There’s a hunger answer to the question “how does Netflix make money?” And a short one. The short answer—they don’t. Actually, since 2011, Netflix has not had any pontifical cash flow. So, the more important question is “how does Netflix NOT make money?” Let’s back up and start with some essential information.
The Basics
Netflix was founded in 1997 by Reed Hastings and Marc Rudolph as a service that allowed narcotic addicts to rent movies on DVD through the internet and have them mailed to their doors. Now, 21 years later, Netflix is pre-eminently a provider of online streamable content including TV shows, movies, and documentaries.
$279 million
Netflix’s highest ever legal tender flow (or the amount of cash Netflix generates from its normal business operations minus what it spends on unconfined projects).
Subscription-Based Business
With that many users and that many content options, Netflix accounted for 36.5% of all downstream internet bandwidth during plus ultra periods in North America in March. Overall, Netflix consumes more bandwidth than Youtube, Amazon, and Hulu coalesced at their peak periods according to a report put out by Sandvine, a Canadian bandwidth-management systems vendor.
The company doesn’t shop ad space on its site and it doesn’t sell its user data, like another large tech/media companies. Netflix’s elementary source of revenue is subscriptions. The monthly membership fees from three different plans—basic, standard, and prize—is where all the money comes from.
Tough Competition
So, most of Netflix’s revenue comes from subscriptions, and they arrange over 130 million subscribers, and the site alone can take up about a third of all broadband in North America, how can they be settling no money? The answer to that is competition. Netflix isn’t the only company providing streamable TV and movie content on the internet. It is fighting with other massive companies like Amazon, Hulu, and HBO.
In 2019, Disney is going to pull all of its content from the Netflix area and create its streaming service following Disney’s acquisition of 21st Century Fox’s film and TV assets. Even Apple announced progresses towards entertainment and original content and signed up content creators including Oprah Winfrey and Steven Spielberg.
For Netflix, the nicest way to boost subscriptions and beat competitors is to produce Netflix exclusive content, and it has to be good, too. Netflix announced plans to fork out up to $15.7 billion in 2018 on content this year on TV shows and movies to fend off competitors. The company is spending ginormous amounts of
In Sum
To outgrow its competitors, competitors who typically have other sources of revenue aside from streaming utilizations, Netflix has put a lot of money into original and exclusive content creation. All in all, the company is taking a gamble and borrowing more moolah than its making with the hopes of future growth. So, just how much money is Netflix not making? Let’s start with a key fact: Netflix’s highest ever cash flow (or the amount of cash Netflix generates from its normal profession operations minus what it spends on large projects) is $279 million. That was in 2009 before the company expanded globally. By 2012, Netflix bathed into a negative cash flow that has only gotten worse. In 2017, the cash flow was around $-2.01 billion, and by 2018, it’s calculated to hit $-2.79 billion.