My two cents on What would be Netflix distribution strategy in India
Proposed Netflix Distribution Strategy
The partner ecosystem for Netflix can be broadly classified into two sets:-
Direct Partners or Netflix Ready Partners- These are the partners that have capability in their
existing infrastructure to directly distribute Netflix services to customers. It is possible to integrate
Netflix services into their respective platforms.
existing infrastructure to directly distribute Netflix services to customers. It is possible to integrate
Netflix services into their respective platforms.
Example of these partners include:- Consumer Electronics Manufacturers (Smart TV, Smart phones &
Tablets, Gaming Consoles, Blue Ray Players, Personal Computers and Laptops); Cable & Satellite
TV Operators, In- Car Entertainment systems( OLA play) etc.
Tablets, Gaming Consoles, Blue Ray Players, Personal Computers and Laptops); Cable & Satellite
TV Operators, In- Car Entertainment systems( OLA play) etc.
Indirect Partners or Collaborators: - These are the partners that offer services that are
complementary to Netflix services. It is possible to collaborate with these partners to reach out to
their existing customer base and increase awareness among customers and encourage sampling of
Netflix services.
complementary to Netflix services. It is possible to collaborate with these partners to reach out to
their existing customer base and increase awareness among customers and encourage sampling of
Netflix services.
Example of these partners include: - ISPs, Telecom Partners, Online aggregators- OLA, Flipkart,
Whatsapp etc.
Whatsapp etc.
Prioritization and Selection of Direct Partners
The end objective is to increase subscription revenues by increasing distribution of Netflix services.
Therefore it is important to select, build and grow with right partners.
Therefore it is important to select, build and grow with right partners.
For the purpose of this assignment, will analyze devices ( Smart TV, Streaming Media Players,
Game Consoles, Set-top boxes, Blu-ray players, Smart phones & Tablets, PC & Laptops,
In-car entertainment systems) with respect to Indian market:-
Game Consoles, Set-top boxes, Blu-ray players, Smart phones & Tablets, PC & Laptops,
In-car entertainment systems) with respect to Indian market:-
The set of criteria selected to prioritize a partnership is as below:-
Market Penetration( Overall Reach)
Customer Awareness
Customer Viewing Experience
Customer Engagement
Customer Retention
Total Cost of Ownership to Customer
Availability
Customer Life time Value
No. of subscribers who sampled Netflix services to overall subscriber base
No. of Renewals- Paid subscribers ( what is plan-wise split- Basic, Standard and Premium )
Average revenue per user
Average no. of hours spend by Customer on Netflix via Partner’s platform
Churn Rate
20% of subscription revenue from partner’s platform will be shared with partner, till CAPEX on integration is fully recoveredOnce CAPEX is fully recovered, revenue sharing percentage is subsequently reduced to 10% of total user subscription revenue received on partner’s platform
Criteria mapping among devices with respect to Indian market for Netflix services
Devices such as Set-top boxes, Smart phones, Smart TV, PC & Laptops score the highest among other devices in criteria mapping matrix. Therefore in terms of priority, will be keen to build partnership with below mentioned partners in Indian market:-
Priority Devices
|
Key Operators in Indian Market
|
Set-top box Operators1
|
Dish TV (25%), Tata Sky (23%), Airtel Digital TV (20%), Videocon d2h (20%), Sun Direct(10%)
|
Smartphone Manufacturers2
|
Samsung (23.5%), Xiaomi (23%), Lenovo (9%), Oppo (8.5%)
|
PC & Laptop Manufacturers3
|
HP (25%), Dell (23.6%), Lenovo (19.7%)
|
Smart TV Manufacturers4
|
Samsung, LG, Panasonic, Sony, VU, Micromax
|
Measure the success of Distribution Partnership
Post building a relationship with strategic partners, it is mandatory to monitor its growth vis-à-vis other partners. The intent is to build, grow and sustain these partnerships. Key metrics to monitor:-
Metrics for the measurement of Efficacy of Partner’s Platform
Customer Acquisition CostCustomer Life time Value
No. of subscribers who sampled Netflix services to overall subscriber base
No. of Renewals- Paid subscribers ( what is plan-wise split- Basic, Standard and Premium )
Average revenue per user
Average no. of hours spend by Customer on Netflix via Partner’s platform
Churn Rate
Level of Integration and ease of access to Netflix Services
Structuring Distribution Partnership- Proposed Economics
The structure of distribution partnership & economies will be governed by three major factors:-
Partner Market Reach( Size of potential Netflix user base)
Investment on Joint Marketing programs (Co-branding, promotional activities etc.)
Investment on Integration. For instance different levels of integration can be illustrated as below:-
Partner Market Reach( Size of potential Netflix user base)
Investment on Joint Marketing programs (Co-branding, promotional activities etc.)
Investment on Integration. For instance different levels of integration can be illustrated as below:-
Highest level of Integration
|
Medium Level of Integration
|
Low Level of Integration
|
Device is ‘Netflix ready’
|
Device is ‘Netflix ready’
|
Device Infrastructure supports Netflix services
|
Customer is able to stream Netflix services via partner’s platform
|
Customer is able to access Netflix service only as an add-on
|
NA
|
Customer is able to pay for Netflix services via partner’s platform
|
NA
|
NA
|
Customer is able to solve Netflix related issue via partner’s customer support network
|
NA
|
NA
|
A. Categorization of Partners on the basis of Market Reach, Marketing Investment and level of Integration
Categorization of Partners
|
Market
Reach
|
Marketing Investment
|
Level of Integration & Investment
|
Revenue Sharing % from user subscription on partner’s Platform
|
Platinum Partners
|
High
|
High
|
High
|
High
|
Gold Partners
|
Medium
|
Medium
|
Medium
|
Medium
|
Silver Partners
|
Low
|
Low
|
Low
|
None
|
Platinum Partners- These partners will be primary driver of growth for distribution of Netflix services
Gold Partners - These partners will play an important role in sustaining and maintaining distribution of Netflix services
Silver Partners - In majority of cases, it will be a symbiotic relationship to promote each other’s services.
Proposed Commercial Structure
In order to work out mutually beneficial arrangement, it is important to take into consideration CAPEX, OPEX and ROI aspects of partnership.
CAPEX in the form of investment that is required to build a level of integration in partner’s existing infrastructure to distribute Netflix services (Cash Outflows)
OPEX in the form of investment that is required to service the arrangement and in the marketing of Netflix services (Cash Outflows)
Subscription revenues that are collected from users who are using Netflix services on partner’s platform (Cash Inflow)
CAPEX in the form of investment that is required to build a level of integration in partner’s existing infrastructure to distribute Netflix services (Cash Outflows)
OPEX in the form of investment that is required to service the arrangement and in the marketing of Netflix services (Cash Outflows)
Subscription revenues that are collected from users who are using Netflix services on partner’s platform (Cash Inflow)
The exact economies of distribution partnership will depend on investment by both partners, revenues, profit margins & growth potential on partner’s platform.
A possible scenario is illustrated as below:-
Platinum Partners
In case of platinum partners, a proposed commercial arrangement will be as below:-
An initial Investment in the integration of Netflix services will be shared by partner and Netflix in equal proportions i.e. 50% will be contributed by Netflix and 50% will be contributed by partner
An initial Investment in the integration of Netflix services will be shared by partner and Netflix in equal proportions i.e. 50% will be contributed by Netflix and 50% will be contributed by partner
50% of subscription revenue from partner’s platform will be shared with partner, till CAPEX on the integration is fully recovered.
Once CAPEX is fully recovered, revenue sharing percentage is subsequently reduced to 25% of total user subscription revenue received on partner’s platform
Gold Partners
In case of gold partners, the proposed commercial arrangement will be as below:-
Initial Investment in the integration of Netflix services will be shared by partner and Netflix in equal proportions.
50% will be contributed by Netflix and 50% will be contributed by partner
20% of subscription revenue from partner’s platform will be shared with partner, till CAPEX on integration is fully recoveredOnce CAPEX is fully recovered, revenue sharing percentage is subsequently reduced to 10% of total user subscription revenue received on partner’s platform
Silver Partners
In case of silver partners, there won’t be any revenue sharing, as it would be a win-win situation for both players. In most of cases, Netflix will get access to partner’s user base and partner benefits from additional user engagement (data usage), enhanced visibility and reputation (globally).
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