How media, streaming, and gaming make money
The media segments, the four revenue models, the value chain from creation to monetization, and an approximate streaming cost breakdown.
Industry brief, with a one-minute summary: Media and entertainmentFirm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.
Key takeaways
- Media companies spend heavily upfront to make or buy content, then earn it back from many people through subscriptions, advertising, or sales.
- Video streaming: subscription video on demand (SVOD), advertising-funded video on demand (AVOD), and hybrid plans with ads at a lower price.
- Television: broadcast and pay TV (cable or satellite), funded by advertising and subscription fees.
- Film studios: make films and series, earn from cinemas, streaming licences, and TV rights.
Key idea
Media companies spend heavily upfront to make or buy content, then earn it back from many people through subscriptions, advertising, or sales. Because one film or game costs the same whether one person or one hundred million use it, scale is everything.
The main segments
- Video streaming: subscription video on demand (SVOD), advertising-funded video on demand (AVOD), and hybrid plans with ads at a lower price.
- Television: broadcast and pay TV (cable or satellite), funded by advertising and subscription fees.
- Film studios: make films and series, earn from cinemas, streaming licences, and TV rights.
- Music: streaming services pay record labels and publishers per stream; artists also earn from live events.
- Gaming: console, PC, and mobile games. Many mobile games are free to play and earn from in-game purchases.
- Advertising-funded platforms: social media, search, video sharing, news sites. The user pays with attention; advertisers pay the platform.
| Model | Who pays | Revenue formula | Examples |
|---|---|---|---|
| Subscription | The viewer or player, monthly or yearly | Subscribers x ARPU (average revenue per user) | Streaming services, pay TV, music streaming, game subscriptions |
| Advertising | Advertisers | Impressions / 1,000 x CPM (price per thousand impressions) | Free TV, social media, free tiers of streaming, news sites |
| Transactional | The buyer, per item | Units x price | Cinema tickets, game purchases, in-game items, pay-per-view sport |
| Licensing | Other companies | Fee per title, per market, per period | A studio licensing a series to a streamer abroad; sports rights |
So-what
Most large media companies now mix two or more models, for example a streaming plan with ads.
- From idea to money
- CreateStudios, game developers, creators, sports leagues, news rooms
- Key: Package and own rightsPublishers, labels, studios, broadcasters buy or own rights by territory and window
- DistributeStreaming apps, TV networks, app stores, consoles, cinemas, telecom bundles
- MonetizeSubscriptions, advertising, purchases, licensing, merchandise, live events
| Line | Approximate share of revenue | Comment |
|---|---|---|
| Content amortization | 35 to 60 percent | The cost of films, series, and sport spread over their useful life. Netflix was about 36 percent in 2025 (USD 16.4 billion on USD 45.2 billion of revenue); smaller services sit higher |
| Marketing | 8 to 12 percent | Higher during launches and in new countries |
| Technology and delivery | 5 to 10 percent | Streaming servers, apps, data |
| Partner and payment fees | 3 to 8 percent | App stores, telecom and TV partners, card fees |
| General and administrative | 4 to 8 percent | Head office and support |
| Operating margin | Negative to about 30 percent | Leaders at scale earn well; many smaller services lose money |
So-what
Content is a mostly fixed cost, so each extra subscriber adds a lot of profit once the library is paid for.
Key metrics
- Subscribers (paid memberships) and net additions (new subscribers minus those who left).
- ARPU: revenue divided by average users or subscribers in a period, usually per month.
- Churn: the share of subscribers who cancel in a period, usually per month.
- Engagement: hours watched or played per user; daily and monthly active users (DAU, MAU).
- CPM: the price an advertiser pays for 1,000 ad impressions. Fill rate: the share of available ad slots actually sold.
- For games: payer conversion (share of players who spend) and ARPPU (average revenue per paying user).
A free mobile game makes money mainly from what?
Sources for this lesson (2)
- Recognized public explanations of case-interview concepts and frameworks
- Netflix Q4 2025 shareholder letter (Form 8-K exhibit)
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