How does Netflix make money? what’s great about


Company Profile


Netflix (ticker: NFLX) was founded on August 29, 1997 by Reed Hastings and Mark Randolph. The duo first considered shipping VHS tapes, but eventually found they were too expensive to stock and too flimsy to ship.

Subscription service

In 1999, a subscription-based service was launched. By 2009, Netflix could provide more than 100,000 movie DVDs, with more than 10 million subscribers. Netflix sold its first subscription service 25 years ago. For the company founded in 1997, this decision was one of the major milestones.

Digital streaming

Netflix’s streaming service launched in January 2007, bringing video-on-demand to a wider audience. Until then, the site was just a way for consumers to order DVDs, as there was no sizable or well-known streaming video service on the Internet.

When Netflix’s streaming service launched, it offered just 1,000 movies, compared with 70,000 on DVD.

The site’s original vision was that consumers could download movies overnight and prepare to watch them the next day. But as internet speeds improved, the first update of the modern Netflix was born.

Mail and stream split

In 2011, Netflix announced that it would separate its DVD mail service from its online streaming service and set a monthly subscription fee for both services at $7.99.

This decision coincided with the decision to start producing original content.

Initial public offering

Netflix went public on May 22, 2002, offering 5.5 million shares at $15 each. After more than 20 years, it reached an all-time high of $691 in 2021. When Netflix went public, it only had 600,000 subscribers. That number is now more than 230 million.

Netflix’s original business scope

When Netflix was first founded, its main business was an OTT service company that provided Internet-on-demand streaming videos, and at the same time operated a single-rate postal video disc rental service in the United States. The latter used return envelopes to send DVD and Blu-ray rental discs Send the piece to the receiving address specified by the consumer.

Operating situation

Business model

Its business model is also relatively simple. It mainly earns income by charging customers monthly or annual membership fees. After customers subscribe to the membership, they can obtain TV series and movies of various types and languages on the Netflix platform. Netflix currently provides video streaming services to customers in more than 190 countries, and customers can watch Netflix content at any time, anywhere, and on any device.

Market share

After years of competition, Netflix’s market share in this industry has dropped significantly. According to Just Watch’s research report, as of December 2022, Netflix will still be the company with the largest market share in this industry, but the market share of Amazon’s Prime Video and Disney’s Disney+ is already very close to Netflix.

Revenue by country

In fiscal year 2022, the revenue share of each region:

  • United States: 45%
  • EMEA: 31%
  • Latin America: 13%
  • Asia Pacific: 1 1%

This geographic diversification also mitigates the risk of Netflix becoming overly dependent on one particular region or country. Compared with fiscal 2021, Netflix’s revenue growth in fiscal 2022 will mainly come from Latin America and Asia Pacific, while revenues in other regions have declined.

However, Netflix is still unable to broadcast in China, the world’s largest market.

FY2022 Performance

Netflix’s fiscal year 2022 revenue hit $31.6 billion, a 6.5% increase compared to the previous year. The increase is mainly due to the addition of 9 million paid members in fiscal year 2022 and the increase in membership prices. While Netflix’s revenue increased in FY2022, its operating profit declined (from $6.2 billion in FY2021 to $5.6 billion in FY2022). The decrease was primarily due to higher operating expenses due to higher acquisition, licensing and content production expenses. It is worth noting that most players in the video streaming industry are investing heavily in content in FY2022.

Netflix has $2 billion in operating cash flow in fiscal 2022, while its free cash flow totals $1.6 billion. This is a big improvement from the previous year (when Netflix’s operating cash flow was no longer sufficient to cover capital expenditures).

The company’s cash and cash equivalents position has now reached $6.1 billion, and its net debt has dropped to $10.9 billion.


Original contents

means content exclusively produced, co-produced or distributed by Netflix on its Services. Netflix doesn’t finance its original shows when it signs on, unlike other TV networks, they pre-fund and immediately order two seasons of most series, and reserve more future revenue opportunities (such as possible syndication , merchandising, etc.) commercially successful series.

In March 2011, Netflix purchased the production rights to “House of Cards”. The political drama premiered in 2013 and has become a hit on the platform.

By late 2011, Netflix had also purchased the rights to a new season of “Arrested Development” and an original series “Orange is the New Black,” and began investing heavily in a shift toward original programming.

Netflix’s first big hit was the July 2016 sci-fi horror series Stranger Things, which went viral, setting the stage for an upcoming spinoff and Millie Bobby Brown. Brown’s career was laid. The show ran for four seasons and was nominated for 10 Emmy Awards.

Then, in September 2021, Netflix debuted its biggest series yet, “The Squid Game,” a Korean-produced horror drama. The show racked up 1.6 billion hours watched in its first 28 days, cementing Netflix’s status as the world’s most popular streaming service.

Movie and TV Deals

Netflix has exclusive pay-TV deals with multiple studios. The deals give Netflix exclusive streaming rights while also adhering to the rights and obligations of traditional pay-TV terms.

Supported Devices and Equipment

Netflix can be accessed through a web browser on a personal computer, and the Netflix app is available on a variety of platforms, including Blu-ray players, tablets, mobile phones, smart TVs, digital media players and video game consoles (including Xbox Series X and Series S and later, and PlayStation 5 and later).

Additionally, a growing number of multi-channel TV providers, including cable and IPTV services, have added the Netflix app to their own set-top boxes.

Set many records

Oscars and emmys

With a proliferation of original streaming content on the site and a matching fast-growing budget, Netflix began attracting the likes of Martin Scorsese, Guillermo del Toro and Alfonso Cuaron. Award-winning filmmaker.

Now, just 10 years after Netflix debuted its original content, the streaming site has produced eight Academy Award nominees for Best Picture. Two of those films — “Roma” and “The Story of Inuyama” — won best director awards.

Meanwhile, Netflix has been dominating the small screen awards. In 2021, it won 44 Emmys, more than any other network or streaming service for the first time. In fact, it had more than double the win rate of its closest competitor (HBO) that year. In 2022, Netflix won 26 Emmy Awards, including six for “The Squid Game” and five for “Stranger Things.” Another Netflix hit, The Crown, is the most Emmy-winning Netflix show with 21 of its 62 nominations.

The king of video streaming

In terms of pure streaming video services, excluding other non-streaming video services, Netflix is the world’s largest streaming video provider.

Other achievements

In February 2022, Netflix was the world’s second largest media and entertainment company by market value. In 2019, Netflix joined the Motion Picture Association of America (MPA). In addition, Netflix is also listed as one of the technology giants by some media.


As of March 2023, Netflix’s streaming service has 230 million subscribers worldwide, and 73.3 million subscribers in the United States.

Non-visual business

Development of Original Programs

Netflix Originals means content that is exclusively produced, co-produced or distributed by Netflix on its service. Netflix funds its original programming differently than other TV networks when they sign a project, they pre-fund and immediately order two seasons of most series, and reserve more future revenue opportunities (such as possible syndication, merchandise sales, etc.) commercially successful series

International production

In November 2017, Netflix announced the production of its first Columbia original series.


In July 2021, Netflix hired Mike Verdu, a former executive at Electronic Arts (ticker: EA ) and META (ticker: META ), as vice president of game development, with plans to add video games by 2022. Netflix has announced plans to release mobile games that will be included with subscribers’ service plans.

Netflix will officially launch mobile games on the Andex platform on November 2, 2021. Through the mobile gaming app, subscribers get free access to five games, including two previously made Stranger Things games. Netflix intends to add more games to the service over time. On November 9, the corresponding iOS version of the series was launched. In addition to continuing to expand their game portfolio, Netflix has taken a huge interest in cloud gaming.

And in order to support the development of the game, Netflix began to establish many studios through mergers and acquisitions.


In July 2022, Netflix announced an ad-supported subscription service in partnership with Microsoft. Netflix’s planned ad service will not allow subscribers to download the content of the film like existing ad-free platforms.

However, due to poor results, in July 2023, Netflix confirmed that the company had canceled its lowest-level ad-free subscription plan in the United States and the United Kingdom. The company is looking for ways to increase revenue in the mature streaming service market.


In January 2022, Netflix ordered more sports documentaries from Drive to Survive producer Box to Box Films, with one series following PGA Tour golfers and another following professional tennis players on the ATP and WTA tours. performance on the track.

Cracking down on account sharing

How many people share the account?

By the end of the first quarter of 2022, Netflix estimates that 100 million households worldwide share their account passwords with others. In March 2022, Netflix began charging for additional subscribers in Chile, Peru and Costa Rica in an attempt to rein in account sharing.

Subscribers dwindled at first, but recovered

Signs of strong subscriber numbers follow Netflix US crackdown on streaming passwords. Netflix’s practices, which included urging members to limit their use to a single household and urging them to buy additional memberships at a lower price for those sharing from outside, led to a huge increase in subscribers.

Netflix has averaged 73,000 daily signups in the period since it announced the move in the U.S., a 102% increase over the 60-day period, a figure that even exceeds Netflix’s peak signups during the initial COVID-19 lockdown.

The global password-sharing crackdown has delivered strong subscriber growth in the second quarter of 2023, a boon for the company as its rivals grapple with a flagging TV business and costly streaming business.

Main competitors

The main competitors of Netflix are the following streaming companies, all of which are very large in scale:


Fierce competition

Netflix faces tough competition from other streaming platforms like Amazon’s Prime Video, Disney
Ni’s Disney+, Warner Bros.’ HBO Max, etc. Increased competition could lead to higher operating expenses for Netflix, lower subscriber numbers and pressure on membership prices. All of this could negatively impact Netflix’s financial performance.

International expansion

Netflix’s international expansion will face challenges. Although Netflix has expanded its business in more than 190 countries/regions around the world, this has brought it challenges in adapting to different cultures, languages and regulations. While this expansion has the potential to generate higher revenue, it could also result in higher content costs, currency risk and operational challenges.

Currency risk

The majority of Netflix’s revenue comes from markets outside the U.S., with currencies other than the U.S. dollar already accounting for 56% of its revenue in fiscal 2022. As a result, Netflix faces currency risk. For reference, the company reports that if exchange rates remain constant compared to 2021, its revenue will increase by about $1.8 billion. These risks are not only reflected in revenue, but also in expenses, because Netflix operates in different regions at the same time. Management must continue to execute an effective strategy to mitigate this risk.

Closing words

Netflix is one of the top players in the market despite facing competition from other streaming services. Netflix has improved dramatically in recent years, with an already healthy balance sheet, focus on international expansion, new ad revenue model

credit: wikimedia

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