Enterprise Analysis: Netflix
March 1
2016

 
 

 
 
 
Table of Contents
Background & History. 2
History. 2
Products & Services. 3
Industry & Markets. 4
Management. 5
CEO.. 6
CFO.. 7
Acquisitions & Divestitures. 7
Financial Analysis & Trends. 8
Balance Sheet. 8
Income Statement. 10
Cash Flow Statement. 13
Ratios. 15
Peer Comparisons. 15
Online TV & Movies. 15
Rent-by-mail or Physical Rentals. 16
Market Share. 16
SWOT Analysis. 17
Strengths – Internal Factors. 17
Weaknesses – Internal Factors. 17
Opportunities – External Factors. 17
Threats – External Factors. 18
Enterprise & Management Assessment. 18
Strategic Competitive Advantages. 18
Strategic Competitive Disadvantages. 18
Summary. 19
Bibliography. 21
 
 
Background & History
History
Netflix started as a DVD rent-by-mail company in 1997. Netflix also sold DVDs over the internet at this time. One of the founders, Reed Hastings, got the idea for rental-by-mail when he was hit by $40 in late fees for returning the movie Apollo 13 late. The co-founder with Hastings is Marc Randolf and they founded Netflix in Scotts Valley, California {{Uhle, Frank and Stephen Meyer. 2010;}}.
1997 was the year that DVDs were introduced and less than 1,000 titles were available on DVD. Also, the hardware needed to play DVDs was expensive and few Americans had this hardware. Despite this, Reed and Hastings forecasted that DVDs were the next big thing and would replace the lower resolution video tapes. Also, many rental stores did not carry DVDs making this a market that they wanted to grab {{Uhle, Frank and Stephen Meyer. 2010;}}.
Before opening for business, they experimented with over 200 mailing packages in order to find one that was safe to ship a disc in, light and relatively inexpensive. They were also going to promise quick delivery to their customers which meant having the DVDs in stock and also relying on the US postal service to delivery quickly. In order to be ready for the demand of new releases, Netflix promised to buy more than 1,000 copies of new releases {{Uhle, Frank and Stephen Meyer. 2010;}}.
Netflix opened for business in the spring of 1998. They offered 7-day DVD rental for $4 and $2 shipping. The initial response to Netflix was so strong that their internet site was forced to be shut down 48 hours after it went online because of heavy site traffic. Netflix only had a few other competitors when they started including Magic Disc, DVD Express and Reel.com {{Uhle, Frank and Stephen Meyer. 2010;}}.
Just 6 months after opening for business, Netflix received a big promotional boost when it sold DVDs of Bill Clinton’s Grand Jury testimony in the Monica Lewinsky affair for two cents each plus $2 shipping. This was covered in news media and really gave Netflix a lot of media coverage. Shortly after, Netflix announced that it would stop selling DVDs and customers were directed to amazon.com for purchases. In exchange for business directed its way, amazon.com promoted Netflix on its highly trafficked site. In just one year, Netflix grew from 30 employees to 110 and a large French firm, Arnault, invested $30 million in Netflix. This investment was to be used for brand-building and marketing endeavors. This investment is now seen as key to Netflix’s dominance of the DVD rental category {{Uhle, Frank and Stephen Meyer. 2010;}}.
For the year 1999, Netflix reported losses of $29.8 million on a revenue of only $5 million. This is because Netflix was still investing in getting customers to its Web site and taking the chance that it would become popular after the brand was more well-established {{Uhle, Frank and Stephen Meyer. 2010;}}.
In December of 2000, Netflix achieved a huge accomplishment by striking revenue sharing agreements with Warner Home Video and Columbia Tri-Star. The movie studios would give Netflix better prices on large quantities of DVDs in exchange for a percentage of rental receipts. Other studios like DreamWorks and Artisan Entertainment Inc. soon followed {{Uhle, Frank and Stephen Meyer. 2010;}}.
In 2002, Netflix started to open new regional distribution centers to speed delivery. The first facilities proved to have a high return on investment so Netflix opened 7 more later that year. By 2002, Netflix now had 670,000 subscribers, 11,500 different movie titles and agreements with more than 50 film distributers. By early 2003, Netflix hit 1 million subscribers and by then end of 2003, the stock price went up by 400% {{Uhle, Frank and Stephen Meyer. 2010;}}. It was a pretty good year for Netflix!
Now comes the time to start streaming video which is what we are familiar with today (although I am old enough to remember DVDs coming in the mail). As cable television providers started to provide video-on-demand to their subscribers, Netflix needed to make a move. In the fall of 2004, Netflix joined forces with TiVo to develop the means to stream secure video content to PCs via the internet. By 2007, Netflix launched its “Watch Now” online service making videos available instantly over the internet. Netflix partnered with Microsoft to stream over the Xbox, Sony to stream over PlayStation 3 and it also made content available via the Nintendo Wii. This was all by spring of 2010 when Netflix had over 12 million subscribers and 42% streaming over the internet {{Uhle, Frank and Stephen Meyer. 2010;}}. This is now the core of the Netflix business.
Products & Services
As stated in the history above, Netflix started with DVD rentals and sales. With amazon.com also offering DVD sales, Netflix backed out of the market of selling DVDs and continued to rent them to customers via mail. Once cable companies started to offer on-demand video streaming, Netflix started to strategize how to stream videos to their customers. By 2007, Netflix launched its on-demand streaming via the internet to its customers. As stated previously, this is now the core of Netflix and they service most of their customers this way {{Netflix 2016;}}.
Over time, Netflix has changed their offerings for rental packages. The table below shows a history of their rental offerings.
Figure 1 Netflix Service Offerings
Now you can connect with Netflix over almost any device including PCs, game consoles, smart TVs and smart phones. Currently it is $9.99 per month for the basic package where you can watch 2 screens at once (which is handy when you share your account in a family) and HD is available. There is also the Premium package that includes Ultra HD and you can watch up to 4 screens at once (for your larger family) {{Netflix 2016;}}.
Netflix currently has movies, TV shows, documentaries and even original series (like Orange is the New Black) for its customers to watch {{Netflix 2016;}}. Netflix even has done very well with its original series with some even nominated for Emmy, Golden Globe and Academy Awards {{Blau, Gavan 2015;}}.
In summary, Netflix currently has 3 main business segments: rent-by-mail in the US, US streaming and International streaming {{Blau, Gavan 2015;}}.
Industry & Markets
Internet Publishing and Broadcasting
Because Netflix does both on-demand video streaming and rent-by-mail, they are technically in 2 different markets. The first market is Internet Publishing and Broadcasting. This industry includes organizations that offer news, music and video through the internet. Most of the revenue in this industry is from advertising space or subscriptions to consumers {{Blau, Gavan 2015;}}. Netflix derives most of its revenue from subscriptions to its on-demand streaming. This industry does not include internet service providers.
 
The industry has grown an annualized 9.6% over the past 5 years and is expected to grow another 5.6% annualized rate over 2016-2020. This market is definitely continuing to grow. Competition is very high because of the rapidly changing technology landscape {{Blau, Gavan 2015;}}. Consumers have a seemingly endless list of options to choose from for streaming movies and TV and companies are competing for that opportunity. Since streaming is done over the internet and the infrastructure is already in place, the barriers to entry are low. Other infrastructure needed would be servers and storage capabilities {{Blau, Gavan 2015;}}.
 
Netflix has 10.7% of this market and the other major players are Facebook with 20.1%, Apple Inc. with 22.4%, Google with 27.2% and the remaining market is shared by various other smaller companies.
 
DVD, Game & Video Rental in the US
The other market that Netflix is a large player in is DVD, Game and Video rental in the US. This is the rent-by-mail business segment of Netflix. According to IBIS World, demand for this market will continue to fall as consumers opt for web media {{Blau, Gavan 2015;}}. The revenue in this industry comes from subscriptions of consumers. The annualized growth from 2010-2015 was -11.5%. The forecasted annualized growth for 2016-2020 is -7.2% {{Blau, Gavan 2015;}}.
 
Not only has streaming negatively affected this industry, but rental kiosks have also had a negative effect (they are not included in this industry). Since rental kiosks have low overhead costs, their rental costs are lower and they have taken over the market for physical media rentals. Streaming demands continue to increase which will continue to hurt this market. Remaining competitors will focus on niche, hard-to-find films that are not available to stream {{Blau, Gavan 2015;}}.
 
Netflix has 16.1% of this market and other major players include Redbox, Blockbuster (exited in 2010) and Movie Gallery (exited in 2010) {{Blau, Gavan 2015;}}. The US DVD rental business segment of Netflix has declined at an average annual rate of 21.9% over the past 5 years and it projected to continue to decline like the rest of the physical rental market {{Blau, Gavan 2015;}}.
 
Management
Netflix has a unique and unorthodox management style. The Chief Talent Officer at Netflix published a power point on how Netflix manages its people and it went viral with over 5 million views. It is no surprise that a company out of Silicon Valley has such a different set of management styles than most companies. Netflix, as a company, has been very successful but how do they attract, retain and manage their talent? There are 5 main ideas behind their management strategy.
The first strategy that Netflix uses is to hire only “fully formed adults”; this means hire adults that are capable of using common sense. Most companies spend a lot of time and money on HR policies to take care of those that would abuse freedom to choose vacation time. Instead of having formal policies, Netflix lets its employees use common sense for vacation and they have casual conversations about performance instead of yearly performance reviews. They simply try not to hire those that would abuse the system and only hire those that support and understand a high-performing work place {{McCord, Patty 2014;}}. The expense policy also follows these common sense guidelines; it is simply “Act in Netflix’s best interests” {{McCord, Patty 2014;}}.
The next strategy is that employees and managers should tell the truth about performance. There are no formal reviews at Netflix, instead employees and managers make it a part of their work to have informal conversations about how they are doing. They also have peer reviews where they have face-to-face discussions with their co-workers on what they do well, what they should stop or what they should start. Netflix has also found that instead of putting people on Performance Improvement Plans so that they have a paper trail to let someone go, they just tell the truth; the person’s skills are no longer needed and they give them a rich severance package. Netflix has found this much easier emotionally for all and the employees take it well because they are told the truth {{McCord, Patty 2014;}}.
The next part of Netflix’s management strategy is that managers own the job of creating great teams. To do this, Netflix needed to be able to recruit top talent from companies like Amazon and Google. To do this, they needed an attractive incentive and that was their compensation philosophy. Netflix uses market based pay and they encourage their employees to talk to other recruiters to see what other companies are offering for their talent. Managers wanted this information so that they felt they were compensating their employees appropriately {{McCord, Patty 2014;}}.
Another style that Netflix practices is that leaders should create the company culture {{McCord, Patty 2014;}}. Leaders need to make their employees aware of what drives the business so that everyone has the same goals. They also need to be aware of different subcultures in the company; for example, hourly employees in a warehouse have a different culture than the engineers in the office {{McCord, Patty 2014;}}.
The last part of Netflix’s management style is that good talent managers think like businesspeople and innovators first and like HR people last {{McCord, Patty 2014;}}. This means that talent managers need be innovative in how they communicate with their employees, what is good for the company and make sure that everyone understands what is meant by high performance {{McCord, Patty 2014;}}.
Overall, Netflix has a very interesting technique for talent management but it is also very simple. Hire good people that have common sense and share the business motivation that the company is striving for. The power point that was made by Netflix is popular because it is an approach that you would not expect to find in such a large company.
CEO
The founder and CEO of Netflix is Wilmot Reed Hastings Jr. Netflix got the idea for Netflix after his company was acquired and he had a $40 late fee for ‘Apollo 13’. He had misplaced the cassette and was very worried about telling his wife. Later that day, at the gym he realized that the gym had a better business model; you pay $30 or $40 per month and use it as much or as little as you want. When Hastings took this idea and created Netflix, he really didn’t know if this was something that consumers would want.
As Netflix grew, Hastings wanted to make sure that they did not lose their entrepreneurial spirit. He pushed the “Freedom and Responsibility” culture that Netflix is very well known for (which was talked about in the section above). Hastings says that “At most companies, average performers get an average raise. At Netflix, they get a generous severance package,” {{McCord, Patty 2014;}}. Hastings definitely helped to shape a culture that is different than most companies of that size. I believe that such a great company culture is a big reason that Netflix continues to be successful.
Hastings is also an active educational philanthropist. He is on the board of several educational organizations in California. He is also a board member of Facebook and was on the board of Microsoft from 2007 – 2012 {{Netflix.com, 2016}}.
CFO
The current Chief Financial Officer at Netflix is David Wells. He has been at Netflix since 2004 and the CFO since 2010. His previous roles include a variety of planning and analysis roles. His current responsibilities are customer service, real estate and employee technology {{Netflix.com, 2016}}.
Acquisitions & Divestitures
Netflix has not had any mergers or acquisitions.
 
 
Financial Analysis & Trends
Balance Sheet
Figure 2 Balance Sheet {{Reuters, Thomson 2016;}}
To review, the current ratio is the current assets/current liabilities. The acid test is a more rigorous version of the current ratio because inventories and prepaid expenses are excluded from the calculation of the acid test, which means that companies can’t play with inventory and have an effect on this ratio. This means that typically the acid test ratio is a smaller number than the current ratio. In the graph above, Netflix has very similar and sometimes the same value for both ratios. This is because Netflix does not have inventory, therefore this is not in the current ratio either. There may have been prepaid expenses in the years 2011 and 2012 and that is what makes that difference.
In general, the trend is looking good for Netflix. Since they don’t have inventories, the upward trend generally means improving financials. Since liabilities are in the denominator, the increasing ratio means that Netflix is either lowering its liabilities or increasing their cash (or accounts receivable). Looking at the balance sheet above, there was definitely a decrease in cash on hand in 2012 but in general an upward trend. Since liabilities are also increasing, according to the balance sheet, then the cash is just increasing faster. This means that Netflix is in a good financial position and hopefully the trend continues.
Income Statement
Figure 3 Income Statement {{Reuters, Thomson 2016;}}
Since Netflix does not manufacture any products, there is no information for the cost of goods manufactured section on the Income Statement.
Just looking at the trend of revenue, there is a pretty picture for Netflix. So why is income not matching this increasing trend? Netflix has started to expand to other countries outside of the US starting in 2012 with Canada. By the end of 2016, they hope to be in over 200 countries. This expansion has a lot of costs associated with it, including high sales and marketing costs. In order for Netflix to gain customers, they need to advertise. This can be seen on the operating expenses in the sales and marketing expenses. There is definitely an increase in spending each year in this area but that makes sense since Netflix is expanding.
This expansion also explains why the revenue is increasing each year. More customers means more money! I believe that as Netflix establishes itself in these new countries, the income will increase. 2012 was the only year that there was a loss.
The gross profit percent is looking at the profit after cost of goods sold is accounted for, divided by the revenue. This means that an increasing gross profit would be that COGs is decreasing or revenue is increasing faster. From the chart above and the income statement, both COGs and revenue are increasing, which is why Gross Profit as a % is relatively steady.
Return on equity is the net income divided by the total equity. Having a good return on equity means that the stockholders will get benefits from good return on the company’s investments. 2012 was a negative year, which means that the ROI paid to creditors was greater than their return on investments (or assets). Since then, return on equity has been positive so another good sign for Netflix.
Cash Flow Statement
Figure 4 Cash Flow Statement {{Reuters, Thomson 2016;}}
 
 
This is going to start to sound repetitive but most of Netflix’s finance are heavily influenced by their recent expansions and this is pretty evident in the net cash graph shown above. There is a large increase in cash from financing (also shown in the increase in debt to equity ratio) from 2013 to 2015. This cash is being used for expanding into new countries. Cash from operations has decreased and actually gone negative. This is because Netflix is operating at a loss in some of the new countries. If Netflix establishes a good customer base in these countries, this will most likely become positive again and Netflix should also need less cash for financing because the initial barriers to entry into those markets should be much less.
 
The debt to equity ratio is the total liabilities/ stockholders’ equity. The stockholders generally would like more debt so that they can have financial leverage but creditors would like less debt and more equity (because then Netflix is more likely to pay off debt back to creditors). 0.0 – 3.0 is a pretty common ratio for most companies. A higher number is a company with higher risk. Looking at the graph for Netflix shown above, Netflix is taking on debt to fund projects. In Netflix’s case, projects is their expansion into new countries. Since they are going from 50 countries in 2015 to over 200 by the end of 2016, I am sure that their debt to equity ratio will increase in 2016 from increased debt used to finance the expansion. Most companies have a higher ratio when they are newer or taking on big risks. Netflix is definitely taking on a risk through its expansions.
Ratios
Peer Comparisons
Since Netflix does both online streaming and physical movie rental, there are really two different groups of competitors. There are no other companies that have this feature so competition must be separated by business model.
Online TV & Movies
Hulu
Hulu is an online company that offers TV shows and movies via hulu.com. They are also partially ad-supported, which is a slightly different business model than Netflix, where there are no ads. Hulu launched in 2008 and is projected to have a revenue of over 1 billion in 2016 {{Blau, Gavan 2015;}}. There is content on Hulu that is not on Netflix and their business models are very similar, making them direct competitors.
Amazon Prime
Amazon Prime offers subscribers access to stream movies and TV shows. It is more difficult to track Amazon in comparison to Netflix because there are a lot of Prime members that do not utilize the streaming service and it is difficult to differentiate those consumers. Note that Amazon Prime memberships mean free 2-day shipping on many items on Amazon and this is a big driver for their customers to become Amazon Prime Members.
Rent-by-mail or Physical Rentals
Redbox
Redbox has automated Kiosks that rent video games, DVDs and Blu-ray discs to customers from convenient locations (like McDonalds or Lund’s). They have been rapidly expanding over the past 5 years with over 44,000 kiosks in 36,400 locations {{Blau, Gavan 2015;}}.
Blockbuster
Blockbuster went bankrupt in 2010. Traditional video stores have a much more difficult time competing with digital media because digital media is more convenient for consumers and the costs for operations are much lower. Blockbuster was once the largest movie and game rental company in the U.S. until streaming media became large and heavily cut into Blockbuster’s revenue. After filing for bankruptcy, Blockbuster was acquired by DISH and they divested all international operations and closed all but 50 franchise stores. Blockbuster was definitely affected by the rise of streaming media.
Market Share
Below is the market share for the main companies in the home video market. Cable VOD would include services like HBO Go and similar services that are video on demand {{Lazich, Ed, 2016;}}.
As shown in the graph, Netflix has a total of 39% of the market. This is both the streaming and rent-by-mail services. This is a large portion but the competition also has large shares. Netflix has a nice advantage that thus far, they have been successful at creating their own content. Maybe this will boost their market share.
Revenue Comparison
The graph shown above shows a comparison of the revenues of Blockbuster, Redbox, Hulu and Netflix. Amazon Prime is not included because it is difficult to separate revenue gained from people using the streaming services vs. the people using other Prime services.
Netflix is clearly doing very well in terms of revenue increase compared to the other companies. They are also much larger. Hulu is also on a steady increase but it is not as steep as a curve as Netflix. Blockbuster filed bankruptcy in 2012 which is why their revenue zeros out from 2012 forward. Redbox seems to have hit a top point. Redbox did try to expand into Canada but it was not successful so they pulled out last year. This could be why their revenue went down slightly.
SWOT Analysis

Strengths
–          International rollout is on trach
–          Successful original content investments with great marketing
Weaknesses
–          Operate internationally at a loss
–          Dependency on striking deals with content owners

Opportunities
–          Expansion globally
–          Continue expanding the original content side of business
Threats
–          Competition from other online streaming services
–          Black market of downloading

 
Strengths – Internal Factors
Currently Netflix is in 50 countries and plans to be in 200 by the end of the year. They are on track for this rollout with Korea, Hong Kong, Taiwan and Singapore that happened in early 2016. With this rollout, there will come contribution losses from the newly added countries and will most likely peak in 2016 {{Haggiag, Ever 2015;}}. It makes sense that a new market would not have high contribution margins the first year since there is a lot of investment into marketing in the new countries and it will take some time for the customer base to build up.
Netflix has fantastic original content. Have you seen ‘Orange is the New Black’? What about ‘House of Cards’? ‘Narcos’? All are amazing series and leave you wanting to watch more. This is definitely a strength that Netflix has.
Weaknesses – Internal Factors
Since Netflix is still relatively new internationally, they are currently operating at a loss in international locations (although revenue has increased since expanding). In the first 3 quarters of 2015, Netflix recorded a contribution loss of $81M. The expansions added various expenses to the business including a tax that began in January of 2016 in Europe {{Haggiag, Ever 2015;}}. Although they are losing money in the short term, I am sure that once their customer base has built up internationally that they will no longer be operating at a negative contribution margin. Netflix is definitely thinking more long term.
Most of Netflix’s business relies on making deals with content owners in order to keep their library up to date with a variety of options for the consumers. Relying on other companies to continue to make deals is a risk but having easy to access content is what Netflix started on. This is not something that I see going away soon.
Opportunities – External Factors
One big opportunity for Netflix is to continue to expand internationally. As mentioned before, they are currently in about 50 countries and plan to be in about 200 by the end of 2016 {{Haggiag, Ever 2015;}}. Once established in those countries and the customer base increases enough, Netflix will start to have a positive contribution margin internationally.
Another great opportunity for Netflix is to expand its Original Content business. It has already been very successful (did I mention ‘Orange is the New Black’?) and if they continue to expand this, they could become a full-on entertainment company producing their own movies and T.V. shows {{Haggiag, Ever 2015;}}.
Threats – External Factors
Online streaming has a low barrier to entry since it is low capitol cost so Netflix has a big threat from competition. One competitor is Amazon Prime where members pay per year and not only get free shipping on some purchases but they also have access to a streaming platform that has a lot of content (I have honestly never used this and I am an Amazon Prime Member). HBOGO is another online movie subscription service where customers can sign up and don’t need to already be subscribing to the cable version of HBO (this is how you can watch Game of Thrones…not for me) {{Haggiag, Ever 2015;}}.
The other threat is the black market which is really a threat for anything that can be streamed online like music or books. There is an increasing amount of people ages 20 to 30 that download content for free {{Haggiag, Ever 2015;}}. Hopefully with increased security and more severe consequences, this trend will slow down.
Enterprise & Management Assessment
Strategic Competitive Advantages
One big advantage that Netflix had when it was first starting out was the availability of titles that were not found in mainstream video stores such as Blockbuster Inc. (2001) {{Uhle, Frank and Stephen Meyer. 2010;}}. This was a huge aspect that played a role in pushing companies like Blockbuster and Movie Gallery into bankruptcy. As a part of the availability of titles not found in mainstream, Netflix was able to tap into underserved markets for independent and foreign films. Because customers were not paying on a per DVD basis, they could take a change to watch lesser-known films that were suggested to them {{Uhle, Frank and Stephen Meyer. 2010;}}.
Convenience is another huge advantage that Netflix has. If you have internet, then you can have Netflix. Not having to go to a physical store and roam around looking for a good movie is a huge reason that Netflix is so successful, especially with the customers that stream their content (vs. DVD by mail).
Along with convenience comes low operating costs. Since Netflix is mostly a streaming content company, there is no inventory and little maintenance. Most of the costs are from advertising and also working to get content from the owners. By not having a physical location like Blockbuster or even Redbox, there are little to no maintenance costs for Netflix.
Strategic Competitive Disadvantages
One big disadvantage that Netflix has that was also mentioned as their weakness is that they depend on partnerships and contracts with content owners. This means that consumers do not know which deals Netflix will acquire so who knows what movies will be available on Netflix. This is a big reason that some consumers are not solely Netflix users but also may use Redbox, Hulu or Amazon Prime (I personally go to Redbox if Netflix does not have what I am looking for).
Another disadvantage that Netflix has is in the international markets. As previously mentioned, by the end of 2016, Netflix will have expanded to over 200 countries. There are a lot of difficulties that come with expanding internationally. One is navigating the countries laws. Some coutries may have laws governing what content can be released and this differs from country to country (). Another challenge is that although customers internationally like American movies and TV shows, they still want their local content and this is a big challenge for Netflix. There are already other video-streaming services in most countries, similar to Netflix, that offer the local content and some American content as well so why would consumers switch to Netflix? (). It will be an interesting year in 2016 for Netflix.
Another disadvantage for Netflix is really that they do not have an advantage by already being in the market. There are low barriers to enter this market and the competition is high. This is why Netflix will continue to face challenges both in the US and internationally.

Summary
Overall, Netflix is a company with a great reputation and a very unique culture. Their culture is one that sets an example for other companies to model after and also one that many millennials would like to be a part of.
Netflix really did a great job grabbing the opportunities that they did and seeing the potential for rent-by-mail movies and then expanding to streaming. They are very well-known in the U.S. and they put other companies out of business that missed the boat on rent-by-mail and streaming.
Netflix does face some growth challenges ahead in terms of expanding internationally. They need to be able to offer local content as well as American content. Netflix also needs to overcome any laws that countries may have around content release. That is a lot of logistics to navigate. With challenges comes opportunity though. Netflix has done a fabulous job with their original content (Seriously, watch ‘Orange is the New Black’) and they are planning on offering more, maybe even in other languages to tailor to their new customers. Who knows, maybe they will become more of an entertainment company offering much more original content.
Netflix has good financials but with international expansions happening and all of the investments and cash that Netflix needs for that, some of their numbers are not so great. I think that once they establish themselves in the new locations over the next few years, their debt will decrease and their contribution margins will increase.
Netflix also has a large share of the market at 39%. This definitely has the potential to grow if Netflix can continue to be innovative in their offerings of services, as well as continue to create fantastic original content.
 
 
Bibliography
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