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
• 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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Developing A Sustainable Business Model

  1. 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. 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. 3. Agenda  •  IntroducFon  •  Trends  &  CompeFFon  •  Industry  Overview  •  CompeFFve  Landscape  •  Weaknesses  &  Blocking  Strategy  •  Closing  Remarks  
  4. 4. Introduction!Necessary  framework  to  understand  the  key  reasons  HappyKids!    will  be  successful  
  5. 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. 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. 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. 8. Trends & Competition!Analysis  of  the  current  state  of  the  market  and  how  HappyKids!    can  effecFvely  enter  
  9. 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. 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. 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. 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. 13. Industry Overview!Highlights  the  current  status  of  movie  rental  industry  and  HappyKids!    key  disFncFons  
  14. 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. 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. 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. 17. Competitive Landscape!Detailed  analysis  and  how  three  direct  compeFtors  can  impact  HappyKids!    overall  success  
  18. 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. 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. 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. 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. 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. 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. 24. Final Analysis!Highlights  potenFal  weaknesses  and  provides  confirmaFon  thatHappyKids!  will  be  successful  
  25. 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. 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. 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. 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. 29. You’ve got Questions?If  so,  HappyKids!  has  answers!!!  
  30. 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