Netflix

Netflix sells one product, a membership, and spends on what makes it worth keeping. A member pays a monthly fee for a plan (Standard with ads, Standard or Premium) and watches anything in the catalogue, on any device, with no schedule and no long contract. In almost every country except China and Russia the service is the same app; the catalogue changes by country with the rights Netflix holds.

What it streams is part made, part licensed. Netflix commissions and produces series and films in many countries, usually owning worldwide rights, and releases them everywhere on the same day with subtitles and dubbing: Stranger Things, Wednesday, Squid Game, Money Heist, Adolescence, KPop Demon Hunters. It licenses other studios' shows and films to fill the catalogue. Since 2023 it has added live events, WWE Raw every week and NFL games on Christmas Day among them, and games included in the membership.

How it is delivered is Netflix's own engineering. Open Connect, its delivery network, places servers holding the catalogue inside internet providers' networks, close to viewers, and video is encoded scene by scene so it looks as good as the connection allows. The app runs on almost every TV, console and streaming device; recommendations are personal to each profile. Netflix runs much of the rest of its software on AWS.

Advertising is the newest part. The ad-supported plan, launched in 2022, lowers the price for members and sells ad breaks to advertisers, now through Netflix's own ad technology.

Netflix reports one segment. Revenue was $45.2B in fiscal 2025, almost all of it membership fees.

Leaving Netflix costs a member almost nothing: there is no contract, cancelling takes a few clicks, and rejoining later restores profiles and viewing history. Members stay only as long as the catalogue gives them something to watch, which is why Netflix spends on a steady flow of new shows, films and events in every genre and many languages.

What holds them is breadth and habit. A household's profiles, its saved lists and recommendations tuned over years, the kids' profile with its parental controls, and the fact that Netflix is the first app on many TVs all make it the service people keep when they cancel others. Its own shows exist nowhere else, so a new season of a hit brings back people who left.

The alternatives are many and cheap to try: Disney+, HBO Max, Prime Video (already included in Prime), Apple TV, Paramount+, Peacock, free ad-supported services such as Tubi and Pluto, and above all YouTube, which takes more time on TVs than any streaming service. People rotate subscriptions month by month to follow a show. Netflix's answer is to be the one service that is worth keeping every month, and to offer a lower-priced plan with ads for households that would otherwise leave on price.

For advertisers there is no lock-in at all: budgets move between Netflix, YouTube, Amazon and broadcast TV each season.

Revenue was $45.2B in fiscal 2025, up 15.9%, after 15.6% in fiscal 2024, 6.7% in fiscal 2023 and 6.5% in fiscal 2022. Growth picked up after Netflix launched its ad-supported plan in late 2022 and began charging for sharing outside a household in 2023. Over the five years from fiscal 2020 it grew about 12.6% a year.

Content is largely a fixed cost: a show costs the same whether ten million or a hundred million members watch it, so each new member and each price change adds more to profit than to cost. The operating margin rose from 4.3% in fiscal 2016 to 18.3% in fiscal 2020 and 29.5% in fiscal 2025, operating income of $13.3B. Net income was $11.0B, a 24.3% net margin.

Cash tells the content story. Netflix pays for its own productions while they are being made, before they reach the service and before their cost is amortized, so for years cash left faster than profit arrived: free cash flow was negative $3.1B in fiscal 2019. As spending on content grew more slowly than revenue, that turned around: free cash flow was $9.5B in fiscal 2025 (20.9% of revenue), even with operating cash flow of $10.1B still below net income. Netflix needs little physical capital: capital spending was $688M. Equity pay was $368M, 0.8% of revenue. It ended fiscal 2025 with $14.5B of debt against $9.1B of cash and short-term investments.

Netflix is widening what a membership includes while keeping one subscription. Live events grow from occasional specials toward a calendar: WWE Raw every week, NFL games at Christmas, boxing, and the FIFA Women's World Cup in the US in 2027 and 2031. Games are narrowing to what fits a TV and a family, party games played with a phone as the controller, and games for children.

Advertising is the largest new line. Netflix now runs its own ad server and Ads Suite, so it can build formats around its shows and live events, sell programmatically, and use what members watch to target ads. The ad-supported plan also lets it keep lowering the entry price in countries where income is lower, while raising prices on ad-free plans.

The catalogue keeps tilting toward its own productions in more countries and languages, and toward franchises it can extend into merchandise, games and Netflix House, its venues with experiences based on its shows. Netflix is also applying generative AI to production work, such as visual effects, and to recommendations and search in the app.

In December 2025 Netflix agreed to buy Warner Bros.' studios and HBO; in February 2026 it walked away when Paramount Skydance offered more, so Netflix grows on its own slate rather than through a large studio library.

• Winning time from YouTube and short video. The main rival for attention on the TV is free, endless and made by creators. Netflix has to make long-form shows people choose over it, at a cost that keeps rising.
• Hits on demand. Revenue depends on a steady flow of shows people talk about, and a hit cannot be scheduled. Cancelling shows early keeps costs down but teaches viewers to wait.
• Building an ad business. It started late against YouTube, Amazon and Google, whose ads are tied to search and purchases, and has to win budgets with measurement and targeting it built only recently.
• Sports rights. Live events need rights that are expensive, short and fought over by companies with large sports businesses.
• Regulation abroad. More countries require local content quotas, levies or investment obligations from streaming services, and taxes such as the non-income tax assessments in Brazil the 10-K describes add costs country by country.