Mind Map Collection

Synopsis

Why did Netflix choose Microsoft as its ad partner? On Netflix's Q2 earnings call, the company announced it lost 970,000 subscribers. This was Netflix's second straight quarter of subscription losses, after it lost 200,00 in Q1. To make up for this lost market share, Netflix needed a plan: and that plan became the launch of an ad-supported version. A few months later, Netflix had a partner to run these ads: Microsoft.

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How might this partnership influence the future collaborations between tech and streaming companies?

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The partnership between Netflix and Microsoft could set a precedent for future collaborations between tech and streaming companies. It could lead to more tech companies partnering with streaming services to provide ad-supported versions of their platforms. This could also encourage more tech companies to develop their own ad technologies to support such partnerships.

What could be the potential impact of this partnership on Netflix's growth strategy?

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The partnership with Microsoft could potentially have a significant impact on Netflix's growth strategy. By launching an ad-supported version, Netflix is aiming to make up for the lost market share due to subscription losses. Microsoft, being a renowned tech giant, could provide robust ad technology and a vast network, which could help Netflix reach a broader audience and increase its revenue. This could also attract users who are reluctant to pay for a subscription, thus boosting Netflix's user base and growth.

What are some potential reactions from Netflix's subscribers to the ad-supported version?

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The potential reactions from Netflix's subscribers to the ad-supported version could vary. Some subscribers might appreciate the lower cost option and be willing to watch ads. Others might be frustrated by the interruption of ads and choose to unsubscribe or upgrade to an ad-free plan. There might also be a group of subscribers who are indifferent to the change.

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In this article, we explain 1) how Netflix decided that it needed to display ads; 2) how it chose Microsoft for a partner; 3) how you can use similar brainstorm tactics to solve your most difficult problems, and 4) how the Mind Map Collection template we created provides all the tools you need to get started.

Netflix business case

Let's jump back to April: Not only did Netflix miss analysts' expectations for subscriber growth by 2.5 million, it lost subscribers for the first quarter ever and announced it would lose more. Netflix's stock lost a third of its value the following day, leaving its share price down $500 dollars from its previous peak. So why did Netflix decide ads would fix this?

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What are the potential impacts of Netflix's decision on its content strategy?

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The potential impacts of Netflix's decision on its content strategy could be multifaceted. It could lead to a change in the type of content produced, focusing more on ad-friendly genres. It could also lead to a shift in the viewing experience, with interruptions for ads. This could potentially alienate some subscribers who prefer an ad-free experience. However, it could also generate additional revenue, which could be invested back into content production. Ultimately, the impact would depend on how Netflix balances these factors.

How could Netflix's decision to introduce ads affect its revenue?

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Introducing ads could potentially increase Netflix's revenue by providing an additional source of income. Advertisers would pay Netflix to display their ads to its large user base. However, this could also risk alienating some subscribers who prefer an ad-free viewing experience, potentially leading to a loss of subscribers.

What are the possible future scenarios for Netflix after the introduction of ads?

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The introduction of ads on Netflix could lead to several possible scenarios. One potential outcome is an increase in revenue, which could help offset the company's recent losses and missed expectations. This could potentially lead to a rebound in the company's stock value. However, it could also lead to a backlash from subscribers who are used to an ad-free viewing experience. This could result in a further loss of subscribers, which would negatively impact Netflix's bottom line. Ultimately, the impact of introducing ads on Netflix's future is uncertain and will depend on how the company manages this change.

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Netflix named two main issues behind its loss of subscribers: widespread account sharing and increased competition. On password sharing, Netflix says 100 million households use its service without paying. With an ad-supported tier, it could win over some of its more *ahem* frugal viewers and convert them to monetizable customers. That, and it will trial a system to make users pay for additional households. Then there's increased competition from rival streamers. There are now over 817,000 shows on US streaming services alone. The monumental rise of Disney+ is giving Netflix a run for its money. While Disney grew from zero to 138 million subscribers, Netflix only nabbed 58 million.

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How does the number of subscribers of Netflix compare to other streaming services?

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Netflix has faced increased competition from other streaming services, particularly Disney+. While Disney+ has grown from zero to 138 million subscribers, Netflix has only gained 58 million subscribers. Additionally, Netflix has identified widespread account sharing as a significant issue, with 100 million households using its service without paying.

What strategies could Netflix employ to win over its more frugal viewers?

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Netflix could employ several strategies to win over its more frugal viewers. Firstly, it could introduce an ad-supported tier, which could attract viewers who are not willing to pay the full subscription fee. This would convert them into monetizable customers. Secondly, Netflix could implement a system that requires users to pay for additional households, addressing the issue of widespread account sharing. Lastly, Netflix could focus on increasing the quality and variety of its content to compete with the rising number of shows on rival streaming services.

What are the potential impacts of the increased competition on the quality of shows on streaming services?

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Increased competition in streaming services can potentially lead to a rise in the quality of shows. This is because each service will strive to differentiate itself and attract viewers, often through high-quality, exclusive content. However, it could also lead to an oversaturation of content, making it harder for viewers to find quality shows amongst the vast number of options.

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This brings us to content spending. The top eight video streaming services are estimated to spend around $140 billion on content this year. With customer acquisition costs rising in a saturated market, this is no longer sustainable without additional monetization strategies. All of these networks need to compete for global subscribers, and most of that growth will likely come from emerging markets where price points are lower.

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How does the growth of video streaming services in emerging markets compare to that in established markets?

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The growth of video streaming services in emerging markets is expected to be higher than in established markets. This is because established markets are becoming saturated, with customer acquisition costs rising. On the other hand, emerging markets offer a large pool of potential new subscribers, and the lower price points in these markets make the services more accessible to a larger audience.

What are the potential consequences of not having additional monetization strategies for video streaming services?

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The potential consequences of not having additional monetization strategies for video streaming services could include unsustainable spending on content, increased customer acquisition costs, and difficulty competing for global subscribers, especially in emerging markets where price points are lower.

How can video streaming services manage their content spending to remain sustainable?

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Video streaming services can manage their content spending to remain sustainable by implementing additional monetization strategies. This could include introducing tiered subscription models, incorporating advertising, or offering premium content at an additional cost. They could also focus on producing high-quality, exclusive content to attract and retain subscribers. Furthermore, they could explore partnerships or collaborations to share the costs of content production.

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Earlier this year, Disney+ announced it would launch its own cheaper ad-supported version for another entry price point to capture global subscribers. And HBO Max, Peacock, and Paramount Plus all have ad-supported tiers already. This all brings us to subscription losses. Netflix lost 1.3 million subscribers in the US and Canada alone during Q2. Among so many offerings, Netflix blamed these losses on recent price hikes. But since it has to spend $18 billion on content this year, it can't just lower prices without other revenue to compensate. An ad-based tier answered all four problems. Analysts estimate that commercials could bring Netflix an additional $4 billion in revenue by 2030, Netflix confirmed it will aim for an early 2023 launch of its ad-supported tier with partner Microsoft.

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So how did Netflix choose Microsoft?Microsoft manages the fourth biggest ad platform on the market with nearly $15 billion in annual revenue across LinkedIn job postings and Bing searches. But crucially, Microsoft acquired a consumer ad platform Xandr from AT&T just last month. This new deal would give marketers access to not only Xandr's connected TV business, but the Xbox platform, and now, Netflix's userbase. Also, Microsoft just so happens to be the only ad tech giant without a streaming library, which, didn't hurt. Netflix operating office Greg Peters also said choosing Microsoft "offered flexibility to innovate over time on both the technology and sales side" and offered "strong privacy protections for our members." Netflix's subscribers are its moat, so it wants to protect them from invasive ads or more will unsubscribe.

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There is also massive synergy in this deal based on Netflix's other vertical for growth: gaming. The gaming industry will grow to $268 billion by 2025, 2x the market size of video streaming. Netflix already hosts playable games through its mobile app, and the mobile games market is bigger than console and PC gaming combined. *Microsoft CEO Satya Nadella previously said he wants to create a "Netflix for gaming" and the company's Xbox subscription service already has 25 million subscribers. Not only could this deal lead to a seamlessly connected ad platform across Xbox and Netflix, but it could also lead to deeper content partnerships, as Netflix could create TV shows and movies from Microsoft's library of game titles. And who's to say this couldn't all lead to a merger between the two later down the line?

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Tool highlights

Traditional mind map

To solve your own problems like Netflix, a mind map can help you visually organize information into a hierarchy that categorizes ideas by relationship. Since solutions are rarely surface-level, deeper exploration of the problem is needed. After each idea is generated, the map flows downward, forcing you to question the origin of each subsequent idea. This traditional mind map visualization starts with a single problem, question, or topic in the middle. Ideas branch out in every direction, which then branch into sub-ideas, then sub-sub-ideas. (Slide 15)

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SCAMPER mind map

This map uses the SCAMPER framework to problem solve when you don't know where to start with suggested actions: either substitute, combine, adopt, modify, put to other ( or reorganize), eliminate, or reverse. (Slide 8)

Tree mind map

A tree map organizes ideas from top to bottom, and branches out into three stages: planning, doing, and post-doing, and is best for project plans. If you want to learn how the project planners at the Hoover Dam finished the project years ahead of schedule, go check out our Project Plan presentation template. (Slide 33)

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Double bubble map

A double bubble map assesses where two topics share similar solutions. Like a Venn Diagram, its useful to find synergy between seemingly unrelated ideas, like the Netflix and Microsoft partnership. It's also a prioritization tool: if you need to solve two problems, choose solutions that overlap. (Slide 38)

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Brainwriting

Brainwriting is an alternative mind map tool where 6 people each contribute 3 ideas to solve a problem for five minutes. Each virtual sticky note is color coded to the team member who contributed the idea. Team members round robin they start each round with another's idea from the previous round. Through multiple rounds of iteration, you build a continuous chain of inspiration. (Slide 53)

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Conclusion

All of the slides we just showed you, as well as 50 other visualizations, are included in our fully customizable Mind Map Collection presentation template, which you can download right now to save time and hours of work. Each can be customized and reorganized to follow wherever the analysis leads. For more resources like this, check out our presentation on Innovative solutions for the best tools and insights available on how to solve problems with innovation to avoid being disrupted.

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