<\/span><\/h2>\nWe are here to understand how does Netflix make money? Before delving deeper into that let us first understand how does Netflix raise its funding.<\/span><\/p>\nUnlike 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.<\/span><\/p>\nNetflix has chosen to invest most of their funds on their own original content called \u2018Netflix Originals\u2019. Shows like \u2018House of Cards\u2019 and \u2018Orange is the new black\u2019 have been a hit among the viewers. Original content are the major way to bring in subscribers to their platform, which has worked for the company.<\/span><\/p>\n<\/span>Netflix: Cost of Revenue<\/span><\/span><\/h2>\nLike every other business, Netflix also has a detailed revenue model. This has to be looked into if you want to understand how does Netflix make money?<\/span><\/p>\nNetflix invests most of its money in these major deals that run the company.\u00a0<\/span><\/p>\n\n- Licensing<\/span><\/li>\n
- Production<\/span><\/li>\n
- Marketing<\/span><\/li>\n
- Research & Development<\/span><\/li>\n
- Technology & Development<\/span><\/li>\n
- General and administrative<\/span><\/li>\n
- Miscellaneous<\/span><\/li>\n<\/ul>\n
These are the major avenues which run this digital entertainment giant. Let us look into these in a bit more detail.<\/span><\/p>\n<\/span>Licensing<\/span><\/span><\/h3>\nWe know that Netflix started off as an on-mail rental DVD subscription. When the transaction from DVDs to on-demand video streaming happened. Licensing became a huge part of the deal. Netflix had to buy licenses to the films and television shows it wanted to stream on their online portal. To keep the subscribers coming in, Netflix had to make sure that they have the most popular and the best critically acclaimed movies. This is still the major investment the company is running on.<\/span><\/p>\n<\/span>Production<\/span><\/span><\/h3>\nNetflix converted to an on-demand video streaming company in 2007. It started its own production \u2018Netflix Originals\u2019 in 2016. With the beginning of this, their own content and productions became another major avenue Netflix was investing in.<\/span><\/p>\nAfter attaining a grand success in the on-demand streaming business, Netflix started their own production. \u2018Netflix Originals\u2019 were an instant hit and have been popular ever since. This started with the release of \u2018House of Cards\u2019 and \u2018Orange is the new black\u2019 which were superhits among the Netflix audience.<\/span><\/p>\nThese productions took up a huge amount of investment in the company. With these investments, they also brought in regular subscribers. Netflix original productions have been a huge source to bring in subscribers to the business. To maintain these subscribers Netflix now has to come with a lot of their own content regularly.<\/span><\/p>\n<\/span>Marketing<\/span><\/span><\/h3>\nMarketing again is very important for the company. This again is a good investment for the company because the original content has to be showcased very frequently to the audience. Marketing gives a wide reach to the company and brings in a lot of new subscribers.<\/span><\/p>\nWe can understand this as every show or genre of movie has a particular target audience. It is very important for the company to reach out to that target audience. Once these audiences are made aware of the available content, an interest is aroused in them leading to them taking the subscription. Which brings in business.<\/span><\/p>\nMarketing helps the company to find and reach the exact target audience for all their original shows. This is also done for their other movies and television shows available on Netflix.<\/span><\/p>\n<\/span>Research and Development<\/span><\/span><\/h3>\nIn any business, research is very important. Netflix particularly takes its research and development very seriously. It makes sure that they find out the best content to get the distribution rights for. Netflix also makes sure that the research and development are done well for the original content they have to produce. It costs them well but it yields the desired results as well.<\/span><\/p>\n<\/span>Technology and Development<\/span><\/span><\/h3>\nWith millions of subscribers, Netflix has to keep its technology up-to-date. It has to make sure that the online portal by partnering with hundreds of ISPs to take into account the enormous amount of traffic received. All of this is very necessary to give the user a lag free and seamless experience on Netflix.<\/span><\/p>\nThe technology involves streaming delivery technology costs, design application costs, and the other infrastructural costs.<\/span><\/p>\n<\/span>General and Administrative<\/span><\/span><\/h3>\nThis involves all the infrastructural costs of the company. It also involves the payroll of all the employees and other general flowing costs.<\/span><\/p>\n<\/span>Miscellaneous Costs<\/span><\/span><\/h3>\nThe company sometimes has to bear some of the extra costs. Some of them can be named as the payment processing fees, DVD postage fees or the amortization of the streaming content.<\/span><\/p>\nAll of these were the avenues where the multinational entertainment giant is investing its money.<\/span><\/p>\n<\/span>How does Netflix Make Money?<\/span><\/span><\/h2>\nAfter understanding the funding and the revenue model of the entertainment giant, let us look into how does Netflix make money?<\/span><\/p>\nVery 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.<\/span><\/p>\nWe know that the company provides their users with three types of subscriptions. All of these subscriptions have different benefits one can avail. Let\u2019s have a look at these in detail below:<\/span><\/p>\n<\/span>Basic subscription<\/span><\/span><\/h3>\nIn 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:<\/span><\/p>\n\n- The user can stream instantly and download content to watch them later in offline mode.<\/span><\/li>\n
- The user can watch the content on only 1 screen<\/span><\/li>\n
- HD and Ultra HD is not available in this subscription<\/span><\/li>\n
- With this subscription, the user can watch Netflix on laptop, phone, tablet and TV<\/span><\/li>\n
- Unlimited films and TV programmes are available to the user with this subscription<\/span><\/li>\n
- The user can cancel the subscription anytime he wants<\/span><\/li>\n
- The first month of the subscription is a free one month trial provided by the company<\/span><\/li>\n<\/ul>\n
<\/span>Standard subscription<\/span><\/span><\/h3>\nIn 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:<\/span><\/p>\n\n- The user can stream instantly and download content to watch them later in offline mode.<\/span><\/li>\n
- The user can watch the content on only 2 screens<\/span><\/li>\n
- Ultra HD is not available in this subscription<\/span><\/li>\n
- With this subscription, the user can watch Netflix on laptop, phone, tablet and TV<\/span><\/li>\n
- Unlimited films and TV programmes are available to the user with this subscription<\/span><\/li>\n
- The user can cancel the subscription anytime he wants<\/span><\/li>\n
- The first month of the subscription is a free one month trial provided by the company<\/span><\/li>\n<\/ul>\n
<\/span>Premium subscription<\/span><\/span><\/h3>\nIn 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:<\/span><\/p>\n\n- The user can stream instantly and download content to watch them later in offline mode.<\/span><\/li>\n
- The user can watch the content on only 4 screens<\/span><\/li>\n
- Ultra HD is available in this subscription<\/span><\/li>\n
- With this subscription, the user can watch Netflix on laptop, phone, tablet and TV<\/span><\/li>\n
- Unlimited films and TV programmes are available to the user with this subscription<\/span><\/li>\n
- The user can cancel the subscription anytime he wants<\/span><\/li>\n
- The first month of the subscription is a free one month trial provided by the company<\/span><\/li>\n<\/ul>\n
<\/span>Netflix: Delivery Medium<\/span><\/span><\/h2>\n<\/span>Domestic streaming content<\/span><\/span><\/h3>\nNetflix 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.<\/span><\/p>\n<\/span>International Streaming content<\/span><\/span><\/h3>\nOnce Netflix was expanded to other parts of the world, the revenue increased exponentially. The international streaming market was a great base for the company\u2019s expansion. This was another medium of business for the company<\/span><\/p>\n
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