Netflix is the most popular streaming service in the world. However, Netflix does not make money the way traditional cable does. So how do movies make money on Netflix?
At the heart of Netflix’s revenue strategy, it is a subscription-based streaming service. Netflix is able to use the money gained from subscriptions to buy the streaming rights of movies and to produce its own content. This is a pretty basic rundown of how movies make money on netflix so let’s take a closer look at Netflix’s revenue strategies.
What is Netflix?
Netflix is a subscription-based video streaming service that contains a wide variety of content such as TV shows, movies, documentaries, and its own Netflix original content.
The streaming service was founded in 1997 by two American men named Reed Hastings and Marc Randolph as a DVD-by-mail service. However, the company has grown immensely since 1997.
Netflix now has over 260 million subscribers from 190+ countries, making it the most popular streaming service in the world.
Related: 10 Best Netflix Movies You Forgot About
Netflix’s Business Model
So Netflix brings a wide range of content to its subscribers. But how is it a business?
Netflix is like an online library that you pay a monthly subscription to access. The prices range from $8.99 a month, which is a basic plan, to $17.99 a month, the premium plan. These different plans affect the quality of what you are watching on your screen.
On the website, you just need to be connected to the internet and then you can browse its entire catalog to choose what you want to watch. Once on Netflix, you can binge watch any show on the streaming service to your heart’s desire.
In addition to this, Netflix makes itself more appealing by being the first to air its in-house production projects that viewers can not stream anywhere else. This includes shows like Orange Is The New Black, Stranger Things, and 13 Reasons Why. These shows are not only hit Netflix shows, but some of the most popular TV shows of all time.
So How Does Netflix Make Money?
At this point, you will have picked up on the fact that Netflix makes money through subscriptions. But what does that really mean?
Netflix makes money from three different sources: subscriptions, partnerships, and ad revenue.
As previously discussed, the Netflix subscription consists of three different plans ranging in price: The standard subscription with ads, the standard subscription without ads and the premium subscription. The more expensive the plan, the higher the quality of the picture. Once viewers pay for the subscription, they gain access to Netflix’s broad library.
Almost 90% of Netflix’s revenue comes from subscriptions and strategic partnerships. In 2023, Netflix made $35 billion in revenue from subscriptions alone. Approximately 10% of its revenue comes from advertising.
Strategic Partnerships
To bring more subscribers in and make money, Netflix is a part of five different kinds of strategic partnerships.
- Distribution Partnerships: Netflix often partners with telecom companies, cable providers and other distributors of media. These partnerships allow Netflix to be pre-installed as a part of consumers’ bundled packages or add-on subscriptions. This allows Netflix to earn a portion of the subscription fees paid by customers to the distributors.
- Device Partnerships: Sometimes, Netflix partners with manufacturers such as Samsung and LG to ensure that its app is available on their products. This way, a percentage of the subscription revenue is generated by their products.
- Content Partnerships: Netflix also engages in partnerships or licensing agreements with other media companies to participate in revenue-sharing agreements, gaining Netflix a percentage of the revenue.
- Marketing Partnerships: Another kind of partnership Netflix forms is a marketing partnership with other brands to promote its content. These kinds of partnerships often include co-branded marketing campaigns, content that is sponsored by the company, or cross-promotional ads. This kind of partnership allows Netflix to attract more people to subscribe, thus upping their revenue.
- International Expansion: As Netflix’s audience is expanding globally, Netflix needs to know what their international consumers are looking for. So, in international places, Netflix may engage in partnerships with local media companies to learn more about local content and to be a part of revenue-sharing agreements.
Though subscriptions make up the majority of Netflix’s revenue, strategic-partnerships play a crucial role in Netflix’s success, especially its constant expansion to new subscribers.
Read More: 5 Best Netflix Shows of 2024, Ranked
Conclusion
Hopefully you now have a better understanding of how Netflix makes money. But how do movies make money on Netflix? It is kind of like a cycle. Subscribers provide Netflix with the money to buy the rights to movies or produce content. Then, Netflix is able to provide subscribers with higher quality content which helps them continually gain new subscribers. The more subscribers Netflix has, the more money movies make.
If you take anything away from this, know that at the heart of it, the success of Netflix and the movies streaming on Netflix completely depends on subscribers.
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