Netflix was founded in 1997 by Reed Hastings and Marc Randolph as a DVD-by-mail service, launched streaming in 2007 and its first major original, House of Cards, in 2013. In 2025 it made $45.2B at a 29% operating margin.
Sources: NetflixForm 10-K for 2025 and Q2 2026 shareholder letter (SEC EDGAR). Analysis by The Business Engineer.
How we source: figures on this page come from the company’s own filings (SEC 10-K, 10-Q and earnings releases, or its annual report), with the period stated next to each number. Last refreshed October 2026. Our methodology.
Netflix is an over-the-top content platform and production company founded in 1997 by entrepreneurs Reed Hastings and Marc Randolph.
During the late 1990s, video rental stores such as Blockbuster dominated the lucrative home entertainment market. But Hastings in particular became frustrated after forgetting to return a movie by the due date and having to pay a $40 fee. This frustration was compounded by the inconvenience of the rental process, with customers having to select and then return a rental to the store themselves.
Netflix turns $12.6B of quarterly revenue into $4.2B of operating profit. Source: Netflix Q2 2026 shareholder letter (Form 8-K, SEC). Costs calculated; cost of revenues is mainly content amortisation per Netflix's filings. Analysis by The Business Engineer.
A 3-minute explainer of Netflix's business model and latest numbers, built from its SEC filings. Analysis by The Business Engineer.
Sensing a shift away from VHS to newer technologies, Netflix began as a rent-by-mail DVD service in April 1998. Initially, users browsed a list of movies on the Netflix website and then placed an order. Hasting and Randolph would then mail the DVDs, charging around $4 per movie plus $2 postage.
Here, users paid a fixed monthly fee to rent as many movies as they liked. Importantly, there were no late fees. Netflix customers could return a movie whenever they wanted, but could not rent a new DVD until they posted the old one back.
This disruption to the movie rental industry was so swift that large players such as Blockbuster were caught unprepared. This was partly because customers loved Netflix, but also because Blockbuster failed to take advantage of new opportunities. When Hastings approached the company in 2000 about a partnership, then-CEO John Antioco famously laughed him off. That same year, Netflix introduced a personalized movie recommendation system using member ratings on past titles to predict future choices.
Between 1999 and 2003, Netflix built a customer base of 1 million subscribers. This doubled to 2 million in 2004 and then again to 4.2 million in 2005.
From DVDs to a 29% margin
The hard part was the switch to owning content: Netflix burned $2.9B of operating cash in 2019 building its library, then turned cash-positive and generated $10.1B in 2025.
In 2026 it walked away from a deal for Warner Bros. after declining to raise its offer, and received a $2.8 billion termination fee. See Netflix revenue.
Netflix as a streaming service
Netflix introduced Watch Now in 2007, a streaming service allowing members to watch television shows and movies on their personal compute — as explored in the economics of AI compute infrastructure — rs. The service started with a meager 1,000 titles and placed limits on the number of hours of free streaming.
In 2008, Netflix partnered with consumer electronics brands to allow streaming on video game consoles, Blu-ray players, and TV set-top boxes. In 2009, the company held a competition with $1 million in prize money to develop an algorithm better able to predict user content preferences.
Over the next few years, Netflix expanded into Canada, Latin America, the United Kingdom, Ireland, Scandinavia, and the Caribbean. With 25 million members reached by 2012, a Netflix button started to be incorporated into TV remote controls.
Over-the-top content and production
So-called over-the-top content describes content offered directly to viewers via the internet.
Many Netflix television shows, documentaries, and movies have been funded and produced directly by the company to critical acclaim. The company has received many Emmy nominations and Academy Awards for programs such as House of Cards, ROMA, Godless, Orange is the New Black, and The Square.
High-quality content and expansion into Europe then helped the company pass 50 million members in 2014. By 2016, Netflix was available in more than 190 countries and 21 languages.
Key takeaways
Netflix is an over-the-top content platform and production company founded by Reed Hastings and Marc Randolph in 1997. Hastings wanted to make the video rental industry more customer-friendly by abolishing late fees and making the rental process more convenient.
Netflix signed up 1 million users to its DVD rental subscription service between 1999 and 2003. The company then released a streaming service in 2007.
Netflix is a pioneer of self-produced, award-winning films and television shows. It is now available in multiple languages in most of the world’s countries.
Netflix is a subscription-based business model making money with three simple plans: basic, standard, and premium, giving access to stream series, movies, and shows. Leveraging on a streaming platform, Netflix generated over $33.7 billion in 2023, with an operating income of over $6.95 billion and a net income of over $5.4 billion. Starting in 2013, Netflix started to develop its content under the Netflix Originals brand, which today represents the most important strategic asset for the company that, in 2023, counted over 260 million paying members worldwide.
Binge-watching is the practice of watching TV series all at once. In a speech at the Edinburgh Television Festival in 2013, Kevin Spacey said: “If they want to binge then we should let them binge.” This new content format would be popularized by Netflix, launching its TV series all at once.
Coopetition describes a recently modern phenomenon where organizations both compete and cooperate, which is also known as cooperative competition. A recent example is how the Netflix streaming platform has been among the major customers of Amazon AWS cloud infrastructure, while Amazon Prime has been among the competitors of the Netflix Prime content platform.
Netflix SWOT: global scale and 29% margins, against a slowing home market and the fight for viewing time. Source: Netflix Form 10-K (SEC XBRL) and shareholder letters Q4 2025–Q2 2026 (Form 8-K, SEC); quotes from the letters. Framework: FourWeekMBA / The Business Engineer. Analysis by The Business Engineer.
Netflix's operating margin rose from 4% in 2016 to 29% in 2025. Source: Netflix Form 10-K filings via SEC EDGAR XBRL company facts. Margins calculated. Analysis by The Business Engineer.
Netflix’s largest individual shareholder is Reed Hastings, co-founder, and former CEO of the company, now Chairperson of Netflix, with a 1.76% stake, valued at over $4.5 billion as of January 2024. Other significant individual shareholders comprise Jay C. Hoag, the company’s directors since 1999, and Ted Sarandos, former chief content officer and now Chief Executive Officer of Netflix. Major institutional shareholders comprise The Vanguard Group (7.99% ownership), BlackRock (6.24% ownership), and FMR (5.35% ownership).
In 2023 Netflix had over 260 million paid subscribers. In 2022, Netflix had 230 million paid subscribers and almost 222 million paid subscribers in 2021.
Netflix's revenue reached $45.2B in 2025, 5.1x its 2016 level. Source: Netflix Form 10-K filings via SEC EDGAR XBRL company facts. Analysis by The Business Engineer.
Netflix reported an average yearly revenue per subscriber of $139.68 in 2023, compared to $141.12 in 2022. Thus, Netflix had an average revenue per subscriber of $120 in 2019 (pre-COVID) and $139.68 by 2023.
In 2023, Netflix reported an average monthly revenue per subscriber of $16.28 in the US & Canada, $10.87 in EMEA, $7.64 in APAC, and $8.66 in the LATAM region. Thus, the US & Canada reported the highest average monthly revenue per subscriber of $16.28.
In 2022, The Walt Disney Company’s total paid subscriber base was larger than Netlfix, with over 235 million paid members, compared with Netflix’s over 230 million members. However, Disney’s offering is fragmented among Disney+, ESPN+, and Hulu, compared with Netflix, which has a single offering.
Netflix in charts
Netflix at a glance: $12.6B of revenue and a 33% operating margin in one quarter. Source: Netflix shareholder letters (Form 8-K, SEC EDGAR) (Q2 2026); 2025 from Form 10-K. YoY calculated. Analysis by The Business Engineer.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
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