Netflix, a powerhouse in the streaming industry, has revolutionized entertainment consumption since its inception in 1997. From its roots as a DVD rental service to its current dominance as a global streaming giant, Netflix has redefined how audiences engage with streaming content.

In this guide, we dissect Netflix’s business model, drawing essential insights that marketers need to know to strategize their connected TV (CTV) spend.

How Netflix started 

Founded by Reed Hastings and Marc Randolph as a mail-in DVD rental service, Netflix swiftly adapted to the digital age, launching its streaming service in 2007.

By 2017, Netflix was available in more than 190 countries worldwide, in 21 languages, and reaching 100 million subscribers. 

Since then, award-winning original content and forays into in-person events and gaming have helped fuel Netflix’s rise (and price hikes). Netflix has not only disrupted home entertainment, but also continues to shape the evolving streaming and digital video landscape.

Netflix’s business units

Netflix’s strategic approach to subscriptions, advertising, and partnerships remain pivotal in shaping its streaming industry dominance.

Subscriptions 

At Netflix’s core is a subscription-based model, offering a vast library of video content for a monthly fee. The evolution of Netflix’s subscription structure has been instrumental in its global outreach, adapting to diverse markets by offering tiered pricing options (ranging in the US from its ad-supported plan for $6.99 per month to the standard plan for $15.49 and premium for $22.99) as well as localized content. 

  • Netflix’s US subscription revenues will reach $14.52 billion in 2024, up from $13.58 billion in 2023, per a December 2023 EMARKETER forecast. 
  • EMARKETER expects Netflix’s subscription OTT ad-free viewers to decline each year until the end of the forecast period, sliding 1.4% in 2024 and 0.3% in 2027, according to a September 2023 forecast. 
  • This dip is largely due to the lure of more affordable ad-supported subscription options. In fact, 32% of US adults are watching subscription video-on-demand services less because they are watching more on free streaming services, per a July 2023 Aluma Insights survey.
Share of the US netflix subscriptions by plan type
A chart showing the share of US Netflix sign-ups by subscription plan type, February 2023 to September 2023.

Advertising

Compared with its streaming competitors, Netflix, which rolled out its ad-supported subscription plan in November 2022, was considered late to the game; yet it only took a year for the ad tier to amass 15 million global monthly active users. This foray into advertising opened up a lucrative revenue stream and a new avenue for advertisers to tap into Netflix’s massive audience. 

Since the release, Netflix has bolstered its appeal to advertisers, adding more ad length options, offering “elevated” measurement capabilities, and eventually integrating shoppable functionality such as QR codes to ad creative. These incentives are on top of Netflix’s decision to lower costs per thousand (CPMs) in August 2023. Although it still has the highest CPMs of the major ad-supported video-on-demand subscription services EMARKETER tracks, prices are normalizing, having reached $47.05 in Q4 2023.

  • In 2024, Netflix’s ad revenues per viewer will grow 47.6% YoY to $5.92, according to an October 2023 EMARKETER forecast.
  • The company’s US ad revenues are set to pass the $1 billion mark in 2024.
  • A binge ad format rewards ad-supported viewers with an ad-free episode after they watch three consecutive episodes—a strategic move that aims to boost time spent. 
  • Netflix is considering adding advertising to its gaming content, which could open another revenue stream.  

Partnerships 

Netflix’s strategic alliances and partnerships have played a pivotal role in expanding its content and global reach. Collaborations with acclaimed filmmakers, production houses, and international studios—including Steven Spielberg’s Amblin Partners and Spike Lee’s 40 Acres and a Mule Filmworks—have enriched its library, offering a diverse array of content that resonates with audiences across demographics.

Additionally, co-productions, licensing agreements, and distribution partnerships have also been key to broadening the platform’s content spectrum. 

  • Netflix hosted its first-ever live sports event, The Netflix Cup, in November 2023. Following the event, the company announced plans to ramp up its sports streaming offering with a tennis match, The Netflix Slam, set to air in March 2024..
  • The last two years has seen Netflix build and acquire a number of video gaming studios in hopes of fortifying multimedia dominance. It will soon release games based on its popular intellectual properties, such as “Squid Game,” “Stranger Things,” and “Black Mirror” according to The Wall Street Journal. 
  • Netflix House destinations, scheduled to open in the US in 2025, are physical experiences that will draw inspiration from the streamer’s most popular shows to produce installations, performances, and food and retail offerings. 

How many subscribers does Netflix have?

In 2024, there will be 173.7 million US Netflix viewers (or 50.8% of the population), per a September 2023 EMARKETER forecast. Millennials will make up the largest percentage of Netflix viewers, at 50.6 million (or 29.1% of the population). 

This year, 13.0 million people in the US will be subscribers to Netflix’s ad-supported plan in 2024. 

Time spent versus ad spend on Netflix 

An outlier among streaming companies, Netflix doesn’t rely very much on ad revenues as of January 2024, signaling a huge opportunity for the platform considering its extensive hold on viewer engagement. Despite generating only 2.5% of US CTV ad revenues in 2023, Netflix captured more than one-fifth of streaming time spent, per EMARKETER’s US CTV Time Spent vs. Ad Spending 2023 report. 

Its measured approach is deliberate. “We’re still in the crawl of the crawl, walk, run stage,” Netflix CFO Spencer Neumann said at a conference in September 2023. “We have to scale the reach of our ads tier.”

“I think I’m super bullish and confident in the long-term opportunity of advertising as a big incremental revenue and profit contributor to the business, but we do have to build it over time,” Neumann said.

  • Active US users will spend an average of 1 hour per day with Netflix in 2024, according to EMARKETER’s June 2023 forecast.
  • Netflix’s share of time spent will remain stable over the next couple of years, accounting in 2024 and 2025 for around 6.8% of total time spent with digital media and 8.4% of total time spent with TV and video.
Average time spent daily with select digital media platforms by active users in the US
A chart showing the average time spent per day with select digital media platforms by active US users, 2023.

What Netflix subscribers watch 

The “What We Watched: A Netflix Engagement Report,” released twice a year, provides a glimpse into global viewing preferences and highlights the most popular series and film titles, whether they are new, old, licensed, or original.  

Its latest version, with data from January 2023 to June 2023, covers more than 18,000 titles and nearly 100 billion hours viewed, and includes metrics per title, such as hours viewed, availability worldwide, and release date. 

The viewing data underscores how Netflix’s licensing strategy is crucial to its bottom line, in addition to its ability to draw target audiences because of its position as a powerhouse platform—not solely because of its content offering. 

  • The most viewed titles were “The Night Agent: Season 1” (812.1 million hours), “Ginny & Georgia: Season 2” (665.1 million hours), and “The Glory: Season 1” (622.8 million hours).
  • Non-English stories generated 30% of all viewing.
  • Around 45% of total watch time across Netflix’s titles were licensed, as well as 30% of the top 100, according to Puck and Variety.  

Charting Netflix in 2024 and beyond 

Even though Netflix’s ad-supported subscriber base is relatively modest, its extensive popularity as a streaming platform is enough to bank on the company’s potential as a top contender in ads. In fact, the collective streaming time spent with Hulu, Disney+, ESPN+, and Amazon Prime Video only marginally exceeds Netflix’s time spent by 11%.

As a growing number of consumers look to scale back on discretionary spending amid economic uncertainty, Netflix’s ad tiers are likely to see more uptake. 

  • 59% of US consumers prefer to watch ads to save $4 to $5 per month, per Hub Entertainment Research. 
  • Nearly 40% of consumers preferred platforms that offered both ad-free and ad-supported tiers, showing their need for flexible payment plans based on their unique needs.