subscription, PPV, and monetization features?

  37. Gareth Bale says:

    I am planning to build an OTT platform like Netflix service for my niche-based company. Kindly provide me the more details for starting & how does Netflix make a profit.

  38. Brian Connor says:

    Hey I want to know full details about how much money does Netflix make in OTT solution with subscription model topnotch functionalities like branded platforms

  39. David Low says:

    Hi, This is David From the USA,
    We are specialized in creating content in the entertainment sector like Netflix. So planned to start our own feature-centric ott platform with a subscription model & a seamless delivery option. Is it possible with Vplayed?

  40. Micheal Jones says:

    Hey, Thanks for sharing how does Netflix generate revenue. Can you help us to build a cost-efficient ott platform like Netflix for our streaming services?

  41. Bale Gare says:

    I am planning to build an OTT platform like Netflix’s revenue model for my niche-based company. Kindly provide me the details for starting & how Netflix earns money.

  42. Watson says:

    We want to become a successful OTT service like Netflix in our region. Need an expert’s suggestion on how do Netflix shows make money with SVOD for our niche-based service?

  43. Steve Brooke says:

    Such a professional guide to how does Netflix make money with a subscription right from the scratch with necessary details. Good work team

  44. Simone says:

    Awesome piece of content with lot of information and strategies on how does netflix make money with its monthly and annual recurring revenue model.

  45. Renée says:

    Is it necessary to have content license to monetize it like Netflix, Just now checked the best one from your side about how does netflix make money you didn’t mention anything about the content part.

  46. Pauline says:

    Great info on how does netflix make money.. Its quite useful info for the content owners to know about the business models and money making techniques from the global company.

  47. Patrice says:

    I want detailed statistics on how does netflix make money without ads in Europe and USA. What are the techniques they used to reduce the churn rate for the apps.

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