Netflix Business Model

Netflix Business Model: Ultimate Guide For Success In 2022

Elena Hudgens
By Elena Hudgens 11 Min Read

Netflix, Inc. is one of the most successful entertainment media companies. So it’s obvious to have some curiosity about the Netflix Business Model. Initially, the company began providing movies and TV in 1998 by sending physical copies to customers via standard shipping.

Netflix’s journey from physical copies of handouts to allowing people to stream their favorite content has been a success story. The company has managed to transform its business model over time through changes in technology.

Netflix has evolved its business structure by using streaming technologies to offer high-quality TV and movies. The application offers its viewers the possibility to stream, watch and even create an account.

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1. Netflix’s Key Partners

A key partner or partners help a company grow by bringing in more resources, reaching more customers, increasing overall efficiency, and adding value to the organization. Following are the Key Partnerships in the Netflix Business Model:

  • It has partnered with more than 35+ media companies. In addition, Netflix now offers millions of different movies that subscribers can easily choose from.
  • Netflix’s primary goal is to attract “gamer customers.” Netflix has formed alliances with smart TV manufacturers, LG and Sony. Netflix has also teamed up with other brands from different industries, such as gaming, to offer its customers a subscription service for video games.
  • Netflix has partnered with Dish and other TV network companies since they converted their mail-in system into a streaming service. In the transition, they partnered with Apple, Android, and Microsoft. Netflix has even partnered with Google and Amazon to join networks that are Big Data providers like them.
  • Recently, Netflix partnered with Samsung to integrate its streaming service on Galaxy smartphones. In return, Samsung users get Netflix’s original shows and special bonus content in addition to the standard video selection package. To further expand its reach into West Africa, Netflix has partnered with Nigerian filmmaker Mo Abudu, who owns Ebony Life TV. This partnership will allow Netflix to produce new content targeted at African viewers from Nigeria, Ghana, and Kenya.
  • Netflix has partnered with six Japanese animators – CLAMP, The Kindaichi Case Files, Mobile Suit Gundam, Goth, Mardock Scramble, and Thermae Romae – to produce original content.

2. Netflix’s value propositions

The value proposition is what an organization provides to its customers, something that is unique or something that solves a problem faced by the customers. Netflix Business Model strategically employs methods to provide the best customer experience by offering value propositions.

  • 24×7 streaming without ads
  • High-definition shows and movies
  • Convenient streaming of content at any location
  • Unlimited access to TV series and movies
  • Exclusive access to Netflix’s original movies and shows 30-day free trial or 1-month free services for new signups
  • Freedom to cancel the contract at any time
  • Locally produced content and culturally relevant content
  • New options through algorithmic recommendations
  • Flexibility to enable or disable notifications and suggestions
  • User profiles allow users to personalize their accounts and preferences.
  • Different profiles for children
  • Option to share accounts
  • The company has made it its mission to solve many people’s problems with four simple words – “Watch Anywhere. Cancel Anytime.”

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3. Netflix’s Key Activities

The activities that take place in the company on regular intervals or daily basis that make the organization what it is are the key activities in a business model. The key activities in the Netflix Business Model include:

  • Hiring and retaining software and technology experts.
  • Maintaining and expanding the website, mobile apps, and TV apps.
  • Producing, acquiring, and licensing original content to expand video libraries.
  • Develop a pricing strategy and subscription model to make it affordable and attract new customers.
  • Developing a roadmap to penetrate the new market.
  • Great recommendations for users to retain their current customer base.
  • Build partnerships with studios and content production houses.
  • Negotiating contracts with studios, content providers, and film production companies.
  • Compliance with laws depending on state or region/country.
  • Compliance with censorship
  • Supporting disadvantaged communities or other ideological issues important to clients.
  • Development of local original content.

4. Netflix’s Customer Segments

Netflix offers a wide range of movies and shows ( TV ) to watch. The content is also tailored to everyone’s tastes, and most people can agree that they want to watch it.

Netflix offers content for both children and adults, but Netflix strives to promote family-friendly, educational, and entertaining content to reach the interests of families.

Therefore Netflix Business Model has a varied customer segment.

5. Netflix’s Customer Relationships

In a market, a customer is the king and given so many options; one thing that sets you apart is your relationship with your customers. Customer relationships are given vital importance in the Netflix Business Model.

  • The self-service experience is simple.
  • The platform was originally designed to ensure that it was simple and easy to use.
  • The website developers have made sure that the elements and themes that serve the user experience are interconnected and allow for self-installation.
  • Highly rated customer experience.
  • Customer service is provided through the website portal and email inquiries.
  • You can reach a representative directly via phone and live chat.
  • Online live chat services.
  • Inquiries regarding discounts and other special offers are available to eligible users.
  • Social media channels.
  • Post ads offer, and special promotions through social media channels and other appropriate platforms to ensure high appeal to customers and new users.
  • Social media is also used to inform and update people who work or are familiar with the Netflix platform, including Facebook, LinkedIn, Instagram, Twitter, Snapchat, etc.
  • Netflix E-Gift Cards.

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6. Netflix’s Key Resources

Many things are required to run a business, and some cannot be excluded. These resources help you create your product or render your service. They are the critical resources in your business model. 

Following are the key resources in the Netflix business model:

  • Software developers are the biggest part of Netflix Business Model resources who constantly work on innovations.
  • Managers who are responsible for developing and improving a better customer experience
  • Algorithm for the recommendation system – artificial intelligence and sequence technology for selection preference.
  • Some data is based on new releases or internal data identifying users’ choices and most-watched movies.

7. Netflix’s Channels

Channels are the pathways chosen by the company to communicate with its customers. Through the Netflix channels, users and interested users can access the Netflix platform through one or more of these channels:

  • Online streaming via the website
  • Online streaming via mobile apps
  • Streaming on game consoles and TV apps
  • Postal delivery of DVDs

8. Netflix’s Cost Structure 

The cost structure is the part where you evaluate all the costs or expenses associated with your business. It mainly comprises production cost, distribution cost, and relationship maintenance cost. Netflix Business Model Cost Structure includes:

  • A large purchase of rights (TV shows and movies)
  • Cost of film production
  • Cost of personalized recommendations
  • R&D costs
  • Artificial intelligence costs
  • Subscription maintenance costs
  • Paid contracts with Internet service providers (ISPs) such as Comcast to stream Netflix data at high speeds
  • Infrastructure development (data centers)
  • Costs of streaming content
  • Costs of DVDs and mailing
  • Salaries of employees (customer service, engineers)

9. Netflix’s Revenue Streams

Netflix generated significant revenue streams and additional income in 2007 with the launch of “streaming” subscription services.

There are monthly subscription fees with three different pricing options in the U.S. market:

Basic – $8.99/month, Standard – $12.99/month & Premium – $15.99/month.

Netflix has a global customer base with its international streaming options. Upselling opportunities such as upgrading from Basic to Premium plan. Money-making movie studio with Netflix original shows like Stranger Games, House of Cards, and many more

In 2000, Blockbuster had the opportunity to buy Netflix for just $50 million. Netflix was a mail-only platform that offered an extensive collection of movies, series, and dramas. Not until 2007 did Netflix change its business structure from a mail-order system to subscription-based streaming content. Before introducing online streaming in 2007, Netflix’s revenues averaged $997 million per year.

Conclusion

Netflix’s business model is much more than streaming. It also includes the specifications of its global operating system, which includes content production and licensing, merchandising and publishing, marketing services, technology development, and partnerships.

Netflix is ranked as the most valuable media and entertainment brand in 2020. It may not just be about what a company sells but also how it sells or promotes its products.

Netflix has a powerful technological approach that innovates accessibility and captures customers and users with innovative accessibility. Netflix has also taken action in several areas to capture the global market.

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Posted by Elena Hudgens
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Elena Hudgens is an entrepreneur with 10+ years of experience. She started her journey by building her own e-commerce website on Shopify and turned her $1000 savings to millions in just 2 years. Soon she started different ventures in which she failed and succeeded. And now, she's on a mission to help other entrepreneurs with her life and business lessons.
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