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Estimationstandard

Estimate Netflix's annual subscription revenue in the US.

How to approach it

Estimate paying US households, then multiply by an average monthly price across plans.

How a strong answer opens

“I'll estimate paying US households and multiply by an average monthly price across plans, including the cheaper ad-supported tier.”

Outline of a strong answer

Try answering out loud for a few minutes before you open this.

  1. Households, about 130 million
  2. Share subscribing
  3. Average monthly price across plans
  4. Revenue = subscribers x price x 12
  5. Adjust for discounts, bundles and ad-supported plans
  6. Sanity-check: revenue per US household per year versus other streaming spend

Where this question usually goes wrong

Using the top plan price for everyone, or ignoring ad-supported and bundled plans that lower the average revenue.

Learn the method

Top-down and bottom-up in Module 3, Estimation.

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