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netflix presentation

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

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Netflix.com , Inc. Achieving the Long-run Objective Heather Keller
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Netflix.com, founded by Reed Hastings, is the world’s 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
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Problems IPO Re-evaluate the company’s 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? If so, convert as many free trial users to paid
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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…
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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
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