Service platform integration relationship

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ServicePlatform IntegrationRelationshipComputerized ServicesPersonal Computerized AssistanceSegmentsMass MarketCable Satellite SubstitutesBlockbuster FansKeyResourcesVirtual ContentWeb ServersMobile DataDVD InventoryChannelsNetflix.comiOS/Android ApsSet Top Box ChannelsCost StructurePer User LicensingStreaming CapacityContent LicensingFixed Costs (DVDs)Revenue StreamsMonthly SubscriptionPlatform SalesDVD Envelop AdvertisementsExhibit 1 Netflix Financial Statements 2004-2006(Dollars in Thousands)20042005Delta2006Delta44
BUSI 690-D06: Group Case Study 1: NetflixIncome StatementSales Subscription500,611 682,213 996,660 Cost of RevenuesSubscription273,401 393,788 532,621 Fulfillment56,609 70,762 93,439 Total330,010 464,550 626,060 Gross Profit170,601 217,663 0.3 370,600 0.7 Operating ExpensesTech and Development22,906 30,942 44,771 Marketing98,027 141,997 223,386 G&A16,287 29,395 30,130 Restructuring0 0 0 Stock-based Comp16,587 14,327 12,696 Gain on Disposal of DVD’s(2,560)(1,987)(4,797)Total Operating Expenses151,247 214,674 0.4 306,186 0.4 Operating Income19,354 2,989 64,414 Interest and other Income2,592 5,753 15,904 Interest Expense(170)(407)0 Pre-tax Income21,776 8,335 80,318 Taxes181 (33,692)31,236 Net Income21,595 42,027 1.0 49,082 0.2 Cash Flow SummaryCash flows for operations145,269 157,507 247,862 Acquisition Costs of DVDLibrary(100,087)(111,446)(169,528)Purchase of property, plant and equipment(15,720)(27,653)(27,333)Proceeds from sales of DVDs5,617 5,781 12,886 Free Cash Flow35,079 24,189 (0.3)63,887 1.0 Exhibit 2 Netflix Annual Balance Sheet 2004 - 2006Netflix Inc. (NMS: NFLX)Annual Balance Sheet 45
BUSI 690-D06: Group Case Study 1: NetflixReport Date12/31/200412/31/200512/31/2006Cash & cash equivalents174,461 212,256 400,430 Short-term investments---Prepaid expenses2,741 7,848 4,742 Prepaid revenue sharing expenses4,695 5,252 9,456 Current content library, net---Prepaid content---Deferred tax assets-13,666 3,155 Other current assets5,449 4,669 10,635 Total current assets187,346 243,691 428,418 Non-current content library, net42,158 57,032 104,908 Intangible assets, net961 457 969 Information technology assets---Furniture & fixtures1,193 1,240 4,855 Building---Leasehold improvements2,482 2,866 14,389 DVD operations equipment---Computer equipment-22,549 28,237 Other equipment-19,641 25,000 Operations & other equipment---Software---Computer software, including internal-use software10,094 13,061 16,883 Capital work-in-progress4,498 13,266 11,482 Computer & other equipment23,938 --Property & equipment, gross42,205 72,623 100,846 Less: accumulated depreciation23,477 32,410 45,343 Property & equipment, net18,728 40,213 55,503 Deferred tax assets-21,239 15,600 Deposits1,600 1,249 1,316 Patents, net---Restricted cash---Debt issuance costs, net---Other assets---Total other assets---Other non-current assets1,000 800 2,065 Total assets251,793 364,681 608,779 Current content accounts payable---Current content liabilities---Other accounts payable---Accounts payable49,775 63,491 93,864 Accrued state sales & use tax4,736 6,656 9,019 Accrued payroll & employee benefits--5,080 Employee benefits2,709 3,513 -Accrued interest on debt---Accrued content acquisition costs---Accrued legal settlement-8,589 6,615 46
BUSI 690-D06: Group Case Study 1: NetflixCurrent portion of lease financing obligations---Other accrued expenses5,686 6,805 9,191 Accrued expenses13,131 25,563 29,905 Current portion of lease financing obligations68 --Deferred revenue31,936 48,533 69,678 Notes payable---Total current liabilities94,910 137,587 193,447 Non-current content liabilities---Deferred rent600 842 1,121 Long-term debt---Long-term debt due to related party---

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