How does Netflix Make Money? The Key Notes on Netflix

The founders of Netflix are Reed Hastings and Marc Randolph. Both of them were pioneers in their own field. Hastings was also the founder of Pure Software and later on went to sell it for an enormous amount of $700 million. Marc had co-founded MircoWarehouse, which was a computer mail order company. They founded Netflix on August 29, 1997, in Scotts Valley, California. Netflix is now headquartered in Los Gatos.

Netflix Funding

We are here to understand how does Netflix make money? Before delving deeper into that let us first understand how does Netflix raise its funding.

Unlike other known online entertainment companies, Netflix has raised very low external funding. This was done through Venture Capital and Private Equity. Its basic source of funding is equity funding and debt funding. It has raised about $200 million from equity funding. Also, approximately $1.8 million by the means of debt funding.

Netflix has chosen to invest most of their funds on their own original content called ‘Netflix Originals’. Shows like ‘House of Cards’ and ‘Orange is the new black’ have been a hit among the viewers. Original content is the major way to bring in subscribers to their platform, which has worked for the company.

Netflix: Delivery MediumDomestic streaming content

Netflix was started first in the US. this was the basic on-demand video streaming medium available. It was only available in the US and was later expanded to Canada and the rest of the world.

International Streaming content

Once Netflix was expanded to other parts of the world, the revenue increased exponentially. The international streaming market was a great base for the company’s expansion. This was another medium of business for the company

Domestic DVD rental service

Netflix started off as an on-mail DVD rental subscription. It still operates the same but at a much lower rate. DVDs have gone out of fashion since the digital surge in our lives worldwide. Most people prefer watching movies and television programmes online rather than renting a DVD. this is another form of business that the company holds.

These are the various way in which Netflix makes money. If you’re someone who wants to build a similar business to Netflix this is all you need to know about the revenue model of the same.

How does Netflix Make Money?

After understanding the funding and the revenue model of the entertainment giant, let us look into how does Netflix make money?

Very evidently, the basic source of income for this multinational company is the subscriptions that come in from the audience. This can be for their own content or the other films and television shows available on the site.

We know that the company provides their users with three types of subscriptions. All of these subscriptions have different benefits one can avail. Let’s have a look at these in detail below:

Basic subscription

In this subscription, you can view content in standard definition. This subscription is available at 500rs/month. The following are the specific features of the basic subscription:

• The user can stream instantly and download content to watch them later in offline mode.
• The user can watch the content on only 1 screen
• HD and Ultra HD is not available in this subscription
• With this subscription, the user can watch Netflix on laptop, phone, tablet and TV
• Unlimited films and TV programmes are available to the user with this subscription
• The user can cancel the subscription anytime he wants
• The first month of the subscription is a free one month trial provided by the company

Standard subscription

In this subscription, you can view content in high definition. This subscription is available at 650 rs/month. The following are the specific features of the basic subscription:

• The user can stream instantly and download content to watch them later in offline mode.
• The user can watch the content on only 2 screens
• Ultra HD is not available in this subscription
• With this subscription, the user can watch Netflix on laptop, phone, tablet and TV
• Unlimited films and TV programmes are available to the user with this subscription
• The user can cancel the subscription anytime he wants
• The first month of the subscription is a free one month trial provided by the company

Premium subscription

In this subscription, you can view content in the ultra-high definition. This subscription is available at 800 rs/month. The following are the specific features of the basic subscription:

• The user can stream instantly and download content to watch them later in offline mode.
• The user can watch the content on only 4 screens
• Ultra HD is available in this subscription
• With this subscription, the user can watch Netflix on laptop, phone, tablet and TV
• Unlimited films and TV programmes are available to the user with this subscription
• The user can cancel the subscription anytime he wants
• The first month of the subscription is a free one month trial provided by the company

Read more: How does Netflix make money?

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