netflix presentation

netflix presentation - Netflix.com , Inc. Achieving the...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Netflix.com , Inc. Achieving the Long-run Objective Heather Keller Netflix.com, founded by Reed Hastings, is the worlds largest online DVD rental company In February 2000, Netflix launched its new plan $19.95/month, instead of the previous $15.95/month Subscribers allowed to have up to 4 DVDs in their possession at one time Due to its success, in July 2000 the company submitted its S-1 filing for its initial public offering (IPO) However, during this time there was much uncertainty in the financial markets due to the decline in the NASDAQ Investment bankers predicted that the IPO would succeed if Netflix could show positive cash flows within a 12-month horizon Problems IPO Re-evaluate the companys cash flow requirements and make necessary modifications to improve the projected cash flows Make a new subscriber model to forecast the value of new subscribers Could the company afford to keep the free trial offering? Paid subscription: $19.95 Free trial months: 1 Queue size: 4 Shipping cost: $1.00 DVDs watched per month: 5.2 Nflx purchase cost per DVD: $16.03 Nflx DVD stock/subscriber: 5.8 New release (2 mo) %: 20% New Subscriber Model CHART OF NEW SUBCRIBER MODEL Month 1 2 3 4 5 6 7 8 9 Subscription status trial paid paid paid paid paid paid paid paid Revenue--- $19.95 $19.95 $19.95 $19.95 $19.95 $19.95 $19.95 $19.95 Shipping cost $5.20 $5.20 $5.20 $5.20 $5.20 $5.20 $5.20 $5.20 $5.20 Subscriber acquisition cost $93 $9.30 $9.30 $9.30 $9.30 $9.30 $9.30 $9.30 $9.30 Total DVD expenditures $98.20 $14.50 $14.50 $14.50 $14.50 $14.50 $14.50 $14.50 $14.50 Net revenue ($98.20) $5.45 $5.45 $5.45 $5.45 $5.45 $5.45 $5.45 $5.45 % retained : 70% 40% using the above chart I found the discounted expected values and annual values of new subscribers...
View Full Document

This note was uploaded on 03/09/2012 for the course FINANCE 3717 taught by Professor Milanshah during the Spring '12 term at LSU.

Page1 / 10

netflix presentation - Netflix.com , Inc. Achieving the...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online