This is shaping up to be a breakout year for Netflix. On January 22, the former DVD-rental company became the seventh member of Motion Picture Association of America. That same day, it received 14 Oscar nominations, more than it had received in all its prior years combined. And on Sunday night, it had arguably its biggest night ever, by winning four Oscars — tying it with Disney, Fox, and Universal for the most Oscar wins by a major studio in 2019. In just over a month, Netflix solidified its position as an insider in the theatrical business in every way.
Netflix and the Economics of Bundling
A closer look at the platform’s business model.
February 25, 2019
Patrick George/Getty Images
Summary.
How does Netflix get away with releasing its movies in theaters on the same day it makes them available for “free” on its streaming platform? The answer is that Netflix is pursuing a fundamentally different business model from everyone else in the industry. Netflix is not in the business of selling individual movies to many different customers. Instead, it’s in the business of selling many different movies to individual customers—in bundles. Bundled subscriptions allow Netflix to practice a different kind of price discrimination from the movie studios. The company doesn’t have to figure out how much a consumer values any individual movie on the service. The bundle does that for them—very profitably.
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Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Sharpening Your Business Acumen. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Take your career to the next level by learning business and finance basics, and developing an enterprise mindset.