Netflix's business model has evolved over time from DVD rentals by mail to streaming. It now makes most of its revenue from monthly subscription plans that allow unlimited streaming. Netflix acquires and licenses content from partners and produces original shows and movies. It has over 200 million subscribers globally and is highly profitable. However, it operates with negative cash flow due to upfront costs of content licensing and production. Netflix continues to adapt its model by expanding globally and investing heavily in new content.

1. NETFLIX BUSINESS
MODEL TEARDOWN
VINOD SP
WWW.LINKEDIN.COM/IN/VINODSP1/

2. NETFLIX
Netflix is the world's leading streaming entertainment service with 204
million paid memberships in over 190 countries enjoying TV series,
documentaries and feature films across a wide variety of genres and
languages.
Members can watch as much as they want, anytime, anywhere, on any
internet-connected screen.
Members can play, pause and resume watching, all without commercials or
commitments.

3. COMPANY - NETFLIX
CEO: Reed Hastings
Year founded:1997
Headquarter: los Gatos, USA
Type: Public
Market Capital: $240 B
Annual Revenue: 20.16 B
Profit | Net income: 1.86 Billion

4. NETFLIX - PRODUCTS
Products & services: Video on demand, Streaming to game
consoles and Recommendation engine
Major Competitors: Hulu,Amazon Prime, HBO, Sony, Disney+,
AppleTV+, YouTube

5. NETFLIX
WASN’T AN
OVERNIGHT
SUCCESS
As the story goes Netflix founder and CEO Reed Hastings
recounted how the idea behind Netflix came about:
• The genesis of Netflix came in 1997 when I got this late fee,
about $40, for Apollo 13. I remember the fee because I was
embarrassed about it.That was back in theVHS days, and it got
me thinking that there’s a big market out there.
• So, I started to investigate the idea of how to create a movie-
rental business by mail. I didn’t know about DVDs, and then a
friend of mine told me they were coming. I ran out to Tower
Records in Santa Cruz, Calif., and mailed CDs to myself, just a
disc in an envelope. It was a long 24 hours until the mail arrived
back at my house, and I ripped them open, and they were all in
great shape.That was the big excitement point.

6. WATCH
ANYWHERE.
CANCEL
ANYTIME
Users can stream 24 X 7, without any ads!
Stream
View shows & movies in high-definition
View
Get unlimited access to TV shows and movies
Get
Access to exclusive Netflix’s original movies or shows
Access
New signups can avail a 30-day free trial (1 month free of services)
Avail
Contract-oriented but can cancel at any time!
Cancel
Access locally-produced and culturally-relevant content
Relevant
Receive algorithmic recommendation for new items to watch
Receive
Avoid commercials ads- Some people like looking at commercials and other
advertisements and some people avoid them.
Avoid
Sharing accounts feature allows spouses, friends or even groups to share an
account with specific filters and preferences already set
Sharing

7. NETFLIX FLYWHEEL1 : 1998-2006
WAVE1 – Ride the DVD Adoption Curve
FLYWHEEL1 - License DVD content catalog,
acquire customers via online rental and mail order
BUSINESS MODEL1 - Rent DVDs by Mail, E-
commerce

8. NETFLIX FLYWHEEL2 : 2006-2012
WAVE2 – Ride the Broadband Adoption Curve
FLYWHEEL2 - Stream content anywhere, acquire
subscribers
BUSINESS MODEL2 - Subscribe

9. NETFLIX FLYWHEEL3 : 2012 - PRESENT
WAVE3 – Global Smartphone Use
FLYWHEEL3 - Acquire content, know users,
expand internationally
BUSINESS MODEL3 - Acquire Content,
Subscribe

10. Key Partners
 Alliances with smart TV
companies
 Alliance with gaming
industry
 TV network companies
 Google and Amazon
Key Activities
 Hire and retain
 Maintain and expand
 Produce, acquire and license
 Develop its pricing strategy
 Retain current customer base
Cost Structure
 Major purchasing rights establishment (TV Shows & Movies)
 Cost of producing movies
 Cost of recommendations, R&D
 Subscription maintenance cost
 DVDs and mail related shipping cost
Key Resources
 Development resources
 Recommendation system
 Marketing
 Legal
 Sales
 Finance
 Services
 Program Manager
Value propositions
 Users can stream 24*7, minus
the ads
 View shows & movies in HD
 Stream content conveniently
anywhere
 Unlimited access to TV shows
and Movies
 Netflix originals
 New signups can avail a 30-day
free trial
 Cancel at any time
 Receive algorithmic
recommendation
 Avoid commercial ads
Revenue Streams
 Monthly subscription plans
 Basic
 Standard
 Premium
Customer Relationships
 Self-Setup made easy
 Exceptional customer experience
 Online Live chat services
 Social media
 Netflix gift cards
Channels
 Online streaming through the
website
 Streaming on TV Apps and
Gaming consoles
 Mail delivery for DVDs
Customer
Segments
 Interested in watching
movies, TV shows and
documentaries
 Content for children and
adults
BUSINESS MODEL - NETFLIX

11. NETFLIX BUSINESS MODEL IN NUTSHELL
Netflix is a subscription-based
business model making money with 3
simple plans: basic, standard, and
premium giving access to stream
series, movies and shows.
The company is profitable, yet it runs
on negative cash flows due to upfront
cash paid for content licensing and
original content production.

12. HOW DOES
NETFLIX
MAKES
MONEY

13. SUBSCRIPTION
BASED
• Netflix has over 193
million members from
over 190 countries (as of July
2020)
• In fiscal year 2019, Netflix
generated $20.16
billion annual revenue from
both the United States and
international regions.

14. PARTNERSHIPS
• One of the most influential tactics
implemented was its ability to build
alliances with a wide range of movie
producers, filmmakers, writer, and
animators to receive content and legally
broadcasting the contents required
aligning licenses.
• To make the Netflix platform and its
streaming possible, setting the partnership
between Internet Service provider was
also crucially important.

15. TECHNOLOGY
• Technology platforms allowed
“streaming” accessibility to
become convenient and
unique
• Netflix Ecosystem
• 100s of microservices
• 1000s of daily production changes
• 10,000s of instances
• 100,000s of customer interactions per minutes
• 1,000,000s of customers
• 1,000,000,000s of metrics
• 10,000,000,000 hours of streamed
• 10s of operations engineers

16. CONCLUSION
• During the early year in 2000, Blockbuster was offered
to purchase Netflix and all of its assets for only $50
million.
• As of Oct 2020, Netflix is worth $240 Billion in
market cap value. Perhaps, it isn’t really about what a
company sells, rather, it’s about how a company sells or
promotes its products.
• Through Netflix’s powerful technological tactics,
innovating the accessibilities has helped to increase
customer/user experience positively. Netflix
implemented in several areas that helped to capture
the global market.

17. STRENGTHS
• Brand Reputation – Netflix has risen to become a household name in short
period (#4 top regulated company in Forbes)
• Global customer base – serving 190 million countries with 167 million
subscribers (strong bargaining power with movie creators)
• Originality – own publishing house to create original content with highest
quality
• Adaptability – ability to adapt the technology as their customer grew with
highest streaming quality across the globe
• Customer centric – (listen to customers and build solutions that address
their core problem- such as download now for travelers to watch offline or
bad internet connections)
• Affordable pricing – 8.99 (standard) and 15.99 for (premium ultra HD),
standard pricing is cheaper than cable providers, going to cinema halls and also
offer wider selection category

18. WEAKNESS
• Limited Copyrights – Most of its content are not owned by Netflix and it affects negatively as
copyright license gets expired after few years and content starts appearing in another sites
• Increasing Debt (managing platform and customer base across 190 countries) – As of April 2020,
Netflix reported $14.17 billion in debt and plans to raise another 1billion more this year
• Lack of Green initiative (negative impact on brand image) – while competitors such as Facebook,
Amazon, Google and Apple have started using renewable energy to sustain environment
• Over dependence on NA region – (50% of the revenue comes from NA) Major weakness as
NA market is nearing saturation
• Raising Prices – Netflix raised its subscription prices, while new VOD services such as Disney
(6.99$) and Apple (4.99$) have their services at much lower price
• Growing Operation costs – More contents gives competitive edge, however the cost of
supporting the content YOY is increasing as new genres are added.
• Rigid pricing – customer demand customized pricing and has led to stagnation in the number of
new subscriptions (20 million increase year on year)

19. OPPORTUNITIES
• Low- Price Mobile Streaming option – India mobile subscription is offered
at 3$/month and expand this offer globally to compete with Disney,Apple and
Peacock and so on
• Exploit Ad-based business model – most of their competitors makes
billions in revenue from adverts
• Expand global customer base – Expand Services and subscribers to
country such as china, North Korea, Syria and Crimea
• Alliances - Partnership with SPs and Broadcasts to offer bundle packages in
different countries
• Regional Niche Content creation – creating regional localized specific
content – For ex: originalTV series sacred games in India and Spanish series
“La Casa de Papel” which are massive hits
• Introduction of cheaperAnnual subscriptions – Binge watchers (all
favorite movies in short period) cancel their subscriptions. Offer discounts to
encourage subscribers to switch to yearly plans

20. THREATS
• Competitive Pressure – Increasing competition by continuously giving access to new and original
content from Big players such as Disney+, Apple, HBO, Amazon, Hulu, Hotjar and Youtube
• Government Regulations – Strict Governmental rules, and evolving regulations on content
creations, streaming and information restrictions can limit innovations and value creations
• Piracy – Digital piracy is at the peak, as 1000 of people have ways to download the content through
internet w/o paying subscription
• Market Saturation – Netflix America subscriber growth has slowed due to market saturation.
• Account Hacking – Drastic Increase in Netflix account hacking in the recent years. If this persists
into the future, leads to users moving to competitors
• Carbon emission – VOD generates nearly 1% of global emissions and is a major threat to the
climate change
• Government Infrastructure pressure due to capacity issue – Netflix users are growing
rapidly and straining available infrastructure and resources. Large HD Content Streaming will strain
public infrastructure. So Governments will ask to restrict their streaming to standard HD(instead of
full HD) due to infrastructure capacity and resources

21. RECOMMENDATIONS
• User penetration - Tap into new geographical location by
partnering with their local cable providers and streaming their
local and international content in various languages.
• Strengthen Platform Security – Avoid account hackings and
expose whoever is behind digital piracy
• Improve platform accessibility - Improve streaming platform
and websites by providing more user-friendly interface for their
subscribers and offering customized subscription prices
• Partner with Review aggregators - for movies andTV
shows to provide a variety of ratings and other information for
their users. Ex RottenTomatoes, Internet Movie Database
(IMDB) and other internet SPs

22. REFERENCES
• https://ir.netflix.net/financials/annual-reports-and-proxies/default.aspx
• https://bstrategyhub.com/netflix-business-model-how-does-netflix-make-money/