90% of startups fail. Why did NOW TV succeed?
Updated: Jun 18, 2020
The five key elements of successful startups
NOW TV is a successful startup. But why did it succeed when so many other startups fail? Bill Gross, founder of IdeaLab, Picasa, Tickets.com etc. has analysed 200 companies and believes there are five key elements to success. Some startups only need one or two of these elements to succeed. NOW TV had all five.
Timing is the most important factor in Bill’s list and the timing for NOW TV was just right. NOW TV launched in July 2012 in the UK. Consumers were ready to stream TV. The technology meant it was feasible to operate and also simple for end customers to use. Broadband penetration was at 76% in the UK meaning the potential market was a great size.
Blinkbox launched in 2007 and Netflix launched in the UK in Jan 2012. Whilst the competition pipped NOW TV to the post, they had the harder job of having to educate the market on how streaming over the internet worked. With new technology products its often easier arriving slightly late to the party.
Sky’s growth in satellite subscribers was starting to slow and it was predicted that much of the growth in TV customers would come from the “pay-lite” section of the market. NOW TV was the perfect product for this segment at the perfect time.
NOW TV had a capable team in place from the beginning. Skilled engineers, designers and product managers, a strong brand and marketing team, true leaders, fantastic ops and customer service… the list goes on. But they wouldn’t have achieved half as much if it wasn’t for a clear mission, effective planning and adaptability when things didn't go well.
As NOW TV scaled, leadership recognised the importance of aligning teams under a common mission, to provide them with clarity on what they wanted to achieve and why. I was part of the team who collaborated on NOW TV’s mission statement and this is what we came up with:
To share the wow of brilliant TV with more and more people.
There were always deadlines on NOW TV, from the initial launch to releasing new features and products. We managed to hit the deadlines through hard work and stringent prioritisation. Advertising campaigns were booked months in advance of new product launches, such as the live streaming of Sky Sports channels, meaning intense collaboration across departments was key to delivering on time.
When you’re building a new business things will go wrong. The important thing is how you react to these situations. Learning from failure is key to prevent it from happening again. Putting your customers first is also important in building trust and respect.
In April 2014 NOW TV had an outage during a live airing of Game of Thrones. There was unprecedented demand with a huge spike in viewers all joining within several minutes of each other. Viewers who were unable to watch the episode were furious. The technology team dropped all other work and focussed on understanding the root causes of the issue and how they could ensure it did not happen again the following week. Leadership sent an email to all affected customers apologising to them and offering them a free month of NOW TV as a "gesture of goodwill". The way the team adapted ensured there were no long-term impacts on NOW TV’s business or brand.
People tend to think the most important thing you need for a successful startup is a great idea. Something completely unique. It’s worth noting that “Idea” is third in Bill Gross’ list. Below Timing and Team. Here’s why.
If you own intellectual property such as a patent then this can give your business an edge, but uniqueness is not essential. There are many hugely successful businesses which have repackaged established ideas. NOW TV falls into this camp. All of NOW TV’s content was already available on Sky. There were already video streaming services such as Netflix operating successfully in the UK. All NOW TV did was give customers a new way to watch Sky’s TV content, with no satellite dish and no subscription. That wasn’t a revolutionary idea, but the content, the price point and the lack of contract were attractive enough for the business to succeed.
NOW TV started as a movie streaming service. TV shows, live sports and kids content were added in incremental releases. Each of these count as a “business idea”, but once again they were not unique.
The one idea that I think may just edge into the “unique” category was coupling the NOW TV service with a dedicated streaming device - the NOW TV box. It turned a customer’s TV into a Smart TV for only £9.99. The NOW TV box was a white-labelled Roku streaming device. The sales and marketing team did such a good job of getting the box into retail stores that you couldn’t walk into a supermarket or electrical retailer without being confronted by the NOW TV box and its prominent visual merchandising. The box wasn’t a standalone offering either. It was regularly bundled with a variety of “passes” to NOW TV content.
The NOW TV box was a hit. It featured highly on gift list ideas in the press and soon became the most popular streaming device for NOW TV. Customers who used the NOW TV box had a higher engagement score and watched more TV than on other devices. It also allowed NOW TV to control the customer’s TV ecosystem. Neither Netflix or Amazon Prime were available on the NOW TV box for several years after it’s launch. It accelerated NOW TV’s success more than any other idea.
4. Business Model
The reason “business model” appears lower down on the list is that it’s not essential for launching a startup. There are many successful companies who started without a clear business model, such as Youtube and Facebook. Business models can be added or refined over time.
But some companies start with a well-defined business model and NOW TV falls into this camp. It always had a clear vision of how it was going to generate revenue. In short: sell Sky’s existing TV content into the “pay-lite” segment of the market. Reaching scale would balance the initial outlay in operating costs for technology, marketing etc. The team decided to break away from the Sky brand and launch the service under a different name to emphasize the differences in the offering.
There were early concerns from leadership around cannibalisation of Sky’s more lucrative customer base. NOW TV movie passes were initially priced far higher than they ended up a couple of years later. This caution allowed leadership to test and learn and prove that cannibalisation was not an issue. In 2017 only 2% of Sky TV customers had joined NOW TV and many of them would have left Sky anyway. This chart shows how NOW TV was priced in 2017 compared to Sky and the competition.
Finally, we reach funding. The reason this is the bottom of the list is that it’s possible to start a business with limited funding and find more money at a later date. Thankfully NOW TV never had any challenges around funding. Sky’s business is highly profitable. In 2012 operating profits were £1,223m (up 14% from the previous year). This meant NOW TV had the budget to build the product, establish a new brand and provide a great customer service experience.