Netflix is the greatest and most popular online streaming service in the world. The amount of exclusive TV shows, movies, and documentaries you will get in the Netflix library is unmatched. Netflix did not start this way and they used to follow a very different business model to run their multi-media business.
The American company used to distribute physical media in the form of CDs and DVDs. The market was sold on physical media back in the day. However, with the advancement in technology with the evolution of streaming platforms, Netflix changed its business model completely.
Netflix now runs subscription-based with several tiers of subscription-based on monthly, yearly, number of people who can stream from a single account and the quality of the stream.
The subscription-based are refined and caters to lots of viewership monthly. These monthly viewership and subscription-based plans are the biggest sources of income for Netflix.
How do TV shows make money on Netflix?
Generally, many online streaming platforms rely on advertising and subscription business models to make money. For example, Hulu uses both advertising and subscriptions to make money. The basic plan of Hulu shows ads but the subscription costs a lot than the other plan which shows ads.
Netflix runs on only a subscription base and there are no ads running on their platform. It provides both exclusive and non-exclusive shows and movies that the company has licensed from the show and movie producers.
These licenses are given to Netflix exclusively and in return Netflix gives a certain amount of money to the producer. In this way, TV shows earn money on Netflix.
Netflix uses their specialized consumer data mining which allows them to gain information about which consumer is paying to watch a particular TV show or a movie. It helps Netflix to determine the pricing of licensing and agreement.
These data are compiled to calculate an estimated outcome with the help of cost per hour viewed. The period of licensing agreement and the revenue it generates in that period also holds a very important role in determining the cost of licensing.
2. Rental Service
Netflix first started by providing physical CDs and DVDs which contain exclusive shows. Although most of their customers are on the online platform, there are still people who rent those physical media.
This also allows TV shows to make money on Netflix where TV shows give licensing to Netflix so that they can contribute Copies of those TV shows in the form of CDs and DVDs.
In many countries where Netflix is available, it is only available as an online streaming platform. However, in a country like the USA, the rental service of Netflix is also available even though its popularity has diminished over the years.
TV shows that run on Netflix make money by selling their license to Netflix. Sometimes Netflix themselves approach TV show producers to stream their show on Netflix. This allows TV shows to get the budget to make TV shows.