Netflix business model: How does the Streaming platform work?

No platform says ‘streaming’ quite like Netflix does. It is the world’s seventh-largest Internet company in terms of revenue but above that, it’s a revolutionary brand that completely changed the way people consume content on the internet. Netflix plays a significant role in large part of the internet populace as a place where they watch their favorite shows and enjoy movies on as many devices as they want. 

If you are and entrepreneur looking to build a streaming service similar to Netflix, understanding how the latter works is crucial. So this article will focus on the Netflix business model and help you understand its growth and strategy. 

Key Aspects of Netflix Model:

• Netflix started as a physical mail service to rent DVDs in 1997
• Since 2007, Netflix is streaming online videos, marking its appearance in PS3 and Smart TVs in 2009
• House of Cards, Hemlock Grove, and Orange Is the New Black was Netflix’s first original series
• With ‘The White Helmets’, Netflix won its first Oscar, in 2017
• In 2019, Netflix made a business of about $20 Billion
• In the first quarter of 2020, Netflix increased its total revenue by 13%
• Netflix has now reached over 200 million subscribers, with a market cap of over $93 billion.

Netflix Inc.

With over little 20 years in the field, the success of Netflix wasn’t overnight. It started back in 1997 with the vision to deliver out mails containing DVDs of video games, popular shows, and movies in North America. With Technological advancements and internet boom, Netflix revamped it business model and started to stream movies in Canada first and then expanded to 43 other countries in just one year. This transformation introduced a new era of video streaming all over the world. 

Today, Netflix’s subscriber base consists of 15% of global internet traffic. But with the available data, questions like what is Netflix’s business model? How does Netflix make revenue? and what will be the Netflix business model strategy going forward? are set to come up in our minds.

So let’s check out Netflix’s new business model is and if it’s sustainable!

Read more: Top streaming services in USA

The Netflix Business Model

Presently, Netflix is streaming in over 190 countries, with a total subscriber base of over 200 million viewers. Further, it offers content in over 270 languages, creating a globally inclusive platform where diverse group of people consume content at a reasonable cost. 

Netflix Original Business Model

Originally, Netflix’s business model was to rent out DVDs to people of North America through US Portal Services. This rental charged a fixed fee, and subscribers were allotted a fixed number of DVDs. If a subscriber wanted a new DVD, he had to send back a unit through a replying envelope back. 

A year later, Netflix changed its business model strategy of renting out DVDs to online subscriptions with a fixed monthly payment. This move helped them to manage the business operations well. Also, this served subscribers with reduced fees, increasing the subscriber base in the first year itself. 

How does the new Netflix Business Model Work? 

Being available on various platforms (websites, TV apps, Mobile apps), Netflix is one of the largest cross-platform systems available today.

Subscribers pay a simple low monthly cost to be able to watch their favorite shows at utmost comfort. With data-driven technology, it offers personalized recommendations and finds shows and movies fitting your personal preferences.

Netflix offers three basic types of subscription plans but could be more or less depending on the country. These plans (USA) are also not set in stone:

Among these subscription plans, you could choose yours based on your requirements. 

Basic: ($8.99/mo) offers you standard-definition 720p video resolution and HD 1080p video resolution for a single screen.

Standard: ($13.99/mo) allows you to stream content on two different devices simultaneously.

Premium: ($17.99/mo) allows four users to watch at the same time, offering HD and Ultra HD quality video resolution. 

With these subscriptions, users can watch all types of available TV shows and movies worldwide. 

In 2020, Netflix generated $25 billion, continuing a year-on-year growth. 

Business Segments

The business model of Netflix consists of three segments:

Domestic Streaming: streaming content in the United States and generating revenues from monthly membership

International Streaming: revenues from monthly membership generated from content streaming outside of the US

Domestic DVD: revenues from monthly membership fees for services consisting solely of DVD-by-mail

How Sustainable is the Business Model Of Netflix?

Netflix runs on the Subscription Video on Demand (SVOD) model to access an extensive streaming library. Thus, the primary source of revenue is through subscriptions. 

The mixture of several ingredients is what makes a business model successful. In the case of Netflix, it is an on-demand business model strategy with a simple subscription plan. 

On-demand & Subscription: Stakes are high

Netflix’s business model canvas took years to mature. The subscription-based model requires a lot of financial resources to succeed in international markets. Logic, scalability, constant support, expansion, innovation, and ways to make sure your subscribers stick as long as possible, and more is what is needed to make the business model work.

As witnessed, it took Netflix 13 years to start expanding outside the US. Finally, in 2016, after almost twenty years, Netflix was able to reach Asia and Oceania.

Netflix has been performing well. The subscriber base has increased, which ensured an increase in revenue in the last decade. Furthermore, with innovation and technology, Netflix was able to out-cast all its competitors like Blockbuster, which failed to recognize the algorithms behind each logistics facility and struggled to automate them. 

It is an opportune time to create and own a video-streaming site. Even though it may sound like a costly and tedious task, all you need most is the ability to organize and gain users. How does a free video-streaming site sound? Create your own video-streaming website using a Netflix clone software like iScripts Visualcaster.

It includes all the impressive features you would need for your site to be successful. Best of all, it’s free! Install this software on a server and customize the logo and content to fit your own brand image.  There are many web hosting solutions for your business.

Attract traffic and users to your site and shortly after, you can see revenue from ads or create payment plans if you wish. Incorporate the script into an existing website to add more features to expand your business.