...Corporate Financial Analysis and Security Research of Netflix, Inc. [pic] . Finance 307, Professor Peter Lou GGU, Summer 2013 Table of Contents Business Description……………………………………………………………………….. 3 Industry Position and Business Model…………………………………………………… 4 Industry Analysis……………………………………………………………………………. 4 Historic Financial Analysis……………………………………………………………….. 5 Weighted Average Cost of Capital……………………………………………………….. 6 Financial Statement Analysis……………………………………………………………… 7 Bond Valuation I……………………………………………………………………………. 10 Bond Valuation II…………………………………………………………………………… 11 Stock Analysis……………………………………………………………………………….. 11 Off-balance Sheet Items……………………………………………………………………. 12 Revenue and Earnings Growth Analysis…………………………………………………. 12 Conclusion……………………………………………………………………………………. 13 Exhibit I……………………………………………………………………………………….. 14 References…………………………………………………………………………………….. 15 Business Description Below are some fast facts regarding Netflix and a quick history snapshot. |Fast Facts | |Founded |1997 | |Location |Los Gatos, CA | |Industry Sector |Internet Television...
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...Introduction Netflix is the world’s largest online television service provider, which controls the market globally generating over 50 million subscribers. The company has consolidated its position as an online television industry. It provides its users with a fast Internet delivery service of television shows and movies directly on computers, television, and mobile devices worldwide. The video streaming and broadband connection help users around the globe download and watch large video files from the comfort of their homes. With the advantage of this technology, Netflix has launched a video steaming website in 2009 where subscribers can watch the most recent television shows and movies. For today’s audience, it’s all about immediacy and mobility. The content of the users is looking for convenience, product selection, community of users, and customer services to fit their needs. Netflix, however, has given users the ability to watch a movie or an episode of their favorite TV show while traveling or being away remotely from the comfort of their homes. With the understanding of the impact of video streaming and the entertainment industry, there are many competitors that have similar avenues relating to Netflix. Company Overview Reed Hastings and Marc Randolph founded Netflix (NFLX) in 1997 in Scotts Valley, California. Netflix is a consumer technology company and industry leader for on-demand video streaming of copyrighted content on a monthly subscription. The monthly subscription...
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...Netflix’s Underperformance Analysis | BUS 478 FINAL GROUP PROJECT | Instructor: Anthony Chan | Group MemberJackSandraJing(Ivy) Cong 301087222Gavin | Table of Contents EXECUTIVE SUMMARY 1 BACKGROUND INFORMATION 3 CORE ISSUES 5 Price Pressures 5 Competition 5 International Expansion 6 ANALYSIS 6 Industry Analysis 6 Business Model 8 Company Analysis 9 Competitor Analysis 11 Amazon 11 Blockbuster 12 Redbox 13 ALTERNATIVES 13 Additions of Subscription Fee Package 14 Introduction of Netflix' Pay-For TV Channels 15 Domestic Elimination of DVD-mail-in Services in 16 Strategic Partnerships 17 International Expansion 19 Market Strategy 20 RECOMMENDATION 22 CONCLUSION 26 REFERENCES 26 EXECUTIVE SUMMARY Netflix is the world’s leading subscription service provider, offering its members access to an extravagant collection of TV shows and movies. Initially, the company offered its subscribers a low price, single monthly plan, consisting of both the unlimited Internet video streaming service and a DVD-mail-in service. Subscribers could “watch TV shows and movies anytime, anywhere.” In July 2011, Netflix eliminated the combined plan and separated the two services into their own monthly plans. If subscribers wanted to continue receiving both services, they were obliged to sign up for both the services separately, Consequently, the resulting price increase of the new “combined” plan significantly increased subscription cancellations...
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...organization a competitive advantage (Hitt & Robert, 2011, p.10). Value chain analysis is a model that was developed by Michael Porter to help an organization develop a strategy for its organization. Michael porter suggested that organization activities can be grouped into two major categories which include the following; primary and support activities. Primary activities are those activities that are geared towards the creation and delivering of a product. Examples of primary activities include component assembly (Schmitz, 2005, p.20). Support activities on the other hand are not directly related to the production of a product or service. Such activities are those activities that can increase the efficiency or effectiveness within a business. For example, human resource management is an example of support activities. This essay is going to evaluate the process of value chain analysis and its application in the following two companies; Netflix and Redbox companies. 2.0 Background information. Netflix is an online movie streaming and email DVD Company. The company offers consumers a chance to stream live various movies over the internet. In order to use Netflix, consumers are required to register on the company’s website. The registration will involve paying a monthly subscription fee. Consumers are able to stream movies and watch live televisions show to their personal computers or even television sets. Netflix is only...
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...Duane Lefevre Netflix Case Analysis Summary To “Netflix” is fast becoming a common word in today’s society. Everyone knows it, because it is very famous for its service of online movie. It has replaced the traditional DVD rental store and all the rental process can be done through internet with a higher image quality. Reed Hastings incorporated in 1997 and starting movie rental service in 1999. In 2012, there was already over 23 million subscribers and more then 120,000 titles available for online streaming, majorly competing with Hulu Plus and Amazon prime instant video. Analysis Porter five forces analysis The Porter’s five forces model is often used to analyze companies’ level of competition within an industry and business strategy. The rivalry among existing competitors is intense. There are a large number of firms in the movie rental industry and the competition is very high. Several methods for consumers to choose from in-store rental, online rental and mail delivery or video on demand and low level of product differentiation also increase rivalry. There are low switching cost which also lead to aggressive competition and comparable product can be found at many different places. In brief, Netflix major competitors have large levels of capital and also achieved economies of scale. The threat of new potential entrants of Netflix is soberly low...
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...Running head: FAILURE ANALYSIS AND CHANGE STRATEGY 1 Failure Analysis and Change Strategy LDR-531 January 2014 FAILURE ANALYSIS AND CHANGE STRATEGY 2 Failure Analysis and Change Strategy In today’s business market, for a business to succeed, they have to be open to change, be flexible, be technologically savvy, and be able to re-invent themselves to reflect what is happening in the market at the time. “Over the past decade, policy makers and the public have become progressively more concerned as success in information markets has led to a concentration of market power that allows a few firms to dominate what is increasingly seen as a commodity essential to modern life,” (Wright, 2009). The success of the economy is dependent upon the success of businesses. When a company fails, the economy will be affected by the loss of sales, consumer purchases, income, and spending cuts due to the loss of jobs. When a household has more income, spending increases; but when the income decreases for whatever reason, they will tighten the reins on spending which will results in fewer sales. This paper will analyze some of the things that have led different companies to fail and to succeed, and then how they try to apply the lessons learned to avoid repeating the events and strategies that led to failure. Part 1: Failed Business Analysis – Borders Books Business Failure Analysis Former Executive of Borders, Andi Lobdell (2012) states, “As a former executive of Borders...
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...Netflix Case Analysis Netflix is an American provider and the world's leading internet subscription service of on-demand streaming media in the United States, Canada, Latin America, the Caribbean, United Kingdom and Ireland and flat rate DVD-by-mail in the United States. Netflix members can instantly watch unlimited films and TV episodes streamed over the internet to more than 700 devices for about $7.99 a month. With regards to increasing the influence of the Netflix brand, expansion into the video game industry could be an option, however various factors such as competitors, viability and sustainability of the company as a whole need to be further analyzed in order to assess whether this proposal is feasible. Competitor Analysis AREA| NETFLIX| HULU| BlOCKBUSTER| REDBOX| market share| 55%| 35%| 5%| 5%| Subscribers| 23.6 mil| 24 mil| low| 12 mil| Brand Popularity| HIGH| LOW| MED-HIGH| MEDIUM| start date| 1998| 2007| 1985| 2003| Revenue in 2011| 705.7 mil| 420 mil| bankrupt| 363.9 mil| Revenue increase from 2010| 29.00%| 48%| | | Growth in customers| 30%| 50%| | 30%| (in 2011)| | | | | Netflix's success has inspired a number of other DVD rental companies both in the United States and abroad, but none of the purely online companies appear to approach Netflix in terms of market share or revenues as can be seen above. Hulu is a close second in terms of Market share and it can be seen that its entry into the market was nearly...
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...gave customers no reason to visit stores in lieu of the latest and greatest hit. (www.forbes.com/.../the-internet-didnt-kill-blockbuster-the-compa... Forbes Nov 8, 2013) * When should they have sensed or perceived a change to their business would be necessary? Lack of ease of accessibility and higher prices in connection to other video rental outlets. Blockbusters main competitors such as Netflix, Redbox, and many On Demand services seem to have a much better grasp of the importance of instant access at a lower price. (Blockbuster Inc. (SWOT analysis). http://www.yousigma.com/comparativeanalysis/blockbusterinc.html) * When should they have innovated or changed their plans to comprehend the perceived changes? Blockbuster’s biggest mistakes were that it failed to modernize its business strategy to include a multi-channel avenue for its customers to decide how they wanted to rent movies. Movie renters were and still are moving away from the traditional format of renting movies. Failure to adapt to changing consumer behavior and new technology helped companies like Netflix and Redbox gain considerable ground in the video rental industry. * What should they have considered when looking at their Porter’s Model? What do you think kept them from making timely changes? Blockbuster failed to differentiate the threat of substitute products or services when there are many alternatives to a product or service. This oversight made it is easy for new competitors to enter...
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...Netflix Netflix was founded in 1997 in Scotts Valley, California, USA by two entrepreneurs named Reed Hastings and Marc Randolph. In its early days, Netflix offered unlimited movie rentals to its subscribers without due dates for a flat monthly fee with no per title rental, shipping or handling fees or late charge fees. In 2007, the company introduced new business model based on video on demand via the Internet, which was considered by some to be a departure from its original business model of movie rentals. With video streaming, online DVD and Blue-ray Disc rental tripod and with a global streaming subscribers of over 50 million, Netflix reported a revenue of US$4.37 billion US$112 million of which being net income and a total asset of US$5.4 billion in 2013. The company estimates its total equity to be US$1.33 billion and it has over 2000 full-time employees (www.netflix.com). Netflix’s vision as expressed by one the co-founder focuses on global distribution, licensing entertainment contents across the world, market accessibility for film makers, and finding global audience for content creators. (10K Item 1). It’s mission emphasizes growing global streaming subscription business, continuous customer experience improvement, enhancing user interface while at the same time remaining profitable. Mission. Netflix core values revolve around judgement, productivity, creativity, intelligence, honesty, communication, selflessness, reliability and passion. Tepper (2014)...
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...Session 3 Case Analysis Stephanie Shanks Strategic Management March 28, 2015 Professor Debra Hunter Shorter University Netflix in 2012: Can It Recover from Its Strategy Missteps? Introduction The following case analysis follows the strategic moves of Netflix over its existence, specifically from 2011 to 2012. The specific matters discussed refer to some poor strategic decisions made by the company. Netflix made many decisions that turned out to be toxic to the company’s future. Moving from price changes to global expansion, the firm’s financial status was back and forth. Further analysis will identify key issues with strategy and allow for realization for better alternatives. Company Background Netflix was founded in 1997 (Netflix, n.d., para. 1). The company started out with the idea of offering online movie rentals. Over time, the firm has grown to offer subscription services for online media streaming of movies and television shows, and DVD rental. The idea behind the services was to allow consumers more affordability and flexibility in renting videos. Consumers are able to pay a small monthly subscription fee to rent a specified amount of DVDs based on the plan for any desired length of time, without worrying about late fees (Thompson, Peteraf, Gamble, & Strickland, 2014, p. C-137). Netflix also offers a streaming option for movie and TV shows. The service started out as metered but moved to a subscription for unlimited streaming (Thompson et al...
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...Financial Statement Analysis Case Study Blockbuster versus Netflix By Deng Pan December 9, 2013 Financial Statement Analysis is one of the mainly used methods to evaluate a business. The Return of Equity (ROE) basically provides a big picture of how the business runs. This ratio can be decomposed to three parts: 1) Profit margin (Net income / Total revenue) 2) Asset turnover (Total revenue / Assets) 3) Leverage ratio (Assets / Equity) These ratios represent the profitability, activity, and solvency of the business respectively, which are the three main categories that analysts look at to approach the coverall value of the business. In this paper, I would follow this method, and give the vertical and horizontal analysis of Blockbuster Video’s and Netflix’s performance through 2001 to 2009. Blockbuster Video Business Introduction Blockbuster started their home movie and video game rental services business in 1985. They originally provided the rental service through owned franchised video rental shops, and later added DVD-by-mail, streaming, video on demand and cinema theater into the service category. The company generates the revenue from the movie and video rental fees. The main costs of the revenue are the store rental expense, and the inventory cost. After experiencing a fast growth in late 1980’s and 1990’s, the company peaked in 2004 with up to 60,000 employees and more than 9,000 stores. [1][2] However, if we look at their books from 2001 to 2009...
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...Project Proposal The proposed organizations for this project are Netflix and Blockbuster. This research project will demonstrate why the two companies changed to stay in competition. Additionally, this research project will demonstrate how technology obligates organizations to change their business model. Blockbuster opened their first store in 1985 in Dallas, Texas and expanded to operate 6,500 video rental stores (Blockbuster, n.d.). The organization was a competitor in the small video rental stores by providing a wider selection of movies and game rentals. Because of the positive, public acceptance Blockbuster expanded quickly and opened stores across the nation, London and Canada (Blockbuster, n.d.). Netflix was founded in 1997 in Scotts Valle, California. The organization website was launched in April 14, 1998 providing to the public online-per-rental model. Netflix introduced the monthly subscription concept in September, 1999. In February, 2007 Netflix introduced the video-on-demand via the Internet. At the present time Netflix provide services in Canada, Latin America, the Caribbean and Europe. Netflix is recognized to be one of the most successful dot-com ventures (Funding Universe, 2011). ORGANIZATIONAL CHANGES Blockbuster was purchased by Dish Network after filing for bankruptcy in late September 2010. The company has closed a large number of stores at it works to create an online video-streaming outlet (Merced, 2010). Blockbuster’s edge over...
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...Google, the world's most powerful brand, endeavors to purchase Netflix, the largest U.S. based online movie rental service provider. This acquisition is consistent with the Google focus on improving how people connect with information. The acquisition will address a strategic opportunity to deliver more diverse online content to the world, where the graphical and video display-ad market is estimated to grow to $200 billion (Efrati, 2012). It will also further build on the expansive Google acquisition model strategy and use of capital (Rosoff, 2012). Google enjoys proven success and market dominance in online advertising. With its graphical and video advertising successes through its YouTube platform and thousands of other sites, the company has established a significant competitive advantage in the market of display-advertising. With Netflix, Google would leverage its ad expertise to pair advertisements with video search requests and video themes/genres. This acquisition will continue the Google growth model of winning loyalty across every facet of the internet experience which translates into "overall time spent on Google services,[...]more time (for consumers to be) exposed to ads, [and] increased brand loyalty (Young, 2011). The acquisition would provide a diversified monetization model of membership/fee based service which provides strong direct customer and revenue competition to Hulu (streaming video currently offered only to users in Japan and the USA and its overseas...
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...Netflix Reed Hastings, a former Blockbuster customer was once charged a $40.00 fee for not returning a movie on time. Hastings wanted to find a way of allowing customers to enjoy their favorite movies on their own time and without being charged the late fee (Copeland). In 1997 Hastings introduced Netflix to American consumers and the company has been successful ever since. He did away with due dates and extra fees, and gave customers the convenience of selecting movies from home and watching them when they wanted. Netflix, Inc. is an Internet subscription service for TV shows and movies. The company has 23.6 million members in the United States and Canada. Netflix allows its subscribers to watch unlimited TV shows and movies by streaming over the Internet to their TVs, computers, and mobile devices. Subscribers also have the option of having DVD’s shipped to their homes (Netflix Inc.). Industry The changing technological developments over the years in the in-home video entertainment industry have allowed many opportunities for movies rental companies to expand. The internet changed how customers viewed their movies. Online rentals, video streaming and on demand viewing services have entered the field and created a huge advantage over retail stores, such as Blockbuster. With consumers shift toward the internet, customers no longer needed to drive or walk to a store to look through limited-selection stock in search of a movie or to be disappointed that a movie was...
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...Final Exam – August 2013 Part 1 – Analysis of Netflix 1. and 2. Brief Overview of Netflix’s Business Model In order to better understand Netflix’s business model, there are 3 topics discussed at here: 1) the current business model analysis based on Alex Osterwalder’s methodology; 2) the history of Netflix’s business model which will give us more insights of what happened to Netflix in the past, and where it will go in the future; 3) the challenges and issues of current business model. Current business model The following is the current business model canvas of Netflix. As we can see above, Netflix’s revenue comes from subscription fee. The quality of video content is very important for success of Netflix’s business model. Netflix also extend the span of devices which support streaming. The growth of international subscription is one of the key success factors measured by wall-street. History of Netflix’s business model At the same time, to understand the history of Netflix’s business model is also very important. Figure 1Numbe of Subscription Figure 1Numbe of Subscription At the time of 1997 when Netflix was found, it offers online movie rentals. At 1999, Netflix launches the subscription service, offering unlimited rentals for one low monthly subscription. Before 2007, Netflix uses mail to delivery DVD to customers. At 2007, Netflix introduces streaming, which allows members to instantly watch television shows and movies on their personal computers....
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