Netflix makes money primarily through monthly subscription fees paid by its 300+ million members worldwide. That core model has expanded in recent years to include advertising revenue, extra-member fees from paid sharing, and early-stage bets on gaming and merchandise. Here’s how each piece works.
Subscription Plans Drive Most Revenue
Subscriptions remain the engine of Netflix’s business. Every member pays a recurring monthly fee, and the company offers three tiers priced to match different budgets and feature needs. The Standard with Ads plan costs $8.99 per month and includes commercials during playback. The Standard plan runs $19.99 per month with no ads and the ability to watch on two screens simultaneously. The Premium plan costs $26.99 per month, adds a fourth simultaneous stream, and supports higher video quality including 4K.
This tiered structure lets Netflix capture revenue from price-sensitive viewers willing to watch ads and from higher-spending members who want the best experience. When you multiply even the cheapest plan by hundreds of millions of subscribers, the numbers add up quickly. Netflix has also shown a pattern of raising prices every one to two years across all tiers, steadily increasing revenue per member over time.
Advertising Is a Fast-Growing Revenue Stream
Netflix launched its ad-supported tier in late 2022, and it has become a significant part of the business. In countries where the ad plan is available, it now represents roughly 60% of all new sign-ups. That matters because Netflix collects revenue from two sources on these members: the monthly subscription fee and the money advertisers pay to run commercials.
Industry estimates project Netflix’s ad revenue will reach around $3 billion in 2026. The company has been building out its advertising infrastructure, including launching its own ad-serving technology and introducing new ad formats to attract bigger brand budgets. For Netflix, the ad tier solves two problems at once: it brings in viewers who might not pay $19.99 or $26.99 a month, and it creates a second revenue stream on top of what those members already pay.
Paid Sharing Turns Borrowed Passwords Into Revenue
For years, Netflix tolerated widespread password sharing. That changed in 2023 when the company began requiring members to pay if they wanted someone outside their household to use their account. This “extra member” system now generates meaningful revenue.
On the Standard plan, you can add one extra person. On the Premium plan, you can add up to two. Each extra member slot costs $7.99 per month for an ad-supported experience or $9.99 per month for ad-free access. Before this policy, those users contributed nothing to Netflix’s bottom line. Now each one pays nearly as much as a standalone ad-tier subscription. The rollout initially caused some subscriber backlash, but Netflix reported strong member growth in the quarters that followed, suggesting many former password borrowers converted into paying customers.
Why Netflix Keeps Its Shows Exclusive
Unlike traditional studios that license their films and TV series to multiple networks and platforms, Netflix keeps its original content exclusive. The company has stated publicly that any licensing fees it could earn by sending a hit show to a competitor would be dwarfed by the value of keeping that show as a reason for people to subscribe. Netflix doesn’t even maintain a sales team for outbound licensing.
This strategy means Netflix foregoes a revenue stream that competitors like Warner Bros. Discovery and NBCUniversal actively pursue. But the tradeoff is intentional: every original series and film exists to attract and retain subscribers, which feeds the subscription and advertising revenue that makes up the vast majority of Netflix’s income. A show like “Squid Game” or “Wednesday” is more valuable as a reason for 10 million people to keep paying $19.99 a month than as a one-time licensing deal.
Gaming and Merchandise Are Still Early Bets
Netflix has invested roughly $1 billion acquiring gaming studios and building a mobile games library that now includes more than 120 titles. These games are included free with every Netflix subscription, so they don’t generate direct revenue. The idea is that games increase the time members spend in the Netflix app, making them less likely to cancel.
So far, the results have been modest. An analysis from technology research firm Omdia found that Netflix’s games have boosted total user engagement by less than 0.5% after more than four years. The company’s most-downloaded game remains “GTA: San Andreas,” a licensed title rather than something built on Netflix’s own shows, which suggests its original intellectual property hasn’t yet translated into gaming hits.
Netflix has also begun exploring consumer products, including merchandise tied to popular series and live experiences like themed events. These efforts are not yet profitable segments, but they represent the company’s long-term ambition to turn its most popular franchises into revenue sources beyond the monthly subscription.
How It All Fits Together
Netflix’s business model is built on a simple loop: spend heavily on content that attracts subscribers, then use subscription and advertising revenue to fund more content. The company spent over $17 billion on content in recent years, making it one of the largest content budgets in entertainment. That spending creates a library large enough to justify monthly fees across multiple price points.
Paid sharing added a new layer by converting millions of non-paying viewers into revenue. Advertising added yet another by letting Netflix earn from both members and brands simultaneously. Gaming and merchandise remain small today but signal where the company sees future growth. The core math, though, hasn’t changed: Netflix needs people to subscribe and stay subscribed, month after month, and nearly everything the company does is designed to make that happen.