The Subscription Business Model is one of the most successful business models. It allows you to scale fast while building valuable business assets that you provide access to. Netflix is one of the pioneers that have applied this model to digital industries. Studying their success, you can learn the important details about this business model in a way that you can apply to our own ideas.
The Rising Stars
There is an uncountable amount of start-up that have built their success on the Subscription Business Model:
- Dollar Share Club
- Blue Apron
It can be applied to digital and physical products. Most Software-as-a-Service (SaaS) companies are using this business model.
The success stories of these start-ups has been noticed by the tech giants who are rushing into the opportunity themselves:
- Apple: TV+, News+, Card, Arcade and more
- Microsoft: Office
- Amazon: Prime, Prime TV, AWS
- Adobe: Creative Cloud
- Oracle: most products
The subscription business model has been credited with increasing these companies' share prices due to generation of repeat revenues.
Through my blog, I have been in contact with hundreds of you being Founders, CEOs, MBA Students/Alumni, Consultants, Senior Executives. A common theme is that you like the level of depth that I am covering in my articles. Now, if you like that, you will love the book (and the portal). Learn the details that underpin the success of digital subscription business models:
Vision -- Strategy -- Business Model -- Financials -- Economics
Netflix is our in-depth, real-world example to understand these details.
Vision, Strategy & Business Model
Netflix is one of the pioneers who applied the subscription business model model to digital technologies.
Starting with the visions, strategy and the business model will give us an understanding customer value proposition, key activities and assets as well as the challenges of the external environment.
Economies of Scaling-up
One of the most important characteristics of the Subscription Business Model is to constantly evolve and improve your offering. Being able to conduct repeat activities at decreasing unit costs enables you to offer more to customers over time. Equally, you can provide access to an increasing asset base at decreasing unit costs. This leads to an increasing competitive advantage.
The harsh reality of scaling up
We will learn that the reality of innovation is very different to the textbook.
Unit costs do not just nicely slope down as we scale up. And that there is a lot of uncertainty involved all along the way.
The story of Netflix's content costs shows the pendulum swinging back and forth many times over the years. It is ten years into the streaming story and yet the story is still unfolding with an open end.
Customer Acquisition & Retention
Getting users into the system is paramount to the success of your subscription business. It is key to earning more revenues and being able to improve your offer. We need to understand how much does it cost us to get customers acquired (CAC)? What is their lifetime value (CLV)? What are the customer unit profits?
Key Financial Metrics that Guide Your Decisions
Your finances are the oxygen to your ideas. Without a good understanding of your financial standing and the ability to project forward and assess the impacts of your decisions, you are risking to deprive your idea of oxygen. We will have a good look at some of the most important financial metrics.
Contribution margin, operating margin, operating leverage
Why are Netflix, Uber, Lyft and so many other start-ups paying attention to contribution margins? How do we translate these into operating margin? What are our fixed vs variable costs?
These are important questions that will help you to make important investment decisions in your business. Netflix has been using a target contribution margin as the top-down envelope for how much they will invest in new content.
How fast can we build our assets?
It is the new normal to take in as much investor funds as manageable to build your assets that are the core of your customer value proposition.
But what does "manageable" mean in this context?
We need to understand how funding, cashflows into and out of our business work. We need to understand how our assets generate revenues and profit and help us to pay off the debt sometime down the track.
Keep the Flywheel Humming!
Understand the financial lifecycle of your assets from where the money comes in to the point where your assets are fully amortised/depreciated and beyond. Map a financial dashboard that will show you how you are tracking. And finally, we are going to bring everything we learned together in the flywheel. Get it right and it will be humming like a well-oiled machine!
The Book and the Portal!
You are not just buying a book. But you are also getting access to a portal of tools for download that we have described throughout the book (currently 11 downloadable worksheets, dashboards, high res infographics and counting). New items will be added over time.
Thank you to my readers!
I have been hearing from hundreds of you with wonderful feedback. And I am grateful to every single one of you! Your kind feedback has been a great motivation in creating this book. It has helped me to understand what you are after. If you like my articles, then I have no doubt that you will love the book! It takes the depth and quality of content to the next level.
Dr Murat Uenlue, PgMP, PMP
I wanted to let you know how grateful I am to you for producing such high-quality content
Founder-Chairman & CEO
"Recently I came across a website innovationtactics.com and every night for the last two weeks I have been reading the blogs. My wife is now getting a bit annoyed but this site has been better than a new Game of Thrones season"
Business Growth Specialist
Hi Dr Murat,
I have been reading your great material since the beginning of this year. It helps me a lot to understand the nature of the business idea that I was dealing with.
Just wanna say thank you for the incredible content!
Your articles on Innovation tactics are mind blowing! ... I have completed reading over 50 business management books... I decided to work on business & revenue models of some companies before I launch my venture but you have made my work lot easier than I thought
Hi Dr Uenlue,
Just finished reading some of the documents authored by you on the innovationtactics.com website and wanted to thank you for the insightful content!
President and CEO
You are a truly seminal thinker. You immediately understood our gaps, needs and challenges. Your insights and advice on our platform, gaining traction and search/cost efforts are invaluable at this stage.
Founder & Owner
Thank you!!! I have looking fir this information all my life. I recently graduated with a Master in International Hospitality Management and passed with a higher distinction but I never got this information. Interestingly, I enrolled for the course with the intention of getting this information you are offering for FREE."
I have used your material for entrepreneurship related courses which I taught at a University until recently. Now I work for ...
Hi Dr Murat Uenlue,
Your article about the multi-sided platform really helped us to grow our startup business connecting overweight with fitness/wellness ecosystem. We have 3,000 user just using our MVP. I thought you would like to know.
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Netflix Subscription Business Model
40+ Charts with explanation
4 Full-page infographics
20+ Formulas with explanation
125 high-quality pages with zero fluff
In-depth explanations to all the above
Access to 11 related resources
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