📄 Case Study: Netflix

[ Should Netflix double down on ad-supported plans or premium pricing ? ]

Context / Problem Statement

Netflix operates in the streaming entertainment industry with a highly competitive landscape featuring players like Jio Hotstar, Amazon Prime, and HBO. Its core challenge is balancing subscriber growth, profitability, and maintaining a premium brand image amid increasing competition and consumer price sensitivity. The company has introduced ad-supported plans while maintaining premium subscription tiers, raising the question of whether to double down on one approach or continue balancing both.

Goal / Objective

1. 🎯 The primary objective is to maximize revenue and market share through optimized pricing and revenue models.
2. 📊 Success metrics include subscriber growth, retention rate, average revenue per user (ARPU), and overall revenue growth.

Research & Insights

• User pain points: Customers seeking affordable access are receptive to ad-supported plans but dislike intrusive ads. Premium users desire uninterrupted, high-quality streaming.
• Competitor/market analysis: Competitors like Hulu and Peacock have successfully integrated ad-supported tiers, attracting a broad audience, but often at the risk of brand dilution.
• Data or assumptions: The ad-supported tier attracted 40 million users in 2024, contributing approximately $1 billion in revenue, while premium plans generate higher ARPU but have slower growth.

4. Proposed Solutions / Approach

📝 Possible solutions:

1. Double down on ad-supported plans to increase market penetration and diversify revenue streams.
2. Enhance premium plans with more features or price hikes to improve ARPU.
3. Maintain a hybrid approach, investing equally in both strategies.

🔍 Prioritization framework used:

[RICE :- Reach, Impact, Confidence, Effort ]

Final Solution in Detail

• Why this solution? The hybrid approach balances growth opportunities by expanding the ad-supported user base while maximizing revenues from premium subscribers. It minimizes risks associated with relying solely on one model.
• How does it work? (Add diagrams, flows, or mockups if needed) Continue to expand ad-supported offerings in emerging markets and among younger demographics to boost reach. Incrementally increase prices or add value to premium plans to sustain ARPU. Use targeted advertising data to optimize ad placements and personalization, enhancing user experience.