Netflix Case Analysis

Topics: Net present value, Cash flow, Revenue Pages: 7 (2304 words) Published: October 21, 2012
Case Analysis:, Inc

JAVK Consulting Company 6/14/2011
600 Civic Center Dr
Detroit, MI 48226
Dear Mr. Hastings,
Our company JAVK Consulting has examined the Netflix customer model and looked into the company’s five year financial future. We have analyzed Netflix with a scope of entering a rocky internet based company marketplace and seeing success in the future. The company currently is pumping lots of money into marketing strategy in order to growth their customer base and is in turn facing financial troubles while they approach their initial public offering stage. As you read through our analysis of Netflix you will find our company’s thought on your financial performance so far, look into a subscriber model and correlated cash flows, and develop an idea of financing solutions to manage growth. While more users are using mainstream technology such as DVD players, video game consoles, laptops, combined along with high-speed internet the creates a growing environment for a consumers wanting entertainment at their joysticks and fingertips. Our aspiration is for Netflix to have a successful run at an IPO if chosen and manage their customer growth along the way for long term success. Thank you for the chance to help your business thrive. We hope you agree with our financial outlook of Netflix and make a decision that catapults your company into financial success. Sincerely,

JAVK Consulting Group
Problem Statement:
Based on Initial discussion and evaluation, we understand that the launch of Initial Public Offering (IPO) is critical and needs to be evaluated if the company should go forward with the offering, as a result of number of internet companies have been forced to withdraw their IPOs due to market down turn. Secondly the need to show positive cash flows within a twelve month horizon in order to have a successful offering. Third to suggest modifications that would improve the company’s projected cash flows given the fact that the revenues were doubling every six months. One of the most critical points of success for Netflix depended on the company’s ability to manage and sustain their triple-digit growth into the foreseeable future. Analysis:

Technology is continuously facing rapid change which gives a company such as Netflix an exclusive opportunity for a first mover advantage in a new market. The Netflix product is one that can ship easily and cost effectively or be received directly to internet connections worldwide. The definite increase in internet and console users is creating a consumer demand for entertainment that Netflix can fill. This versatile product paired with emerging technology has led to rapid growth for the Netflix Company. The basic elements of Netflix core products give them an advantage over brick and mortar stores such as Blockbuster as Netflix offers a more personalized movie experience, the same new titles, all along with no time restrictions or late fees. As part of this long term objective Netflix’s goal is to grow its customer base and retain users of free trial software. The goal of the free software is to have a positive acquisition rate of free trial users after a month of free service and retain them into the long run future. After retention, the goal of Netflix is to withhold those customers into the long term future by tailoring the Netflix product in a unique way to each customer. Netflix does this by adapting their website interactions for each customer based off of their viewing history and preferences using a unique personal movie finder service. By offering this personalized service video users can find movies they would enjoy and possibly use the Netflix mail service. Theoretically speaking, Netflix performance to date has been positive (although the company has been incurring loss year over year) considering the high operating expenses for the initial years of a new business is common as most...
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