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Here is How Netflix makes money

February 27, 2019

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Netflix is the leading internet television network in the world. This has over 125 million members in over 190 countries enjoying more than 125 million hours of movies and TV shows per day. With a wide range of movies, documentaries and TV shows being offered by Netflix, the target market also becomes vast. It happens to be the people who are 17 to 60 years of age and also the households with income levels of $30,000 and up.

  • What is the business model of Netflix?

The major and only source of revenue for Netflix is the subscription fee. The Netflix only offers its services to the users on the basis of these monthly subscriptions. The users are offered with three different payment plans that are designed with respect to the quality of the content provided. These plans are as follows:

  • Basic: Content is streamed in Standard Definition
  • Standard: Content is streamed in High Definition
  • Premium: Content is streamed in Ultra High Definition

The costs of these payment plans differs according to the difference in countries. The company has three business segments which are as follows.

  • Domestic streaming: This includes the revenues that are generated from the content streamed only by the users in USA.
  • International Streaming: This is solely for the content streaming done by the users outside the US.  
  • Domestic DVD: This is for the membership fee that comes in return of the services that are provided locally for the DVD sent by mail to the customers.

The success of your business depends on how easily your product or service is available for the audience.

USP of Netflix:

The unique selling proposition of Netflix is the fact that it releases exclusive shows; entire season at the same time. This keeps the users hooked and allow them to binge watch their favorite shows.

Facts driving you towards Netflix?

People had a couple of reasons for making their way to Netflix and considering it as an important part of their daily routines. However, the factors that are essential and which drove audiences towards Netflix are as follows:

  • Technology: The seamless internet service is a big reason why Netflix became so easy to use and access.
  • Comfort: With the busy lifestyle and too much on the list, people now do not have the time and energy to go out and rent movies. Netflix has made lives super easy with a long list of TV shows, movies, documentaries etc. that users can choose from and watch wherever and whenever they want.
  • No restrictions: Netflix has no geographical restrictions and the usage is very easy as you can access it anywhere at any time.
  • Subscription: The subscription has no hidden charges. The payment plan is clearly explained and the users are allowed to pick and choose what they want so that there are no future regrets.
  • Personal Preferences: Netflix tends to keep a track of the user’s preferences and allows the user to have a list of content that he may want to look at and stream. This feature also attracts the users as the personal benefits are always pleasing.   
  • Key Factors of Netflix Business Model:
  • Consumer Segments: With the presence of internet and the availability of a TV or a smartphone, all those people who watch movies etc. using these resources are basically the customer segment of Netflix which in short becomes a mass market segment.
  • Customer Relationship: The availability of a variety of content and specifically the content that’s offered keeping the preferences of the customer in mind, makes it more user friendly and results in a good customer relationship, as the users binge watch and spend an ample amount of time using Netflix.
  • Value Proposition: The vast variety of content available on Netflix is licensed and there is no threat of piracy. The service is smooth and seamless, with subtitles available in different languages and no interruptions in the form of advertisements. The Netflix can be accessed on a multiple number of devices such as smart phones, TV, tablets and gaming consoles.
  • Key Activities: The content procurement is a major activity that involves taking permissions from different content providers such as Disney, HBO, Sony etc.
  • Key Resources: The Bandwidth is the major key resource. 60 to 70 percent of the video streaming is done on YouTube and Netflix and therefore the bandwidth plays a major role in running and making Netflix a success.
  • Key Partners: The key partners who collaborate with Netflix in order to deliver a seamless service to you, are ISPs (Internet service providers) and Movie and TV studios.  
  • Cost Structure: The software engineers, the hardware involved ensuring the content is delivered smoothly and that there is no lagging, constitute majorly of the cost structure. The cost incurred in creating content that is owned by Netflix is also included in this.  
  • Channels: The channels where you can get Netflix from are either Play store or Apple Store for the phone users or you can access it by using a website.
  • Revenue Streams: The subscriptions are the only major source of revenue for Netflix, according to the business model.
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Here is How Netflix makes money
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Here is How Netflix makes money
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Netflix is the leading internet television network in the world. This has over 125 million members in over 190 countries enjoying more than 125 million hours of movies and TV shows per day.
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Digital Express
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