Infographic: The Economics of Netflix

Economics of Netflix
Source: GreatBusinessSchools.org

 

The Economics of Netflix: How to Make a $100 Million Show

How buying content is a sinking ship, especially when you make such good shows yourself.

Netflix Plans to Make 5 Original Shows Per Year
Such as:
House of Cards
Orange is the New Black
Lilyhammer

The Economics of Content Creation
$100 million = 2 13 episode seasons of House of Cards
To pay for this…
520,834 people need to subscribe for two years.
Or 1/600 of all Americans.

For five shows…
2.6 million new subscribers are needed.
Or 1/115 of all Americans

But is that possible?

That includes:
Grandma–”without a computer”
Children–”without bank accounts”
Everyday people–”without the extra cash”

Turns Out, Netflix Doesn’t Really Have a Choice.

Streaming content obligations:
[#economic quarter, current obligations, long term obligations]
(Money is in $billions)
Q4 2010: $.5, $.7
Q1 2011: $.7, $1.2
Q2 2011: $1.1, $1.8
Q3 2011: $1.4,$2.7
Q4 2011: $1.7, $3.1
Q1 2012: $1.9, $3
Q2 2012: $2.1, $3
Q3 2012: $2.1, $2.9
— Or, over a 4x increase in two years.–

Streaming content obligations increase:
When more content is created.
When networks know Netflix can pay more.
Ex: 2008: $30 million for Starz content
2011: $300 million not enough for Starz content

HBO’s Business Model Incoming

Once a month, when you see your bill…
“Why am I paying $7.99 for that?”

What comes to your mind?
For HBO: Games of Thrones?
For Amazon: Downton Abbey?
For Netflix: House of Cards?

With great overlap between cable and streaming services, you want something only available by stream to come to mind.

But is $4 million+ an episode too expensive?
Cost per episode:
Hemlock Grove: $4 million
Orange is the New Black: $4 million
House of Cards: $4.5 million before David Fincher (executive producer)

Netflix is Making a Gamble in an Attempt to Beat Out Long Term Quality Content Leader HBO

2013:
HBO–28 million domestic subscribers[6]
Revenue= +4%
Revenue Amount–$4.9 billion
Operating Income–$1.7 billion
HBO raises price to increase profit

Netflix–33 million domestic subscribers
Revenue=+21%[7]
Revenue Amount–$4.4 billion
Operating Income–$228 million
Free cash flow: -$16 million
Netflix is gaining subscribers to increase profit

Market capitalization:[6]
Netflix: $24 billion
Time Warner as a whole: $56 billion

HBO spends $1 billion a year on original content.
But Time Warner owns them…
So there’s lots of cash on hand.

Netflix is continuing to grow,
but they’re having to borrow through bonds to keep expanding.[6]

Perhaps Big Data Can Make Netflix’s Huge Spending a Safe Investment.

Netflix uses big data about it’s viewers preferences to ensure their shows are hits.[3][5]

Informed by 30 million plays a day –
Including:
What you watch
When you pause
When you fast forward
When you rewind
When you rate movies
Your scrolling behavior
What you search for
What device you’re watching the show on
What time of day you’re watching
Series completion rate
Where people typically stop watching series
How long between series watching sessions

Even Trailers were Crafted by Big Data:
10 trailers–
For those who watch Kevin Spacey Movies… he’s in the trailer
For those who watch movies with strong females… show females are in the trailer
For those who are David Fincher fans… fine cinematic points in the trailer

And remember, the rights to quality shows can be sold at a premium once they’re done airing.

Economics of Netflix

Citations:

  1. http://www.thewire.com/technology/2013/02/economics-netflixs-100-million-new-show/61692/
  2. http://en.wikipedia.org/wiki/List_of_original_programs_distributed_by_Netflix
  3. http://www.nytimes.com/2013/02/25/business/media/for-house-of-cards-using-big-data-to-guarantee-its-popularity.html?pagewanted=all&_r=0
  4. http://variety.com/2013/digital/news/caa-agent-discloses-netflix-series-spending-1200006100/
  5. http://blog.kissmetrics.com/how-netflix-uses-analytics/
  6. http://www.cnbc.com/id/101392947
  7. http://www.marketwatch.com/investing/stock/nflx/financials
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#Infographic: Kids of the Past vs. Kids of the Internet Generation

Kids of The Past vs. Kids of The Internet Generation

Explore more visuals like this one on the web’s largest information design community – Visually.

 

Kids these days… am I right? The following infographic takes a look at today’s kids as compared to the children of the past. In other words, it’s a no-holds-barred face-off: Kids of the Past vs. Kids of the internet Generation!

- See more at: http://visual.ly/kids-past-vs-kids-internet-generation#sthash.cQmCI74v.dpuf

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Infographic: Creating a Culture Around Your Brand

Corporate Culture
Source: Masters-in-Marketing.org

Creating a Culture Around Your Brand

When people believe in the worldview, and ethos of your brand, your brand becomes a statement about who they are. Thus, creating long-term customer allegiance and attracting talent.

Corporate culture is the only sustainable way to beat out competition.
Given enough time, and money, your competitors can duplicate almost anything you can do.
Hiring talent.
Reverse engineering processes.
Contest intellectual property in court.

The only thing that can’t be replicated is your culture.

Some cultures attract both talent and customers

Apple
Tag Line: “Think Different”
Employee expectations:
1.) Come and go as you will
But get 110% of your goals done.
2.) Successful creatives are rewarded

Complete secrecy–
1.) Do everything internally +
2.) Pay attention to marketing +
3.) Control the message +
4.) The little design details add up

Equals–>
A feeling of unparalleled craftsmanship.
Great Hype.
You’re part of the creative cult.

Some cultures attract an overwhelming amount of talent.

Google receives over 2.5 million applicants per year.
6,849 per day
or 5 per minute.

Google’s PI lab (people and innovation) and people operations
work full time on maintaining top notch culture

With:
The PI (People and Innovation) Lab
And
People Operations (Google’s HR)

Asking questions:
Such as…

How much maternity leave reduces female turnover?
5 months
How many job interviews is most predictive of job success?
4 interviews
Do employees prefer one time bonuses or smaller base pay raises?
Base pay raises
Are middle managers necessary?
Yes
How long should lunch lines be?
3-4 minutes encourages interaction without wasting much time.

Google informs culture-crafting decisions with a massive amount of data.

Offering services:
Free breakfast lunch and dinner
Free health and dental
Free haircuts
Free dry cleaning
Subsidized massages
Gyms and swimming polls
Hybrid car subsidies
Nap pods
Video games, foosball, ping pong
On-site physicians
Death benefits

Pushing Innovation:
TGIF’s–weekly all-hands on deck meetings where anyone can ask the company’s leaders questions.
Google Universal Ticketing Systems (“Guts”) file a complaint about anything. Patterns in complaints are later reviewed.
FixIt’s–24 sprints where Googlers focus 100% on one problem.

And giving creative people 20% of their time to pursue what they love.
Leading to programs such as:
AdSense
Google Maps
Google Books

And Finally, There’s Culture that People Just Want to Buy.

Harley Davidson is one of America’s most emblematic brands.

While the rest of the world’s cycles evolved, Harley stayed true to its roots.

BMW bikes — 400lbs
Harley — 800lbs

Freedom
Rebellion
The Open Highway

vs.

Speed
Technical Advances

Only 15% of the marketing budget is spent on traditional media — the rest spent on experiences for bikers.

The “Fan Machine” App on Facebook
= 4.7 million likes
Freedom-loving costumers share their own stories.
Then real riders who follow on twitter are invited on rides for ads.

Even with a tiny marketing budget, Harley is almost too successful.
Sometimes with multi-year long wait lists.
Even with $15,000+ tacked onto bike prices.

#stereotypicalharley shows the range of Harley riders:
Police officers, soccer moms, chefs, grade school teachers, doctors.

You don’t even need a license to join the Harley club.

With revenue for accessories, parts, and apparel at $350 million for one quarter of 2013.

Brand cultures make products necessary to live the life you want to live.

Done correctly, brands are part of who you are. And that’s when a brand truly is indispensable.

corporate culture

Citations:

  1. https://www.americanexpress.com/us/small-business/openforum/articles/5-principles-of-creating-a-cultural-brand/?extlink=sm-openf-socialteam-tumblr
  2. http://hartbeat.hartman-group.com/article/62/5-Steps-To-Building-A-Cultural-Brand
  3. http://washingtontechnology.com/articles/2012/10/31/insights-rivera-corporate-culture-branding.aspx
  4. http://www.forbes.com/sites/georgebradt/2012/02/08/corporate-culture-the-only-truly-sustainable-competitive-advantage/
  5. http://www.businessinsider.com/10-ways-to-think-different-inside-apples-cult-like-culture-2011-3
  6. http://articles.economictimes.indiatimes.com/2012-07-04/news/32537303_1_cult-brands-harley-davidson-india-harley-davidson
  7. http://blog.kissmetrics.com/googles-culture-of-success/
  8. http://www.slate.com/articles/technology/technology/2013/01/google_people_operations_the_secrets_of_the_world_s_most_scientific_human.html
  9. http://adage.com/article/cmo-strategy/cmo-harley-davidson-lifestyle-transportation/242952/
  10. http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=RssLanding&cat=news&id=1840987
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