Netflix generates over 99.5% of its revenue from streaming. While the remaining, about 0.5%, comes from DVD. Indeed, before becoming a streaming service, Netflix was a DVD service company; thus, a tiny chunk of revenue still comes from DVDs.
Key Facts
Founder
Marc Randolph & Reed Hastings
Year & Place Founded
August 29, 1997, Scotts Valley, California
Initial Business Model
Sold DVD by mail, with a subscription business model
Year of IPO
5/23/2002
IPO Price
$15.00
Total Revenues at IPO
$75.9 million in 2001, before the IPO
Business Model Change
Fully transitioned to streaming in 2008
Total Revenues in 2022
$31.61 Billion
Netflix Employees
As of December 2021, Netflix had 11,300 full-time employees located globally in 60 countries
Revenues per Employee
$2.62 Million
Who owns Netflix?
The main individual owner is co-founder and CEO Reed Hastings, with 1.79% of the company’s stock
Founded on August 29, 1997, in Scotts Valley, California, the company was founded by Marc Randolph & Reed Hastings, and it IPOed in May 2002 for $15 per share. Netflix generated $75.9 million in 2001, before the IPO and before it rolled out its streaming service businessmodel. Indeed, the company Fully transitioned to streaming in 2008, and by 2021 it generated $29.7 Billion. As of 2021, Netflix has 11,300 full-time employees, thus generating $2.62 million per employee. The main individual owner is co-founder and CEO Reed Hastings, with 1.79% of the company’s stock, making him a billionaire.
Netflix started as a DVD rental business back in the day.
However, the company understood from the early days that the market was transitioning from DVD to the Internet as it went through its IPO in the early 2000s.
To something that would have displaced entirely the underlying technology (DVD) that Netflix was using at the core of its businessmodel.
The interesting part is that as soon as streaming became commercially viable, Netflix successfully transitioned to a streaming model by redefining it via binge-watching.
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.
Another important change was the transition from the aggregator (a company primarily distributing other people’s/networks content) to becoming one of the most important producers in the world (today, most of the shows and series on Netflix are produced by the company).
Netflix generates over 99.5% of its revenue from streaming. While the remaining, about 0.5%, comes from DVD. Indeed, before becoming a streaming service, Netflix was a DVD service company; thus, a tiny chunk of revenue still comes from DVDs.
Now, another core change is going on in the next ten years, which is a business model change.
Netflix is expanding its business model to advertising to scale to a billion members worldwide.
And it’s once again refining its model to go beyond TV series as competition has arisen in the last years.
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 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 $29.6 billion in 2021, with an operating income of over $6 billion and a net income of over $5 billion. Starting in 2013, Netflix started to develop its own content under the Netflix Originals brand, which today represents the most important strategic asset for the company that, in 2022, counted almost 223 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 is among the most popular streaming platforms, with a subscription-based businessmodel. The brand, platform, and content are strengths. The volatility of content licensing and production are weaknesses. The streaming market is a potential blue ocean. The inability to attract and retain premium members and its fixed long-term costs threaten its businessmodel.
Netflix’s largest individual shareholder is Reed Hastings, co-founder, and CEO of the company, with a 1.7% stake, valued at over $1.8 billion in 2022. Netflix runs a subscription-based business model that generated $29.6 billion in revenues, and it had over 221 million global members in 2021. Netflix’s business model runs only premium content on its platform, driven by its Netflix Originals shows. Netflix is also building an ad-supported version.
Netflix generated over $31.6 billion in revenue in 2022, compared to $29.7 billion in 2021. Netflix was profitable in 2022, as it generated almost $4.5 billion in profits.
Netflix had over 74 million paying members in US & Canada, over 76 million in the EMEA region, almost 42 million in the LATAM region, and 38 million in the APAC region.
The most significant geography in terms of average monthly revenue per subscriber in 2022 was US & Canada, with $15.8, compared to $10.99 in the EMEA region and $8.50 in APAC and LATAM.
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.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
