Marketing plan for Netflix in Europe
Netflix is preparing to add a large amount of new original content shows to
further attract new local subscribers as well as gain more global recognition and
brand awareness. Our main focus for the next year will mainly lay in content
creation for new and current shows, which will be financed by our price
increases of the subscription packages by 15% and 20%. Furthermore we plan
on constantly improving and altering our algorithms to ensure that our
costumers obtain the most personalized experience while using our platform,
differentiating us from our competition.
There are generally three types of pay video-on-demand (VOD) services. TVOD
(Transactional Video-On-Demand) services, which include:
o EST (Electronic Sell-Through), also known as DTO or 'Download To Own',
is like the traditional sale of physical video grams, but in digital form.
o DTR (Download To Rent) is like the traditional rental of video grams, but
in digital form. This segment is 56% of total VOD market.
o SVOD (Subscription Video-On-Demand) services, which are based on the
dominant pricing model used for linear pay-tv subscriptions.
(Retrieved from: http://blog.idate.fr/videoondemand-marchesmajeurs/)
SVOD Current Market Situation in Europe
o Netflix is in the Subscribed Video on Demand (SVOD) Market service.
Nearly half of Netflix global market subscribers are outside the USA,
predominantly in Europe.
o 11% of European households have SVOD, of which 52% are Netflix users.
o From 2014-2015, the European SVOD market grew 56%, and we expect it
to reach 50Million homes by 2020 if it continues to grow at this rate.
o While SVoD services are rapidly conquering Europe, there are significant
differences between the rates in Wester vs. Eastern Europe. According to
the statistical reports of the previous years: Eastern Europe is still ‘stuck’
in traditional ways.
TRENDS IN VIDEO-ON-DEMAND REVENUES
o Western Europe is approximately 400-500% more likely to adopt SVOD.,
and the average growth for the next 4 years is expected to be 35%
o Biggest uptake is in the UK, Netherlands, Ireland and across the Nordic
3. Internet based consumer spending is
o Netflix European
TV VoD reached EUR 919 million in 2014 topping other segments of on demand revenues in the EU.
Nevertheless, its share of market appears significantly downsized if compared to online VoD as a
whole (Figure 4). Combined Internet-based revenues surpassed TV VoD in 2012/2013 and continued
widening the gap with TV VoD, affirming as the major driver for consumer spending on-demand
Figure 3: Total on-demand Consumer Revenues – EUR (M) by business model - 2010-2014
TRENDS IN VIDEO-ON-DEMAND REVENUES
In 2012 subscription revenues started soaring and eventually surpassed both TVoD (transactional
video-on-demand) segments, consisting in film and TV shows rentals and sales over the Internet. The
three combined, online VoD branches closed the gap with TV VoD earnings in 2013 and largely
showing the increased adoption of VoD
Figure 5 : Total SVoD
services delivered over the open Internet, so called “over-the-top” (OTT).A comparison between TV
VoD and SVoD compound annual growth rates shows an impressive
slit as well,
393 stopping at 8% and the latter reaching for 113%.
Over the last five years subscription-on-demand services increased their revenues and share of the
market, driving the expansion of on-demand services.
5 7 11
6 9 17
1 2 5 10 16
The British market for SVoD services increased 15 times compared to 2010, with a CAGR of 96%,
which seems still considerable even if not among the highest ones. GB, DE and FR with the addition
82% of all consumers
Breakdown per year also shows a substantial acceleration in revenues growth starting from 2013,
state of the SVoD
7). The British
market share loosed few ground regarding other countries and remained on top with 47% (down 18
to adapt to this growing online streaming trend.
percentage point compared to the share of 65% scored in 2010).When combined, the Nordics (SE, FI,
DK) also hold a significant 23% share of the overall SVoD market, the Benelux (NL, BE, LU) 11% while
France and Germany stand respectively at 7% and 6%. French SVoD revenues surpassed German
ones in 2014, reversing previous years’ trends. They now reach a similar amount of EUR 58 and 51
million each. According to recent studies, these two countries didn’t actually benefit of the “Netflix
effect” (or of the debut of pay TVs stand-alone services) as much as other EU key markets. Statista
estimates SVoD penetration to be close to 5% in France and Germany, while it is over 10% in the
United Kingdom and close to 25% in the US4. The research also points out that Netflix reached a
smaller share of SVoD subscribers, 37% in France and 40% in Germany, against 80% in Great Britain.
A lower level of willingness and habitude to pay for streaming subscription services should also be
the reason for the slower CAGR the two markets are developing at, which is 89% for FR and 63% for
The “Market Insights”
o New research from the European Broadcasting Union (EBU) Media
Intelligence Service shows that, subscription video-on-demand (SVoD)
subscribers in Europe grew 56% in just one year between 2014 and 2015, and
are expected to reach 50 million homes by 2020.
o SVoD in Europe” report shows that the biggest uptake is in the UK,
Netherlands, Ireland and across the Nordic region. Currently, nearly 11% of
all European households have a SVoD subscription. This number is
anticipated to double by 2020 but is unlikely to reach levels seen in the USA,
which remains the driver of global SVoD consumption.
o The report highlights that competition in the SVoD market is also increasing
rapidly. Netflix is the current undisputed leader with a 52% share of the
market in the European Union, however Amazon is mounting a strong
challenge. There are also many other European groups currently in the market
and are fast to adapt to the fast changes of the online world, including Vivendi
(CanalPlay), Sky Plus (Now TV) and ProSieben/Sat.1 (Maxdome).
o Management information system (MIS) research shows that free catch-up
services, such as the BBC iPlayer and RAI Replay, remain the preferred way
to access on demand content.
o 97% of EBU Members have a free catch-up video service.
o There are some regulatory and financial constraints but despite this, most EBU
Members are already embracing SVoD, either launching their own services or
distributing their content on third-party platforms. For example, NPO (SVOD
in Netherlands) operates a joint initiative with commercial broadcasters RTL
and SBS, and RTÉ (Ireland) last year launched RTÉ Player International to
make Irish PSM content available to viewers abroad.
High quality and “original” content
Easy access. (Provides a very
convenient way to watch anything
Pricing. (Available subscriptions:
Great user experience; platform is
easy to use and is compatible with all
Strong brand awareness globally.
Focuses on all types of audiences.
Monthly subscription model.
Fast to embrace the fast changing
habits of the consumer.
Long and successful history: Netflix
has been operating since 1997 and
was the company that effectively
killed of Blockbuster.
The biggest leader in SVoD platforms
New monthly additions to the library.
Attract further new users through
increasing amount of original content
and further expand video libraries
with perhaps also adding bonus
Growing number of users who are
contemplating not to sign up for
cable TV, since it is much more costly
Convert the more traditional
generations (Ex. Baby Boomers) to
trust this new digital platform and
leave the cable TV behind.
Finding more local partners to
further global expansion.
Further tailor its algorithms for the
Low profit margin due to the large
costs of global expansion, production
costs of new original content, and
Limited local content.
Netflix does not have revenue from
advertisements; they pride
themselves on that, as opposed to
Still quite dependable on internet
Under pressure to produce more
high-quality content at a fast pace.
(Production is very expensive).
Big rise in content costs as well as
limited access to certain content due
to stiff competition with local cable
TV´s and conflict with content
Apple and Google may join this war
for the SVoD market.
Competition and price wars.
(Amazon, Maxdome, etc.)
Legal disputes and issues with local
authorities, as well as content
providers because of violation of
regulations and licensing.
AMAZON Prime (Main competitor)
Page navigation might be tricky, it is not as simple to use as the Netflix
No dedicated kids section for child friendly content.
Original content is only focused on “adult” audience.
Not all movies/series are available for prime users; you are only able to
watch them at an additional cost.
Compatibility with all devices. (Problems with android devices, as well as
Association with HBO, ‘x-ray’ enables to find information on actors,
scenes and other IMDB data,
€6.5/month, Amazon Prime offer integrates book, other product
deliveries and more.
Huge content available.
Offers free month trial as well as flexibility with ending the contract.
Strong brand awareness
Only available in France,
Limited own content (10 series per year only), as well as a limited budget
Complex to wiggle out of contract.
Small content library.
Strengths: TV associated site (CanalPlus)
Very localised content, which of course appeals the locals more.
Cheap subscription deals: 7,99/9,99$
Strong position with its parent company (Canalplus).
→ Other competitors: Listed in Figure 3, are all the SVoD platforms that
are most commonly used depending on the country. As you can see Netflix
is the leader by far.
Growth: Average growth of 25% for whole of Europe, representing
€200M in incremental subscription revenue per year. Expect United
Kingdom, France and Germany to average around 20-25% compound
annual growth. Nordic countries expected to have average around 40%,
while new Mediterranean countries are expected to grow at over 200%
from a low base.
1st year objective
o Increase local content in Europe territories, primarily Nordic and
o Consider more exclusive production deals. Target partnering up
with local producers to collaborate on local and exclusive content.
In order to obtain content exclusivity.
o Funding for these local European productions will be needed.
→ Budget will be created by adjusting prices upwards, and/or
reducing gross margins.
o Increase brand awareness in each European market, especially
amongst those ‘resistant’ or ‘traditional’ demographics that do not
easily try new or are convinced by the “new” technologies.
o Pursue brand awareness on the back of more locals.
o Secure more local content at a competitive price.
o Partner up with local cable providers.
o 2/3 current packages will increase in price by 15%, releasing
approximately €40M in funding for new local European productions.
This represents approximately 800 hours of new content.
o Larger price increase of 20% for unlimited device plan to counteract
people taking advantage of shared plans. Furthermore subscribers
significantly underpay for this service with this specific “family pack”, and
this is needed to increase profit.
o This price increase is expected to increase margins.
Marketing communication strategy
The marketing communication strategy for Netflix Inc. does not follow a strategy
based on traditional mass-communication advertising. It will rely mostly on
Digital marketing and generally its online presence:
o The typical Netflix user on average spends more time online as opposed
to traditional media outlets. (E.g. Television, radio, etc.) It is also
understood that digital-only advertising strategies rely on how “sticky”
the new obtained subscribers actually are. Experience shows that
costumers signing up to Netflix through digital messaging have been more
long-term as opposed to those reaching Netflix through other marketing
channels. Therefore we put our main emphasis on the online presence of
o Netflix already takes on a unique tone and voice in its social media
presence, which has helped it differentiate itself from most brands as well
as created a large user base with great engagement. For example, we have
adopted a strategy to excite our user base about the upcoming programs
that are to be released at exactly the right time: we are telegraphing the
value that our network will be bringing the coming month. The way we
sent out these messages does not come from Netflix directly, but rather
they are coming from press outlets. This allows us to reach much wider
social audiences with our marketing messages.
o Big data: Netflix collects its data from its millions of subscribers and
monitors it to attempt to understand our viewing habits more thoroughly.
But not only is this data big, it is the combination of this “big” data with
very complex analytical techniques that makes Netflix a true, big and
successful Big Data company.
o We pride ourselves on knowing and being able to predict what customers
will enjoy watching. We will continue using this Big-Data strategy as well
as constantly evolve our algorithm, which will increase the number of
subscriptions. For example To promote our new shows/new seasons we
lean on personalization and create up to 10 different trailers for the
various segments of Netflix´s audience.
o Content Marketing: Netflix prides itself on having intimate knowledge of
viewers watching behaviours and therefore we can invest accordingly for
the creation of new, original content, making the idea of original creations
less risky for the company. Turning back to the “big” data, you can see
that it´s at the core of what makes Netflix so successful; whenever a new
show is planned, Netflix does not need to do a pilot, instead we run our
data and then it will tell us if our audience would watch it or not.
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