PM Wargame: 10X Netflix UK's revenue
The board
The situation is the following:
"Netflix want to 10x their UK revenue in 3 years. What should we do?"
In ‘PM Wargames’, I take on a hypothetical PM challenge and attempt to unpack the strategic & tactical approaches I would take to solve it. Unless sources are specifically cited, all information (including the challenge itself) is purely for illustration purposes only.
Actions
Research
You know me, I love to start with a bit of research. This time, I want to focus my research inward.
Revenue (et al.)
Since I've been tasked with a plan to 10x our revenue (who thought this would be a good idea??), I better know what we're currently dealing with. I obviously want to look at current revenue but also:
Gross profit (GP)
New customers
Churn
New customers and churn drastically impact our revenue (or loss thereof). We’ll eventually use them to monitor our progress.
While gross profit is out of scope for this wargame, I don't think I could help myself. I would also want to know what our actual GP is.
Competitors & market share
Before we consider 10x'ing our revenue, we should deep-dive into the market we serve and our current market share. What we find might force us into one strategy or another.
Because I'm lucky enough to have the superpower of access to the ✨Internet✨, I looked some numbers up. If you don't have this superpower, you'll have to guestimate this.
According to JustWatch & Statista
The Streaming Video on Demand (SVoD) UK market is worth $4.1billion. The global market is worth $108b.
Netflix dominates the UK market with a 28% market share, ahead of Amazon Prime (27%) and Disney+ (19%).
Globally, Prime edges out Netflix with 21% vs. 20%, and HBO Max is third with 15%.
Yay, numbers. I wanted to ensure there was room to grow. As expected, there is. Phew.
Non-UK Netflix
Finally, I want to speak to my non-UK Netflix teammates.
Public data tells me EMEA is the fastest-growing Netflix region (while the US & Canada region is all but stalling). Of course, the UK are part of EMEA, so I want to dig deeper into the other locations that make up this region (Africa, Middle East).
I'm searching for insights on anything these teams might do differently than the UK. New shows? Better engagement? Different pricing strategy? More promotions?
Ideate
We can choose from four strategies:
Existing product into an existing market. For this strategy, we could work on our marketing (reaching new people), tweak our pricing strategy (increase average revenue per user, deepen market penetration with promos), etc.
New product into existing market. For this strategy, we could create loosely related products relevant to our existing customer base (e.g. games, live sports event passes, etc.).
Existing product into a new market. For this strategy, we could repurpose our product to target a new segment of the market (e.g. kids).
New product into a new market. For this strategy, we would need to create a new and exciting product from scratch and sell it to a new audience.
With these options, here's my game plan.
Game plan
10x'ing our revenue is a lofty goal.
We will need to make bold moves to achieve this which is why I don't believe 'simple' market penetration (#1) will do the trick here.
Sure we could increase our UK subscription cost from £7.99 to £9.99. Assuming no impact on churn, this would increase our UK revenue (on average) by £33m/year. Over 3 years, this would generate ~100m -- far from our 10x requirement (some ~£15bn).
Meh.
Strategy #2 would see us try things like creating an ads (and an ad-free) plan, games related to existing shows, or even sporting event passes.
With strategy #3, we could segment our audience into age groups (e.g. teens, kids, elderly) or gender and produce segment-specific content. While it might introduce more stickiness with these groups, I’m not seeing the growth we’re aiming for.
Neither of these seems big enough.
We need a game-changer. I want a big swing.
To 10x our revenue, I would look into creating new products for a new audience. I am particularly interested in creating something that:
Is user-driven,
Has revenue attached to all (or most) units, and,
Can feed into our core SVoD business.
With these characteristics, we would create a beautiful flywheel to lift the entire business.
I would pitch a studio and/or a marketplace for 'homemade' content.
'Netflix Studio' would enable customers to upload and perform the final edits on video content. It would enable indie producers, film crews, etc. to put the final touch to their art.
'Netflix Marketplace' would enable the customers to distribute and earn money from their content.
These two ideas fit our characteristics. They are user-driven (they upload, edit, and publish their content), we can attach revenue to almost all units (subscription to Studio, revenue share on Marketplace), and it feeds into our core business (promote the best content to our subscribers).
Roll-out
Because this will be a huge bet, I want to spend time validating these ideas. No roll-out just yet.
Netflix has incredible reach with producers, actors, directors, and of course our existing users. I will form a team and aim to collect insights into the appetite for such tools and how disruptive this idea might be to our existing ecosystem (good or bad).
Premortem
Big bets are big. And scary. This could completely backfire.
Some of my biggest concerns before kicking off research are:
Quality control. If we enable customers to upload, edit, and distribute content through our platform, how do we ensure the quality of said content? We want to be mindful of our brand.
Ecosystem. Do we risk going over the heads of some key players in our industry (distributors, agencies, creators, etc.)? If so, is that a risk we're willing to take? Is there a chance we ruin the ecosystem altogether?
Scale. Slightly more of a tactical concern but hosting costs and scale could become a real problem here.
This is my game plan. What do you think of this approach? How would you play this PM wargame?