Case Interview#4- Strategy-Market Entry
This is blog#4 in the series of blogs of case interviews. This is a strategy for market entry question.
Interviewer- Netflix wants to enter the sports streaming market in India. You are appointed as the product manager to plan a strategy for market entry. What would you do? Should Netflix enter the sports streaming market in India?
Initial Clarifying Questions
Candidate- Do I need to focus on any particular sport to start with?
Interviewer- You don't have any restrictions. Please state your assumptions and propose a strategy.
Candidate- Is there a customer segment or geography you have in mind?
Interviewer- As I said, you are free to propose these and state your reasons behind them.
Candidate- Thank you. Can I take a couple of minutes to gather my thoughts?
Interviewer- Sure.
The interviewer has made it easy for the candidate by saying that the candidate can assume and propose the strategy.
Strategy linking to vision and mission
Candidate-Netflix is known for three things. (i) No advertisements (ii) They like to own their content (iii) They are truly global.
Unfortunately, sports do not fit in either of these 3 criteria. Sports revenue relies heavily on advertisements and sponsors. No media company owns sports telecasts. They bid for TV/ media rights every few years. Except for a few sports like football(soccer), and Olympic sports, no sport is truly global. Every country/ region has a different sport that is popular. For example, in the USA, American Football, Baseball, and Basketball are popular. In India, Cricket is the most popular sport. Also, the rules of the sport are designed in a way that advertisements can be shown. For example, the time outs and breaks in cricket are an opportunity for the broadcaster to show advertisements.
So, I will assume that Netflix will move away from its traditional business models. Is that ok?
Interviewer- That's fine
The candidate has started with a bang. The candidate laid out the details of what the current business model Netflix is and what they need to do, to enter into sports. The candidate also got the blessing of the interviewer to go ahead with the approach above.
Competition Analysis and Market Size
Candidate- Let me start with competition analysis
Competition Analysis- Hotstar is the market leader in sports OTT followed by Sony Liv. Hotstar has the rights to ISL (Indian super league football), Indian kabaddi league, and EPL (English premier league football). It had the IPL cricket rights and Formula 1 races until last year. Now Jio Cinema is aggressively entering sports with winning bids for the FIFA world cup and IPL 2023. Formula 1 governing body FIA has started its own streaming app.
Market Sizing- Do you want me to estimate the market size and come up with a TAM, SAM, and SOM?
Interviewer- Do not worry about the market size. Please assume the market is attractive. Go ahead and focus on the strategy part.
Typically interviewers also ask to estimate market size to understand market attractiveness. This can be done with the guesstimate method that I covered in blog#2. The links to all my previous blogs are there at the end of this blog. Here interviewer has told the candidate that the market is attractive and the candidate can go ahead proposing a strategy.
Target Sport and Pricing
Candidate- Thank you. Let me continue with the strategy. I will propose a target sport and pricing strategy.
Target Sport- The obvious thing in India would be to target cricket (IPL or world cup) broadcasting rights. IPL season 2023 is almost over. There will not be much cricket played in India during the upcoming monsoon season. The next big tournament is the 2023 ICC world cup in India broadcast the rights of which are already taken. So, I propose that next year’s IPL 2024 is the tournament Netflix must target. IPL 2024 rights are also already given. But for the sake of this case, I will assume Netflix can bid for it.
Pricing- I propose not to increase the subscription cost. The strategy is to onboard new users and get them hooked to Netflix with the wide range of other content Netflix has. Also increasing the pricing will not go well with the existing customers.
Business Case
Candidate- I would now move to the business case and profitability. How much does an OTT player pay BCCI for IPL rights?
Interviewer- Please assume about INR 5000 Crore for 5 seasons.
Candidate- How much does an OTT platform make in revenues from an advertisement? Do you want me to estimate or propose a pricing strategy for advertisements?
Interviewer- Please assume revenue of INR 1200 Crore per season for advertisements.
Another place where guesstimate skills are required. The interviewer has given the numbers here. If the interviewer asks the candidate to estimate or propose pricing, then the candidate has to follow the framework of a guesstimate case study. Estimate the number of matches, no. of breaks in each match, and no. of minutes that Netflix can show advertisements. Then with trial and error come up with a pricing for per-minute advertisements to achieve profitability.
Candidate- Just with the numbers above, the cost for 5 years is INR 5000 Crore. There could be additional costs. Inviting experts (ex-cricketers/ commentators) to do analysis during the inning break or pre and post-match shows. Promotion costs on various platforms- online (youtube, Facebook, Instagram, etc) and offline (newspapers, TV ads) that IPL will be telecast on Netflix. Can I assume INR 100 Crore per season?
Interviewer- Sure
Candidate- Total Costs now for 5 seasons are INR 5500 Crore (5000 Cr+500Cr). The revenue for 5 seasons will be INR 6000 Crore from advertisements. Also, we could have additional revenue because of new users buying Netflix subscriptions during IPL. How many subscribers does Netflix have today in India?
Interviewer- Please assume about 6 Million
Candidate- 6 Million is 60 Lakhs. I will assume that another 40 Lakhs will subscribe to Netflix during the IPL season. To be conservative, I assume they take the mobile-only plan (INR 149 per month). I assume 5 Lakh people will continue using Netflix because of the other content Netflix has. Is that a fair assumption?
Interviewer- Yes. That's fine.
Candidate-
Total revenue per year from new subscribers during the IPL season only= 35 Lakhs X INR 149 X 2 months. For ease of calculation, I will assume 150 INR as the monthly subscription fee. Total revenue per year from new subscribers during the IPL season only= INR 105 Crore
Total revenue per year from new subscribers who will continue for the rest of the year= 5 Lakhs X 150 INR X 12= INR 90 Crore
Total revenue because of new subscribers for 5 years= INR 195 Crore X 5= INR 975 Crore
Total Revenue= INR 6000 Crore (Advertisements)+ INR 975 Crore= INR 6975 Crore
Total Costs= INR 5500 Crore
It will be a great move for Netflix to explore the sports streaming market in India. They can generate more revenue and add more users to their ecosystem. They should definitely consider entering the sports streaming market in India.
In calculations, it is better to round off numbers for ease of calculation. The interviewer is not looking for the accuracy of the answer. They want to look at your problem-solving skills. So, wasting time to get an accurate number is not a wise thing to do in a case interview.
Conclusion
The typical framework for strategy for market entry is as follows.
(1) Customer discovery (Target segment and Personas)
(2) Competition Analysis
(3) Market Attractiveness (Market Size study- TAM, SAM, and SOM)
(4) Pricing Strategy
(5) Business Case
If the interviewer asks for GTM (Go-to-Market) strategy, then one must include that in the framework as well.
PS,
Links to my previous blogs on case interviews.
Blog# 1- Case Interviews#1- Introduction- Click Here
Blog#2- Case Interviews#2- Guesstimate- Click Here
Blog#3- Case Interview#3- Root Cause Analysis- Click Here
