For many people in the world, Netflix is ​​a gateway to the fantastic world of entertainment. Movies, TV series, documentaries, miniseries… From all over the world and without commercials. However, it’s time to analyze where the magic comes from. We’re going to talk about the business model of this company.

Netflix’s business model

First of all, we must recall that Netflix was born in 1997 as an idea by Reed Hastings. Who, upon receiving a penalty from the Blockbuster video store franchise for delivering a late movie, decided to create a service where this would not happen. However, maintaining a profitable business model would be a challenge for him.

During its first years of life, Netflix suffered economic losses to the point that it offered to be purchased by Blockbuster for $50 million. A proposal that was rejected. But that didn’t prevent its method of income through monthly subscriptions from being successful. After renting DVDs over the Internet for a long time, they began to receive profits.

Netflix Logo 1998
This was the Netflix logo from 1997 until the 2000s. During the years when the company offered DVDs by mail. Source: Logopedia – Fandom

Currently, this company has 125 million subscribers worldwide and confirmed earnings of $11,692 billion as of 2017. To understand how it was achieved, we have to analyze its main sources of income and how they have sold so much in recent years.

Its main customers

Like any business, Netflix is ​​a company aimed at a specific customer segment. To which they aim their marketing and promotion strategies since they’re the ones who use their services more frequently and pay for their monthly subscriptions.

However, it should be noted that they have 3 types of clients. Those who are fans of movies and television series, people who don’t have time to buy DVDs and any individual willing to give money for good service. This is where the value proposition of Netflix comes from: offer audiovisual content legally at any time.

As we said before, its main way to earn income is through monthly subscriptions. Namely, the user opts for a subscription to the Netflix network for a specific amount of money. Which lasts one month and can be renewed. Of course, some subscriptions offer more benefits but have higher prices.

how much are the netflix plans
These are the plans offered by Netflix, ordered according to available prices and benefits. The best known of all is the first free month offer on the platform. Source: 9to5Google

Licenses payment and original content production

Netflix offers audiovisual content through streaming, ergo, said content is displayed without interruptions while downloading  it. But to be able to offer the greatest films and the most successful television series, it must pay licenses for each one of them to have the right to transmit them on its platform.

And as expected, these licenses and permits cost a lot of money. For that same reason, the company realized that it couldn’t subsist on this. So it decided to create its own exclusive audiovisual productions for its platform, which are known as “Netflix Originals”.

Among several of these original productions, there are series and films that have been very successful. Like Orange Is the New Black, 13 Reasons Why, House of Cards, Tallulah, Okja and many others. These productions allow Netflix to profit without having to pay for a license.

Netflix Originals 2018
Some of the original television series that Netflix transmits in 2018. Several of them have obtained a notorious success. Source: New On Netflix: NEWS

This company has more than 10 years in the market. And without a doubt, it knew very well how to establish its business model through subscriptions and online movie rentals. Some people consider that even so, Netflix is ​​unstable but in any case it has managed to stay steady. Always adapting to the circumstances.

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Netflix teaches us that perseverance makes you successful!

Photo used for the entry’s featured image by stockcatalog/www.quotecatalog.com on Flickr.com/CC BY