How Does Netflix Make Money? Business Models of Netflix Explained

04/09/2025

Table of Contents

Netflix is one of the world’s leading entertainment OTT (Over-the-top) platforms, known for changing the way people watch television and movies. Available in almost every country, it offers a wide collection of TV shows, films, documentaries, and original productions to millions of viewers.

Its success is not only about having a large content library but also about building a strong business model that supports long-term growth. By understanding how Netflix makes money, we can see why it has become such a powerful force in the global streaming industry.

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Netflix’s Growth Journey

Netflix began in 1997 as a DVD rental service in the United States. What started as a small business that mailed DVDs to customers has grown into the world’s largest video streaming platform. Its journey shows how the company has adapted to new technologies and changing viewer habits over time.

Key Milestones in Subscriber Growth

When Netflix introduced online streaming in 2007, it had just over 7 million subscribers. By 2011, the number had climbed to around 25 million. Global expansion and the release of Netflix Originals helped the platform reach about 100 million subscribers in 2017.

In early 2021, Netflix crossed the 200 million subscriber mark, and by mid‑2024, it reached 277.65 million paid subscribers worldwide (Statista, Macrotrends).

Regional Breakdown of Subscribers

Netflix has a wide global presence, but some regions contribute more than others:

United States & Canada: About 84 million subscribers, making up around 30% of Netflix’s global audience.
Europe, Middle East & Africa (EMEA): The largest region by subscriber count with about 88–101 million subscribers, or roughly 34% of the global base.
Asia-Pacific (APAC): Rapidly growing markets such as India, Japan, and South Korea account for about 45–57 million subscribers, or nearly 18% worldwide.
Latin America (LATAM): Around 46–53 million subscribers, with Brazil and Mexico leading this region.

Revenue Growth Over the Years

Netflix’s revenue has grown steadily along with its subscribers.

In 2017, the company earned about $11.69 billion.
By 2020, revenue had more than doubled to nearly $25 billion.
In 2023, Netflix generated about $33.72 billion, which was a 6–7% increase compared to 2022 (Macrotrends).

The US and Canada remain the largest markets in terms of revenue, followed by the EMEA region. At the same time, APAC and LATAM continue to grow through localized content and affordable pricing strategies.

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How Does Netflix Work?

Netflix is the world’s leading video streaming platform, delivering hours of entertainment to over 277 million users worldwide. Behind the smooth viewing experience is a powerful combination of cloud technology, content delivery networks (CDNs), and personalized recommendation systems.

Cloud-Based Infrastructure

Netflix runs on a cloud-powered system supported by Amazon Web Services (AWS). This setup allows the platform to handle millions of streams at the same time and ensures reliable performance across countries.

To improve video delivery, Netflix uses its CDN called Open Connect. By storing popular shows and movies in local data centers closer to users, Netflix reduces buffering and provides faster playback.

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Advanced Streaming Technology

To make streaming smooth on different devices and internet speeds, Netflix uses adaptive bit‑rate streaming. This technology automatically adjusts video quality based on the user’s connection, so viewers enjoy minimal interruptions. Netflix also uses modern video compression methods to deliver high-quality content while saving bandwidth.

Personalized Viewing Experience

Netflix collects viewing habits and preferences to recommend content tailored to each subscriber. Its recommendation engine studies what you watch, the genres you prefer, and even which thumbnails you click on. This personalization keeps users engaged and makes it easier to find shows they’ll enjoy.

Multi-Device Accessibility

Netflix is available on a wide range of devices such as smart TVs, laptops, smartphones, tablets, and game consoles. Features like offline downloads, interactive UIs, and easy navigation add to its convenience and popularity.

In short, Netflix works by combining strong cloud infrastructure, smart streaming technology, and data-driven personalization to deliver a seamless and enjoyable experience for viewers everywhere.

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How Much Money Does Netflix Make?

Netflix’s financial performance highlights its strength as one of the largest video streaming platforms in the world. Its revenue has grown steadily year after year, showing the success of its subscription-based model and global expansion.

In 2023, Netflix generated $33.72 billion in annual revenue, which was about 6.8% higher than the $31.6 billion it earned in 2022. On average, Netflix’s year-over-year revenue has increased by around 7% in recent years.

Is Netflix Profitable?

Yes, Netflix is highly profitable. In 2023, the company reported a net income of $5.4 billion. The year before, in 2022, profits were about $4.5 billion, while 2021 saw earnings of $5.11 billion, boosted by increased streaming demand during the Covid-19 lockdowns.

Average Monthly Revenue per User (ARPU)

Netflix’s income per subscriber varies across regions.

Global average: Around $11.64 per month in 2023.
United States & Canada: The highest ARPU, typically between $16 and $17 per month, due to higher subscription costs.
Europe, Middle East & Africa (EMEA): Around $12–13 per month.
Latin America & Asia-Pacific (APAC): Lower ARPU, usually in the range of $8–9 per month.

This variation is largely due to differences in pricing strategies and regional market conditions.

Overall, Netflix continues to achieve strong financial results, with both revenue and profits increasing consistently. Its ability to generate steady income from millions of subscribers worldwide has made it one of the most successful digital entertainment companies today.

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How Does Netflix Make Money? – Netflix Business Model Explained

Subscription‑Based Revenue Model

The majority of Netflix’s income, often over 90%, comes from its subscription video-on-demand (SVOD) model fees. Users pay a recurring monthly charge to access the full library of shows, movies, documentaries, and originals. Netflix offers several tiered plans, including mobile-only (in some markets), basic, standard, and premium (4K), allowing flexibility in pricing, features, and video quality.

Content Licensing Revenue

In its early days, Netflix relied on licensing movies and TV shows from major studios such as Disney, Warner Bros., and NBC Universal to build a strong content library and attract subscribers. These agreements gave Netflix access to popular titles while it grew its audience.

Today, while the focus has shifted toward producing originals, Netflix still benefits from licensing deals. In some regions, it licenses select Netflix Originals to broadcasters and streaming partners, generating extra revenue and expanding its global reach. Many filmmakers also choose Netflix for direct releases, providing the platform with fresh content while gaining access to a worldwide audience.

Global Expansion and Localized Content Strategy

A key driver of Netflix’s growth has been its global expansion. Today, the platform is available in nearly every country, offering tailored experiences to suit diverse audiences.

To strengthen its presence in international markets, Netflix invests heavily in localized content. Popular regional titles such as Money Heist from Spain, Squid Game from South Korea, and Sacred Games from India show how local productions can become global hits. By offering content in multiple languages and with subtitles or dubbing, Netflix makes its library accessible to viewers worldwide.

This strategy not only helps attract new subscribers but also improves retention by providing culturally relevant long-form content that resonates with local audiences.

Strategic Partnerships & Collaborations

Netflix strengthens its reach through partnerships with telecom operators, internet service providers, and device manufacturers. By bundling subscriptions with data plans or broadband services, Netflix attracts customers who might not have subscribed on their own.

It also collaborates with smart TV makers, smartphone brands, and streaming device companies like Roku and Amazon Fire TV to have its app pre-installed. These partnerships expand Netflix’s visibility and make it easier for new users to start streaming, supporting both customer acquisition and retention.

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Ad-Supported Tier: A New Revenue Frontier

To stay competitive with platforms like Disney+ and Hulu, Netflix introduced an ad-supported subscription tier in 2022. This lower-cost plan targets price-sensitive viewers who may not want to pay full subscription fees but are willing to watch ads.

Although still new and being tested in several markets, this AVOD model allows Netflix to expand its audience while generating additional revenue through advertising. It marks a significant step in diversifying Netflix’s income sources for future growth.

Data-Driven Personalization for Customer Retention

Netflix uses data analytics to improve the viewing experience and keep subscribers engaged. By analyzing user preferences, viewing habits, and interactions, Netflix’s recommendation system suggests shows and movies tailored to each individual.

This personalized approach increases the chances that subscribers will find content they enjoy, leading to higher satisfaction and lower cancellation rates. Netflix also studies which genres and themes perform best, guiding its investments in new content that resonates with audiences.

Personalization has become a key factor in helping Netflix retain its paying subscribers and maintain steady growth in a competitive streaming market.

Multi-Tiered Pricing Strategy

Netflix uses a multi-tiered pricing model to serve different types of customers. Plans vary by cost, video quality, and the number of devices that can stream at the same time. In some regions, a mobile-only plan is offered to make subscriptions more affordable.

This flexible pricing approach helps Netflix attract new subscribers in competitive markets while maximizing revenue in regions willing to pay for premium features like 4K streaming.

Original Content Production

One of Netflix’s biggest strengths is its investment in original programming. Hit series like Stranger Things, The Crown, and Squid Game not only draw in new subscribers but also keep existing ones engaged.

By producing its own exclusive content, Netflix reduces reliance on third-party studios and builds a unique library that competitors cannot easily replicate. This strategy has become central to its global success.

DVD Rental Service (Legacy Revenue Stream)

Although streaming is now the core of its business, Netflix still operates a DVD rental service in the United States. While much smaller than the streaming division, this legacy service continues to contribute a modest revenue stream and remains a reminder of Netflix’s origins.

Data Analytics and Viewer Insights

Beyond recommendations, Netflix uses data analytics to guide business decisions. Viewer insights help determine which shows to renew, which genres to expand, and where to invest in original productions.

This data-driven approach ensures that resources are spent on content most likely to succeed, improving efficiency and customer satisfaction.

Merchandising and Consumer Products

Netflix also generates revenue through merchandising and branded products linked to its popular shows. From clothing and toys to collectibles and games, these products strengthen fan engagement and create additional income streams.

By extending its stories beyond the screen, Netflix deepens audience loyalty and builds its brand as more than just a streaming platform.

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What Does It Cost To Run Netflix?

While Netflix earns significant revenue, it also faces substantial costs to keep its service competitive and reliable. Most expenses fall into content creation, technology, marketing, and research.

Content Spending

Netflix spends heavily on acquiring and producing content. Over the past five years, its average annual content budget has been around $17 billion. This includes licensing popular shows and movies, as well as funding original productions.

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Infrastructure and Technology Costs

Netflix invests about $1 billion yearly on servers, CDNs, and cloud security. These expenses ensure smooth streaming quality across devices and networks worldwide.

Marketing and Subscriber Acquisition

With growing competition, Netflix increases spending on marketing to attract and retain customers. This includes promotions, advertising, and partnerships with marketing agencies.

Research and Development

From pioneering streaming technology in 2007, Netflix continues to invest in research, particularly in machine learning and AI. These technologies improve user experience and platform efficiency.

Despite these high costs, Netflix remains profitable. In the last fiscal year, it reported a net profit of $5.4 billion.

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Conclusion

Netflix’s business model centers on consistent subscription revenue, enhanced by advertising and diverse partnerships. By investing in original content, localizing for global markets, and using data intelligently, Netflix sustains massive growth. Its evolution, adaptability, and customer focus point to continued success in the rapidly changing entertainment landscape.

So, how does Netflix make money? Netflix’s monetization model centers on consistent subscription revenue, enhanced by advertising and diverse partnerships. By investing in original content, localizing for global markets, and using data intelligently, Netflix sustains massive growth. Its evolution, adaptability, and customer focus point to continued success in the rapidly changing entertainment landscape.

Its ability to adapt, whether by adding ad-supported tiers, creating hit original series, or personalizing content for viewers, ensures that Netflix continues to thrive in an increasingly competitive streaming market.

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FAQs

How much money does Netflix make a year?

In 2024, Netflix generated $39 billion in revenue. In the trailing year up to June 2025, that figure rises to $41.7 billion. Looking ahead, Netflix expects to bring in between $44.8 and $45.2 billion by the end of 2025.

How much money does Netflix make a month?

On average, Netflix generates around $2.7 to $3 billion per month, depending on new subscriptions, renewals, and global pricing.