W2.

Revenue Growth
`
Strategy

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Table of Contents

1 Action Plan

2 External Analysis

3 Internal Analysis

4 Framework

5 Strategy 1

6 Strategy 2

7 Strategy 3

8 Executive Summary

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1. Action Plan

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 1 ACTION PLAN

Project Action Plan

Project Approach
1 Week
Key 1 Analyze Netflix and the externalities 2 Strategize solutions that allow Netflix to resolve
Milestone the company is exposed to their fundamental problems
Key
Activities > External Factors Analysis > Hypothesis Verification
– What external factors have been impacting Netflix? – Are the hypotheses valid and adequate to solve the case problem?
– How can the factors be categorized? – What are the systematic issues that underlie the problems?
– What conclusion can be drawn from these factors?

> Strategies Establishment

> Netflix Analysis – What needs should be done to solve the problems instead of merely reacting to
them?
– How has Netflix been impacted by external factors?
– Are the strategies realizable and practical?
– What do the impacts imply?
– What can we expect as outcomes from the implementation of such strategies?

> Hypothesis Structure

– Given the case question, what are the hypotheses regarding the
problems underlying Netflix’s slowing sales growth?
– How can the problems be structured into modules?
– What is the direction of the strategies to achieve that goal?

To solve the key question of rebounding Netflix’s revenue growth, we propose our hypothesis and structure it into three modules.
Upon verifying our modules through externalities and company analyses, we establish strategies that respond to the question.

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2. External Analysis

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 2 EXTERNAL ANALYSIS

Industry Overview & Competitors

Market Size & Growth Key Success Factors
Over The Top(OTT) Market Size Prospect (bn, USD)
Market Growth Factors
Global Service User
Expansion Level Experience
COVID-19 led to 32% Reaching wider
subscription growth in 2020 customers 24/7 In many languages Easy-to-use interface
1242

777
982
Pricing Content Choice
615 Rapidly evolving IT ramped up
486 Reasonable & diverse Variety of quality content
385
190 241 304 more customers & players pricing compositions from original to licensed
151
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
[Source] Precedence Research

Players Potential Risk

2022 Global OTT Market Share
High Licensing Price Piracy
standard price

Other (by consumer demand)

12.4% Increasing personnel expenses, 20% of potential revenue lost
equipment costs, and contract fees due to illegal access to content
market
Netflix leader
45.2%
since
2007 Increasing Competition
size = total revenue Relatively low entry barriers for new players to obtain market share
11.4%
& content producers increasingly launching their own streaming service
content quantity
[Source] Parrot Analytics [Source] Streaming Media

The OTT market is expected to grow consistently until 2030.

However, competition is getting more severe and the difficulty of risk management is increasing as well.

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3. Internal Analysis

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3 INTERNAL ANALYSIS

Company Overview

Business Model Regional Streaming

Streaming Revenues (bn, USD)

Basic Basic Standard Premium

Film & Contents License
TV/Media
Ads UCAN
14.1 Key Points
$6.99 $9.99 $15.49 $19.99 12.9
Producers - US market saturated;
9.8 90% of population on
Content EMEA
9.7 streaming service
Movies, Shows, Games 4.1
LATAM
3.6 2022 - LATM & APAC shown
Netflix
growth of 13%, 9%
Originals Production Cost Netflix 3.6
Analytics & Subscription APAC 2021 respectively
Subscribers 3.3

[Source] Netflix Annual Report, 2023 [Source] Netflix10-K, 2023

Financial Overview Subscription Model Reform

Decreasing Sales Growth Revenue Streams Global Members Growth % Basic With Ads Plan Account Sharing Restriction
(bn, USD)
29.7 31.5
99.54% 21%
25 7.7 million
Basic Negative
20.1 20%
15.8 With Ads net new market
0.46% subscribers response
6.2 2022 $6.99
4.6 4.5
1.6 2.6 9%
- Restricted to 63%
- 1 device 4% YoY ↑ single household respond as
1% support at time
2018 2019 2020 2021 2022 in Q4 paid “will cancel
membership - Require locational membership”
Revenue Operating Income DVD Streaming - Watch in HD confirmation
2019 2020 2021 2022
[Source] Netflix10-K, 2023 [Source] KCA Trend Report

Netflix’s sales growth slowed due to its single-channel revenue stream and saturation of main target region,
while its subscription reform yields ambiguous outcomes.

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4. Framework

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 4 FRAMEWORK

Logic Flow & Strategy Alignment

Key Question How can Netflix rebound its sales growth?

Streaming Subscription
(99.5%) (98%)
Subscription Revenue Calculation Formula
Revenue Content
Revenue DVD Price of Subscription * (# of Existing User + # of New Subscribers - # of Churned Users)
Breakdown (0.5%) Advertisement

Excessive Dependency on Streaming Decreasing New Subscription Increasing User Churn

Netflix should attract more users Netflix should take care of
Netflix should balance its revenue
Problem model by adding new revenue source by providing better service its user retention by providing
merits to existing subscribers
Identification

Outer North American Market Penetration

Targeting Indian and South East Asian Market Subscription Model Diversification
Strategy Yearly & Student Price Plan + Continuity Discount
Revenue Model Diversification
Investing in Netflix Game and Merchandising
Building

The basic structure of Netflix’s revenue model shows the need for a balanced revenue source and subscriber number management.

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5. Strategy 1

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5 STRATEGY 1

Logic Flow

Customer Dissatisfaction Price Discontentment

Strategy Overview

Customers are not satisfied of Netflix compared to other OTT players mainly because of its subscription price plans.

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5 STRATEGY 1

Price Plan Diversification

Student Price Plan $ Discounted Price/mo. Yearly Price Plan & Continuity Discount
Yearly Price Discount (U.S., What if) Example: Jet Brains Continuity Discount

$7.49/mo. $1.99/mo. $6.99/mo. Basic Standard Premium Providing yearly price plans with continuity
discount, users would less likely cancel
50% 25% 40% $9.99/mo. $15.49/mo. $19.99/mo. subscription due to loss aversion
10% off 10% off 10% off
$119.9 $185.9 $239.9 1st YEAR: Original Price
$107.9/yr. $167.3/yr. $215.9/yr.
$4.99/mo. $3.74/mo. New Plan $8.9/mo. $13.9/mo. $17.9/mo. 2nd YEAR: 20% off YEAR 1

50% 60% $4.99/mo. One-year subscriptions would lower the price

(45% Discount) rates for users and retain long-term users 3rd YEAR: 40% off YEAR 1

Problems & Remedies Target Market & Stakeholders

Willingness to pay for Netflix 1. Revenue Increase through AVOD 2. Bringing back churned users
Providing Cheaper, (bn. USD)
39% 60
Diverse, Discounted 50%
34% More than half of
Price Plans
CAGR Churned users
the users are not 40
23.99% are increasing,
willing to pay 20 which should be
18% more than $5 9% brought back
0 6% through price
Netflix would be able to 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 reduction
8% take back churned users LATAM Europe NAM Rest of the world
2% as well as those willing to 2021 2022
Active utilization on AVOD would increase ads revenue
pay under about $6
Less than $5 $5 $10 $15 $20 or more Advertising Revenues of the AVOD Market - Forecasts Netflix Churn rate from 2021 to 2022
[Source] Morning Consult [Source] Dataxis [Source] Whip Media

Netflix price plans are deemed expensive, with less selections, resulting in user decline.
It is necessary to lower the price as well as diversify price plans especially through exclusive discounts and active AVOD utilization.
6. Strategy 2

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6 STRATEGY 2

ASEAN-5 Market Share Growth

Logic Flow SEA Consumer Trait Contents Improvement
Recent Netflix Sales
SEA Consumer Contents Consumption Local Contents Strengthen
Slowdown in Growth Mature Market
• Korean dramas were Expanding Content Supply Agreement with
followed by local Original Series Local Broadcast
contents, particularly
Indonesia and • Lower production fee • Local production firms: GDH, GMM
Slowing growth of the early markets which
54% Thailand • Governmental support Studios, Transformation Films
generate significant sales but experiencing
43% • In Thailand, 54% of
market saturation 39% • Local contents preference • Drill down to local level in more
the users watched
23% (ex.Thailand) territories
15% local contents
→ Target the Immature Market
Western Local Korean Chinese Japanese
Index [Source] Statista
Strengthen Korean Contents
Nation GDP growth Nation Penetration

United States 5.9% United States 46.7 SEA Viewer Segments by OTT Usage in a Day SEA Premium Video Viewership Possibility of Korean Content Success
Malaysia 3.1% Malaysia 12.1
by Platform (Q3 2022) Indonesia,
• 81% of users watch OTT at least an hour • Has more users than Netflix and Disney+
Thailand 1.5% Thailand 7.3
• About 30% of higher heavy user rate in Indonesia
Indonesia 3.7% Indonesia 6.9 27% 19%
26% • Due to many K-contents such as ‘Today's
Vietnam 2.6% Vietnam 6.2 webtoon’
Philippines 5.7% Philippines 6.0
Casual <1h 42%
54%
Moderate 1~4
India 8.7% India 5.6 9% A Favorable Environments of Vietnam
[Source] Statista Heavy >4h • Vietnamese authorities censor contents
10% • Family, Romantic comedy genre preferred
ASEAN-5: Indonesia, Malaysia, Philippines, Casual Moderate Heavy 13%
• Having Confucian traditions
Vietnam and Thailand [Source] theTradedesk • Korean drama’s high share in top 10
• Expected to have market growth due to Netflix Viu We TV Disney Others contents
remarkable GDP growth in SEA and low
• Monthly OTT consumption lags just 4% behind traditional TV [Source] Digital TV news
penetration
• 70% of all OTT viewers prefer to tune in between 8PM to 12AM
→ India and ASEAN-5 * 8–11pm is the primetime slot for traditional TV Expected Outcome: Sales Growth Through User Expansion

Considering SEA users’ geographical contents preference, usage pattern, competitive position
compared to traditional TV, local and Korean contents expansion is needed.

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6 STRATEGY 2

Indian Market Share Growth

100%

• 50%

• 0%

• •
•

•
• • •
• •

[Source] BunnyStudio, World Bank [Source] Whats on Netflix, Competition Commission of India, Statista [Source] Invest India, EdTechReview, BARC India

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7. Strategy 3

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7 STRATEGY 3

Expanding Netflix Game Industry

1 Lack of Recognition
• Only 1% of total subscribers play Netflix Games (1.7M / day)

2 Poor Quality Games

• Content-related games were provided in limited series
• Ex) Stranger Things (expected story line)
[Source] Sensor Tower

• Trigger extra payments

1
• Super consumers
• Game lovers
2018 2760

2019 2341 • Watch and play

2020
at same place
• Hardware devices
2 for TV & PC
• Open for Premium
• Invent a “Signature Game” subscribers only • Use of XR & AR
• Aligned story-line / Storytelling • Allure upgrades
2022 (mn, USD)

Expected • Increased number of game players Expected • Increased Sales by In-app Purchases Can maximize sales by expanding from download
Outcome • New subscriber influx Outcome • Introduction of new consumers only to both streaming and download services
[Source] Sensor Tower [Source] Ampere Games

Netflix Games is a new source of revenue.

Netflix must first procure game users by enhancing recognition, then partially charge for extra services.

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7 STRATEGY 3

Merchandise Upsizing
Potential of Merchandising Business In-App Merch Shop
Operates its own e-commerce
website that
sells official merchandise
→ (but app service unavailable)

16.1%
20% +
18.1%
Product Diversification 12.2% •
14.1%
10.4% •
1 •
8.6%

2016 2017 2018 2019 2020 2021 2022

[Source] eMarketer

•
•

2 • •

(units) Possible UI/UX

• 360 342
• 307

•
64
• •
• 2010 2015 2020 2022
[Source] Disney 10-K [Source] Bootcamp

To diversify the revenue model, Netflix should improve its merchandising business by
creating an in-app merch shop and diversifying merchandised products.

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7 STRATEGY 3

Merchandise Upsizing
Potential of Merchandising Business In-App Merch Shop
Operates its own e-commerce
website that
sells official merchandiseUltimate Goal
→ (but app service unavailable)

16.1%
20% +
18.1%
Product Diversification 12.2% •
14.1%
10.4% •
1 •
8.6%

2016 2017 2018 2019 2020 2021 2022

[Source] eMarketer

•
•

2 • •

(units) Possible UI/UX

• 360 342
• 307

•
64
• •
• 2010 2015 2020 2022
[Source] Disney 10-K [Source] Bootcamp

To diversify the revenue model, Netflix should improve its merchandising business by
creating an in-app merch shop and diversifying merchandised products.

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8. Executive Summary

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 8 EXECUTIVE SUMMARY

Executive Summary
Hypotheses External & Internal Analysis Strategies Expected Outcome

Competitors’
Subscription
cheaper/diverse
price increase
price plans • Enhance customer
Increasing
satisfaction
User Churn A) Subscription Plan
Increase of Implement 1 • Secure competitive edge
OTT Basic with Ads
Reform • Decrease user churn rate
Competitors price plan

Low OTT
penetration in UCAN market • Penetrate unsaturated
APAC saturation market
Decreasing B) New Market REBOUND
New 2 • Enhance regional consumer
Targeting preference REVENUE
Subscription High GDP
increase in
Low revenue in
• Increase subscription influx GROWTH
APAC
APAC

Unsatisfactory
Games industry
games • Increase in-app purchases
expansion
performance •
Excessive C) Revenue Model Expand into e-commerce
Dependency 3 market
Diversification
on Streaming Low • Develop new sales channels
IP market merchandise
expansion sales

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E.O.D

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