The company behind “All of us are dead” and “Squid Game”

Korean dramas “All of us are dead” and "Squid Game" have been top discussion topics on social media, and many people have followed this drama, and they have also given high ratings recently.

Why are those shows so popular? A closer look reveals that the producer behind it is Netflix.

When it comes to Netflix, everyone will think of a series of high-quality film and television dramas, such as "House of Cards", "The Queen's Gambit", "Black Mirror" and so on, many of which have been nominated for several Oscars.

If someone goes in depth into Netflix's history, they will find that its current business model is completely different from the original one.

So what did Netflix do in the first place? What exactly does it make money from?

01

Let’s take a brief look at how Netflix got its start.

Netflix first started as a DVD rental business. After the customer placed an order online, Netflix mailed the DVD to the customer's home.

This business model looks simple now, but in 1998, it was quite creative.

Because people at that time wanted to watch discs, they had to go to physical stores,  which was very inconvenient; and suddenly one fine day, they could rent discs without leaving home. Who could resist such a temptation?

Netflix's business is really hot. As its users continue to increase, Netflix has tried to launch a "monthly subscription" service, paying more than ten dollars a month and renting 4 movies at a time.

With the new model, Netflix's subscribers rose to 300,000, and the company's monthly revenue was several million dollars.

But we also know that with the advancement of technology, movies can also be seen on the Internet, and the DVD format has gradually been eliminated.

Netflix keenly observed this technological change and quickly transformed itself into an online video site. To put it bluntly, it is like an "online cinema", which buys film and television drama copyrights from film companies and puts them on the platform for users to watch.

But this model still has its shortcomings. If the upstream price increases sharply, or the movie copyright is not sold to you, the business may collapse immediately.

After thinking about it, Netflix finally decided to produce its own content and attract users through self-produced film and television dramas. But the threshold for filming and TV drama is so high, how to go about it?

In 2013, Netflix launched its first self-made drama "House of Cards", which was well received. Since then, it has embarked on a "point of no return" for self-made dramas.

Therefore, from the earliest paid DVD rentals to the current paid to watch homemade dramas, it seems that Netflix's business has changed, but the essence of providing users the content they are interested in has not changed.

02

When we look at Netflix's stock price over the past ten years, we can see that its development momentum is indeed relatively strong:

You may want to ask, how does this company make money? 

The answer is membership fees.

At present, Netflix has more than 200 million subscribers, and the monthly fee is 8.99 US dollars, and the annual revenue is more than 20 billion US dollars.

The membership fees charged by Netflix are indeed not cheap. But many people are willing to pay this money, one is for its many high-quality original dramas, and the other is that there are no advertisements on Netflix.

When we dived into Netflix's annual report, we found out that Netflix's revenue are mainly from 2 sources , 99% is membership fee, and 1% is DVD service:

Therefore, there is a conflict between the membership service and the advertising business itself. Netflix simply gave up the advertising business and attracted users by continuously outputting high-quality content + good experience.

03

According to the latest annual report, Netflix's annual profit is 2.7 billion US dollars.

Netflix uses big data algorithms and in-depth mining of user data to tailor films that meet the audience's interests, it can mass-produce high-quality original dramas; however, domestic video platforms usually require good scripts to be popular and self-made. The quality of the show can't always be that stable.

Therefore, Netflix has long understood that a video platform can only make money if it has the mindset of pumping lots of money to continue to produce high-quality content. Being able to gain insight into the development direction of the industry so early is the most remarkable thing about this company.

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45.6 billion money game! What "Squid Game" teaches us … (spoilers alert)