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Developing A Sustainable Business Model


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• Create a business model for a start up in an established market and present the business concept, highlight critical success factors and layout the competitive framework of the industry …

• Create a business model for a start up in an established market and present the business concept, highlight critical success factors and layout the competitive framework of the industry
• In the video rental market, my team was asking investors to put money into HappyKids, an online kids focused content streaming and downloading website.

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  • 1. HappyKids!Keeping  both  Kids  AND  Parents  Happy  On-­‐the-­‐Go    Investor  Presenta,on  Lauren  Campion  Kyle  Hilbrenner  Courtney  Kiel  Sara  Maaske  Ike  Nwankwo  Paul  Rudolph  
  • 2. Have  you  ever…..  •  …watched  siblings  fight  over  their  favorite  outside  toy?  •  …seen  a  bored  child  at  a  siblings  pracFce?  •  …seen  a  child  who  was  just  disheartened  overall?  We  have  and  that’s  why  we  created  HappyKids!  
  • 3. Agenda  •  IntroducFon  •  Trends  &  CompeFFon  •  Industry  Overview  •  CompeFFve  Landscape  •  Weaknesses  &  Blocking  Strategy  •  Closing  Remarks  
  • 4. Introduction!Necessary  framework  to  understand  the  key  reasons  HappyKids!    will  be  successful  
  • 5. We  Are  HappyKids!    We’re  Here  to  Keep  BOTH  Kids  and  Parents  Happy  On-­‐the-­‐Go    •  Solves  problems  with  keeping  kids  happy  AND  occupied  – Families  on  the  go:  Soccer  games,  grocery  shopping,  travel  •  Helping  parents  maintain  sanity  – Happy  kids  =  happy  parents  – Re-­‐live  your  favorite  childhood  memories  &  pass  them  on  to  your  kids  
  • 6. HappyKids!  has  MulFple  Key  DisFncFons  •  Both  Stream  and  Download  children’s  movies,  shows,  games  –  Targeted  at  Children  ages  0-­‐8  –  Wide  variety  with  a  complete  soluFon  of  TV,  movies,  games  both  educaFonal  and  entertaining  –  App  for  downloading  directly  to  tablet  /  mobile  •  Lower  cost  than  our  compeFFon,  because  of  kid  focus  •  Offer  an  online  community  for  both  parents  and  kids  –  Plus  online  games  for  kids  
  • 7. Several  Key  Ways  to  MoneFze  this  Service  •  SubscripFon  Model  –  3  key  pricing  Fers  –  Downloads  expire  72  hours  or  30  days  •  Partnership  with  Disney  &  Warner  Bros  –  Exclusive  Sponsoring  Rights  –  PromoFon  of  trailers  •  UFlizing  Older  Content  •  Click  through  rights  for  partners  –  Kids  can  click  through  to  view  partners’  content  on  their  pages  –  Kids  can  play  unlimited  games  via  partners’  pages  
  • 8. Trends & Competition!Analysis  of  the  current  state  of  the  market  and  how  HappyKids!    can  effecFvely  enter  
  • 9. Market  Status  Leaves  Room  for  Growth  •  19.8%  of  families  in  the  US  have  children  under  the  age  of  6  •  Parents  connect  emoFonally  when  purchasing  for  their  children  •  Parents  in  constant  need  to  cut  costs  •  Our  Goal:    1.  ExploiFng  exisFng  problems  in  the  industry    2.  Focus  on  one  segment    3.  Force  our  compeFFon  to  move  NE  
  • 10. Key  Success  Factors  Lead  to  Sustainability  •  CriFcal  Success  Factors:  – Strategy  – Partnerships  – ExecuFon  •  Sustainability  – SubscripFon  model  (constant  flow  of  revenue)  – RecommendaFons  – Sharing  between  community        
  • 11. MulFple  Ways  to  DifferenFate  and  Increase  Revenue    •  PosiFoned  Against  CompeFFon  – Specialist  Company  – Pick  up  “over-­‐served”  customers  – Force  compeFtors  NE  •  Future  revenue  sources  (Growth  Strategies)  – Expansion  outside  of  the  U.S.  – Expansion  to  ages  outside  of  0-­‐8  (tween,  teen)  – Possibility  of  creaFng  original  content  – Growing  categories  of  content  
  • 12. HappyKids!  Business  Model    Customization ofcontentEntertainmentfor the child*without the needfor parental controlsAccess todownloadsfor 72 hours /30 daysLow costMultiplepricing optionsAvoid newreleases(Only get movies thatare over 13 weeks old)Quick DownloadSpeeds(Downloads completein under 5 min)Categorizedvideos byage, ageappropriatecontentPlay /access freeonlinegamesLearning,Interactive,EntertainingcontentRecommendations basedon pastpurchaseEmail sentwithstreamingcapacity ofmoviesAccess tomultiplelanguagesInteractivewebsite,easy forchildren touseApplicationfor mobiledevices ,tables, etc.OnlinegamessourcedfrompartnersChildren’sonlineratingsystemParent’sonlinemessageboard /ForumOnline forumfor parents tochatMultiple subscriptiontiers(3 separate pricingoptions)Wide selectionof options(2000 movies, 1000shows, 500 games)Downloadcontent easily& quicklyAbility todownloadAbility tostreamcontentAmazonCloudbasedserversPartnershipwith WarnerBro’s andDisneyContent for kidsthat parents enjoyAccess to WideSelection ofchildrenscontentHave aCompleteSolution
  • 13. Industry Overview!Highlights  the  current  status  of  movie  rental  industry  and  HappyKids!    key  disFncFons  
  • 14. Overall  Movie  Rental  Industry  is  in  MulFple  Phases  •  Moving  to  online  format,  moving  away  from  linear  TV  &  DVDs  •  Able  to  use  portable  devices  to  watch  or  stream  movies  and  shows  –  Over  61%  of  Gen  X  and  younger  own  a  smartphone  –  Over  40MM  Americans  own  a  tablet  •  Increase  in  mobile  usage  leaves  opportunity  for  growth  
  • 15. Majority  of  Key  Distributors  are  Integrated  •  Although,  Nemlix  is  a  Product  Leader,  Blockbuster  is  the  most  integrated  –  Blockbuster  has  the  highest  cost  and  is  the  least  flexible  •  Redbox’s  overall  low  price  and  ability  to  modify  the  movies  in  each  box  based  on  demand  •  HappyKids!  will  focus  on  being  Integrated  while  retaining  overall  flexibility  IntegraFon     Modularity  
  • 16. Growth  is  Possible  via  Successful  CRM  •  Currently  the  3  major  video  outlets  are  in  different  segments  •  Customer  InFmacy  has  the  most  growth  potenFal  •  Based  on  anributes,  able  to  anract  customers  in  CI  and  PL  categories      Performance  Price  
  • 17. Competitive Landscape!Detailed  analysis  and  how  three  direct  compeFtors  can  impact  HappyKids!    overall  success  
  • 18. Redbox  Disrupts  the  Movie  Rental  Business  with  a  Southwest  Anack  Redbox’s  Low  End  Delighters  •  No  membership  required  •  Last  minute  rentals  of  latest  new  releases  •  Return  DVD  to  any  Redbox  kiosk  locaFon  •  Low  Cost  compared  to  Blockbuster  •  Convenience  and  proximity    (68%  of  populaFon  within  5  minutes  of  a  kiosk)  External  Factors  (Porters  5  Forces)      •  Customers  are  over-­‐served  by  services  of  BB  and  Nemlix    •  Recession  in  late  2000’s  caused  need  for  lower  cost  rentals    •  Customers  willing  to  accept  lower  performance  (less  movie  >tles)  for  greater  convenience  (store-­‐front  kiosks)    Strategy  Lane:  Redbox’s  Cri,cal  Success  Factors                    •  Partnerships-­‐wide-­‐ranging  agreements  with  McDonalds  and    retailers  Walmart,  Walgreens,  Albertsons  and  7-­‐Eleven  •  Technology  to  Scale-­‐kiosk  approximately  $15k  to  install    •  Vision  and  Innova,on-­‐Took  advantage  of  recession  and  kiosk  boom,  for  customers  seeking  convenient  last  minute  rentals  •  Execu,on-­‐within  3  years  Redbox  had  surpassed  Blockbuster  in  number  of  locaFons  
  • 19. Redbox’s  Business  Model  Lower CostLast MinuteRentalsAt Low CostTailoringDVDSfor SpecificAreasTo ObtainReliabilityService withNo HassleBetter ValueRelative toIn-store RentalsTarget the BudgetConsciousMovie RenterFocus onStrategicPartnerships(Revenue sharing withretailers 15%)Access to a LargeAmount of Consumers(68% of people live within 5min drive of kiosk)ReturnRentalsAt anyKioskLocationCreateFootTrafficforRetailersSend TeamsTo PurchaseMoviesAt RetailersTo SupplyKiosksRelocatekiosks tomoreprofitablelocationsSign WideRangingInstallationAgreementMoviesAvailableFor Sale$7NoMembershipRequiredKiosks inTopRetailers:WMT,WAG,MCD,7-11AlbertsonsAutomatedKiosksDirectSalesFrom AllHollywoodStudiosNewReleasesAvailableSame DayAs RetailStoresIncrease UtilizationOf Kiosks(Average Daily Rental49.1 a day)Immediate usagefor consumerContinue toIncrease DVDRental Share(As of 2010, 25%Streaming away from DVDS)Provide CurrentMovies(200 newest titles630 disks per kiosk)OnlineStreamingwith4 Videocredits/moVerizonJointVentureLocatedin HighTraffic 24/7LocationsRigorousDataAnalyticsVideoGame &Blue RayRentalsSoldusedDVDsMuchQuickerThan BBIncreasedConvenienceto Consumers
  • 20. Nemlix  has  NE  MigraFon  &  Adjacency  Moves  •  Consistent  NE  MigraFon  with  Adjacency  moves  – IntroducFon  of  Streaming,  Global  Expansion,  Original  Content  &  Series  •  Resources:  SophisFcated  algorithm  helps  the  company  decide  what  content  to  invest  in,  leadership  that  is  constantly  innovaFng,  great  brand,  high  number  of  streaming  customers  •  Ac,vi,es:  Streams  new  content  online  through  its  own  plamorm,  recommends  original  content  to  Nemlix  members  •  Values:  Only  shown  through  streaming  &  those  subscribers  make  up  80%  of  their  total  number  of  subscribers,  spent  the  same  amount  on  “cards”  as  it  would  have  on  an  exclusive  streaming  deal  with  an  outside  studio    
  • 21. HighPerformanceDeliveryAccess to bothDVD rentals andStreamingUnlimitedmonthlyrentals withno late feesSophisticated,NavigateablewebsiteLow Cost,SubscriptionBased ModelAccess to aWideSelection,Large Varietyof TitlesUltimate onlinedestination formovie enthusiastsPersonalizedRecommendation& rating systemCopyright  ©  2007  Zafar  Iqbal  Wide selection of titles(more that 100,000 DVD titles)Personalized database andRecommendations(3 bil + member ratings,60% member selected moveson recommendations)Integratingservice into agrowing # ofdevices(ex: gameconsoles)Matchcustomerswith new& obscurefilmsPersonalizedmemberpagesTitles reachingcustomersquicklyHighlyautomated /rapidprocessingCreateOriginalProgrammingEasy forcustomersto returnSophisticatedsystemsto trackcustomer’squeues &inventoryPartnershipswithdistributors,Sony /MicrosoftandHollywoodStreamingCapabilitiesOnlineplatform forordering /searching /queueAgreementswith USPSCineMatch /proprietaryrating systemR& D onwhat peoplewatch,nventing &fine tuningalgorithmsOriginal &On DemandContentHighswitchingcostsNo pressureof Late Fees,Unlimited ViewingQuick delivery(95% of customersreceived DVDs in 1 day)Long Tail Selection(70% of DVDs shipped weretitles released olderthan 13 weeks)60 regionaldistributioncentersNemlix’s  Business  Model  
  • 22. Blockbuster  has  had  Bad  Responses  to  DisrupFons  •  Poor  response  to  previous  disrupFon  – Result:  Large  market  share  stolen  – Forced  eliminaFon  of  many  ‘physical’  locaFons  – Anack  Blockbuster  in  Customer  InFmacy  – Bankruptcy  –  not  posiFoned  well  to  defend  their  space  – Not  personal  enough    – No  kid  focus  –  carve  out  a  niche  
  • 23. Blockbuster’s  Business  Model  AffordablePriceMulti-channelPresence (store,online, mail, kiosk)Focus onincreasingUSApresenceCustomerServiceWideSelectionReliableServiceIncreased SalesVersatile Website(5 ways to getmovies)LocalConnections(Approximately500 stores)Have awide arrayof moviesandgamesLeveragename,imageandbrandSustainonlyProfitablestoresCapableto review,order,purchasevideosonlineHigh coststo coveroldbusinessmodelConnectwithcustomersMegastoresandstandardstoresSell usedDVDsRentDVDs,VHS, andGamesGood BrandAwarenessBlockbuster.comNo latefees“Rent it,Like it, Buyit”promotionCleanfamily-friendlyenvironmentRemaincurrent withconsumerpreferencesBroad PresenceEach Store(Average storehad 6,000 units )Efficient Pricing($3.50 pricing)GlobalFootprintCustomerLoyalty
  • 24. Final Analysis!Highlights  potenFal  weaknesses  and  provides  confirmaFon  thatHappyKids!  will  be  successful  
  • 25. Weaknesses  of  HappyKids!  can  be  Overcome  •  StarFng  out  with  less  content  •  Establishing  &  maintaining  relaFonships  •  Start  up  in  a  compeFFve  market  •  DifferenFaFng  ourselves  from  other  children’s  networks  •  Building  a  brand  -­‐  CreaFng  customer  awareness  from  scratch  
  • 26. HappyKids!  has  an  EffecFve  Blocking  Strategy  •  Become  InFmately  Involved  with  the  Customer  – Create  a  Community  &  History  of  RecommendaFons  •  Creates  high  switching  costs    – Gain  visibility  in  community  (partner  with  schools,  sponsor  community  events)  •  Launch  Loyalty  Program    •  Create  IncenFves  for  Referrals  
  • 27. Closing  Thoughts  •  Specialist  company  taking  slice  of  business  from  Nemlix  and  Blockbuster  •  Lower  subscripFon  cost  than  NFLX  and  BB  for  over-­‐served  customers  •  SaFsfying  the  ‘Job  to  be  Done’  of  keeping  children  entertained    &  happy  •  Focus  iniFally  on  limited  content  through  strategic  partnerships  •  Seize  upon  conFnuing  trend  away  from  DVDS  to  streaming  &  downloads  •  Heavy  focus  on  developing  a  strong  online  brand  community  
  • 28. Looking for Angel Investors tomake this crying stop!Invest  in  us  to  help  get  HappyKids! off  the  ground  and  stop  kids  from  crying  everywhere!!!    
  • 29. You’ve got Questions?If  so,  HappyKids!  has  answers!!!  
  • 30. References  •  Consumer  CharacterisFcs  –  hnp://­‐content/uploads/2009/10/4_EmoConnecFon.pdf  –  hnp://  •  Redbox  – Verizon  to  set  up  streaming  service  with  Redbox:  Associated  Press  2/5/12    Peter  Svensson  –  Redbox  Instant  vs.  Nemlix:  3/31/13  John  Matarese  –  How  Redbox  Instant  Will  Take  on  Nemlix  AdAge|Digital    04/4/2013  Jeanine  Poggi  –  Movie  Rental  Business:  Blockbuster,  Nemlix,  and  Redbox:  02/08/2012  Sunil  Chopra  –  Wall  Street  uncertain  about  Redbox:  L.A.  BIZ  04/30/2013  Gina  Hall  –  Lessons  from  a  Dying  Business:  Inc.  12/13/2011  Karl  Stark  and  Bill  Stewart  •  Nemlix  –  Chopra,  Sunil  (2012).  Movie  Rental  Business:  Blockbuster,  NeHlix,  &  Redbox.  Kellogg  School  of  Management.  –  Wesley,  David  (2012).  NeHlix  Inc.:  Streaming  Away  from  DVDs.  Richard  Ivy  School  of  Business.  •  Blockbuster  –  Coughlan  Peter  (2004).  Blockbuster  Inc  &  Technological  Subs>tu>on  (B):  Confron>ng  New  Digital  Formats.  Harvard  Business  School  •  Overall  Industry  –  hnp://­‐by-­‐country/17-­‐usa/855-­‐mobile-­‐devices