Cost structure
The cost structure of Netflix is large. That is why the company had a not-so-good cash flow during its early years.
Later on, it required high investment to reach the company’s position today. The cost structure includes:
- Amazon AWS technology.
- Extensive research and development.
- Platform maintenance.
- Purchasing content and rights. Producing movies, series, and other new content.
- Cost of marketing and human resources.
How Does Netflix Make Money? (Netflix Business Model Analysis)
Barton Crockett, JP Morgan’s analyst, put out a statement in 2007, wherein he said Netflix, which pioneered online DVD rental and dominated the industry with over 6.8 million paid users, experienced competition from big players like Blockbuster that is much tougher than we had initially predicted.
He said that Netflix is going through a challenging competition by the back-then DVD rental – Blockbuster.
Because Netflix in 2007 was facing very peculiar crunch circumstances. Furthermore, after the news came out, the stock prices of Netflix went down by 5%.
Moreover, in general, the market became highly suspicious about Netflix’s future growth.
However, Netflix was so strategically competent to steer through this position that in the next 15 years, Netflix evolved as one of the best-performing stocks across the globe.
During the last few years, Netflix cultivated a return of 10,000% from 2017 to 2018.
In this aticle, let us decipher such an impactful analysis and the business model of the world’s largest OTT platform – Netflix. First, let us understand the business model of Netflix, followed by its strategies and money-magnet approach. Nevertheless, before we move further, let us take a bird’s eye view of how Netflix works.
Table of Content
- What is Netflix?
- Netflix Business Model: A Quick Glance
- How does the Netflix Business Model work?
- Partners of Netflix
- Cost structure
- Does Netflix make money?
- How does Netflix make money?
- Conclusion