How do Netflix movies make money?
To understand how Netflix movies make money, we first have to understand the streamer’s business model, which is a subscription-based one. The majority of their revenue, and hence funding to pay for movie projects, comes from that.
Obviously, Netflix movies, for the most part, don’t spend time in theaters or generate money through ticket sales at the box office.
But how else does Netflix make money to pay for and make movies? Do they sell user information, show advertising or rely on product placement? Let’s take a look.
Netflix offers viewers three different subscription plans to choose from: Basic, Standard and Premium. Both the Premium and Standard cost more than the Basic, and each allows for streaming and downloading on a different number of devices.
With Basic, you can only stream on one screen at a time and you can only download videos on one phone or tablet. Standard doubles both the number of screens and devices you can stream or download on, and also ups the quality to Full HD (1080p). The Premium plan makes both Full HD (1080p) and Ultra HD (4k) available, and you can also watch and download on four devices.
Netflix’s basic plan starts at $8.99/month. The standard was $12.99/month. The premium was $15.99/month. Netflix is raising prices again. While the basic plan stays the same, the standard plan will now cost $14 per month and the premium plan will cost $18 per month.
According to Variety, as of the third quarter of 2020, Netflix had over 190 million subscribers worldwide, which translated into them posting revenue of $6.44 billion.
So, that’s where the money comes from, but then what happens?
Netflix pays licensing fees to stream movies that already premiered elsewhere. That’s why movies don’t stay on Netflix indefinitely.
Netflix originals are a little different.
However, it was because of licensing issues that Netflix ended up developing its own studio. When companies like Disney and NBC decided to create their own streaming services they started taking back the content they’d created, such as hit shows like Friends and Disney movies.
What kind of streamer would they be if they didn’t have content? That’s why Netflix started producing original content.
Netflix has shaken up the movie industry because of its pay structure. They pay producers the full cost of production. Actors, writers and everyone else associated with the making of films are also paid upfront.
How does Netflix make money?
Netflix never sells user information. (That’s a relief, right?)
They also don’t show ads on their site or any of their platforms. Subscribers appreciate uninterrupted binge ad-free viewing.
But does Netflix utilize brands in their movies as a stream of income?
Netflix has so far resisted airing commercials, but what about product and brand placements in their movies? Do they make money from those relationships?
According to Insider, they’ve also resisted that, too, but are definitely open to “co-promotional” deals that reciprocate free advertising.
Take Eggos in Stranger Things for instance. No, that was not paid brand placement. But Eggos certainly loved all the attention and extra sales it nabbed them. They reciprocated by spreading the word about the show.
That’s not to say Netflix doesn’t work with companies. They do. As The New York Times reported, Netflix’s brand partnership group works with companies that want to use its name in campaigns.
Using Stranger Things as an example again, they teamed up with Baskin Robbins to create special ice cream flavors for a cross-promo opp for Stranger Things season 3.
While it may seem like a wasted revenue opportunity not to accept money for product placement, it also means Netflix isn’t beholden to adjusting scripts to please or appease advertisers and brands, which allows producers and directors more creative freedom.
That’s something this Netflix fan sure appreciates.