Netflix

About Netflix:

Netflix is a subscription-based streaming service that allows their members to watch TV shows and movies without commercials on an internet-connected device. It also provides option to download TV shows and movies on iOS, Android or Windows 10 device and watch without an internet connection.

You can watch Netflix through any internet-connected device that offers the Netflix app, including smart TVs, game consoles, streaming media players, set-top boxes, smartphones, and tablets. You can also watch Netflix on your computer using an internet browser.

Netflix subscribers globally are increasing quarter on quarter.

(Litmus: this test is as per Indian audience)

India is a price sensitive market, moreover the streaming service options available now have increased. Also, the content available on Netflix is less oriented towards Hindi audience when compared to Disney+ Hotstar, Sonyliv, Voot, Altbalaji, Zee5 etc.

Till last year Netflix was having the highest retention rate in the segment across the globe, currently, it has moved to the 2nd spot with Disney+ acquiring the best retention rate.

Retention

Disney+ Bundle- 78%

Disney+ Monthly- 74%

Netflix- 74%

Hulu (excluding Disney+bundle)- 67%

Retained users in India

I conducted a survey and received 33 responses across age bracket (15-45) The below data indicates that 75.8% of viewers are retained users using Netflix for more than 2 years. That means Netflix is maintaining a healthy retention rate.

Deeper Engagement:

When asked which other OTT platforms users use:

Netflix subscribers growth globally:

Churn Rate of Netflix across Globe:

Netflix (across globe) has tried to maintain lowest churn rate of around 2.5-3%.

How Netflix is maintaining and managing low churn?

1. Personalized recommendations based on viewing history and rating provided to the content

2. Personalized thumbnail for the same content (refer below image)

3. Email recommendations and Reminders

4. Recently Netflix has introduced Games in order to engage and retain the viewers

5. Suggesting what’s new and hot content upcoming

6. “First Laugh” miniclips from the content

Purchasing power/ Disposable income:

68% of sample audience qualifies for 10+ Lakh per annual income.

Current Spend on Entertainment

Around 60% of sample audience spends around 1000 INR per month on entertainment. Netflix can try to have a fair share of this segment.

Around 40% of the sample audience spends more than 1000 INR to 5000 INR per month on entertainment. These qualify for the power segment target.

The current plan of Netflix:

Around 48% of users are already using premium plans, this also means that they are among the 4 screen users sharing a premium plan among 4 individuals.

Willingness to Pay

It is evident that 500 INR is the maximum price range Netflix users are comfortable paying.

Substitute Pricing

1. What is the core problem does Netflix solve ? Netflix is recognized for its content, quality in the Subscribe On Demand Video (SODV) in the industry and is considered to be in the top entertainment content providers in the world. It saves Time and provide Value for the user along with providing dopamine to the users as at home entertainment and flexibility to stop subscription. Netflix content can be accessed on any internet connected device like mobile , tablet , laptop and television and providing the same seamless experience. 2. What is the other way to fulfill the same use case ? The following few activities including movie hall may be considered by the users for entertainment.

Design Pricing

Who to charge?

Users of Netflix are aware about the core value proposition i.e quality entertainment with convenience at a reasonable price at multiple devices. The Core and Power users are mostly using all the features of the platform with multiple users in the family consuming the content on various devices. The entire family become the champions for Netflix as even if one member does not watch the content , other members ensure that the subscription is renewed regularly. With almost 70% of the Core and Power users being Generation Z , additional features like video games , live sports and exclusive original shows will help charge more from these users.

When to charge?

Perceived Value for Netflix : a) Dopamine – The users get quality , almost unlimited content for entertainment and can access the same on any internet connected device . b) Money - At present an outing to watch a movie in a theater for a couple will cost approximately Rs 1750/- ( Rs 1000/- tickets for 2 , Conveyance Rs 250 /- , Snacks at Theater Rs 500/- ) and the cost increases if there are more members in the family. However watching a movie in the comfort of your home with your family at a fraction of the cost is a value add for the user. c) Time – Going out with family needs advance preparation like booking tickets , travelling , coordinating with everyone to ensure all are on time. However watching entertainment in the comfort of your home saves time and is more convenient. What to Charge for? Access: Exclusive content of entertainment, movies, TV shows, etc. How much to Charge ? The cost of one movie with family in a theater may cost minimum of Rs 1750/- but the same movie on Netflix is available for Rs 499/- per month with multiple movies to watch with your entire family in group or individually as per their convenience and on multiple device.

How to show pricing?

Current Pricing plan

Designed Pricing:

Option: 1 Monthly

Option 2: Weekly

Netflix's lack of success in India has been 'frustrating': cofounder Reed Hastings Source - moneycontrol.com Date : 21-January-2022

Netflix needs to focus on its acquisition strategy, they are doing well with its retention strategy. Also, with now gaming in action, engagement will go up, and hence With just 5 million users in India, Netflix needs to increase its subscribers. India is a very price-sensitive market along with demand for more regional content.

Recommendation

I recommend having a Netflix version with ads offered for free to users exactly how Spotify does it. Why ads? In my survey of 33 responses, 36% said okay to have a cheaper version of Netflix with advertisements.

System Design

Netflix is a low AOV and high-frequency product and hence System 1 design is recommended. Netflix has already used the system design across the world with great success and hence no change is desired.

The End/ समाप्त 🙂