Mind Map Collection
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. 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?
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.
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.
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.
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.
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?
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)
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)
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)
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)
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.