Netflix Balance Sheet

The downturn of the economy has taken away many peoples disposable income and Netflix’s limited online library may have caused customers to question if it was worth it or not.

The year 2011 was considered the “Lost Year” for Netflix as about 1 million of their subscribers dropped their service. Why did this drastic loss of subscribed customers occur and what wrong move did Netflix make to attract such a decrease in subscribers? According to Thompson (2012, p. 127), in June of 2011 Netflix announced a new price plan that caused a 60 percent raise in the the monthly subscription fee for customers who were paying $9.99 per month for access to an unlimited amount of movies and TV shows streamed over the internet and secondly, receiving a limitless number of DVDs every month (by mail one title at a time). Netflix also tried providing its online streaming process through

The continued pressure of keeping its competitive advantage to produce original content, means the costs to sustain and grow these productions continue to rise. “As of the third quarter, Netflix owes $4.89 billion in long-term debt, … and has added nearly $1.6 billion in debt this year alone” (MarketWatch). The costs paid for licensing new content far exceeds subscriber membership costs for streaming content. In conjunction with producing original content, Netflix does not own most of their original programming; the rights to the content usually expire after a year, giving rival services the ability to show the content. There is a large timeline gap between a movie release date, and the date Netflix acquires the movie and releases it. These weaknesses reveal aspects that Netflix needs to work

our user interface and extending our streaming service to even more Internet-connected devices, while staying

There are two ways to calculate the quick ratio. One is to subtract inventory from current asset and then divide by current liabilities. Another way is to add cash, short-term investments, and accounts receivable, then divide by current liabilities. The second way is used here because Netflix does not have any

A large subscriber base creates a cyclical competitive advantage that feeds on itself. More subscribers creates more available capital that allows Netflix to pay the large amounts of money necessary to acquire the vast content library that they possess. In turn, this large library brings in more customers and helps them retain current customers since Netflix offers more content in one place than any competitor by far. In addition, Netflix’s large subscriber base acts as a form of free marketing, with more satisfied users recommending the service to friends, growing upon itself even further.

Netflix was founded in 1997 with the intent to revolutionize the way in which consumers watch movies and television shows. Their accomplishments both in innovation and in customer base for their service indicate that the firm has been, and continues to be, successful in doing so. Currently, the

They generate revenue by purchasing films and shows from networks to instantly stream to subscribers to keep them engaged, paying customers. With the purchase of these films and shows comes a hand full of different contracts, rules, and regulation that Netflix must abide by to avoid any legal disputes leading to disaster for the video streaming service. This makes the company bound by contracts in a way. Some contracts have limited accessibilities to shows and movies that expire overtime resulting in lost content for the company. To avoid the loss of content and become freer from contracts Netflix as gone into creating its own original shows and movies that consumers have been seeming to

Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenue 's.

First of all, Net Operating Cash Flow experienced a huge fluctuation after reaching a peak at 317.71 million in 2011. For now, the number is -749.44 million in 2015. The growth rate of Net Operating Cash Flow is -4646.74% in 2015. In detail, Funds from Operations has the same feature with Net Operating Cash Flow, which decrease from 198.56 in 2011 to -922.33 in 2015. That is the serious problem for Netflix.

One of the struggles for Netflix has always been getting rights to programming. In an effort to save DVD sales Hollywood studios tried to weaken their streaming services by withholding the rights or by charging more for newer movies. Big studios like Warner Bros., Fox and Universal made deals that allowed Netflix to use old movies but only if it waited twenty-eight days after the release of a new DVD before making it available to the public (Balio, 2013). Film executives believe that Netflix is taking the value out of movies by making them available anywhere, anytime (Kaiser, 2011). The fees do not stop them however. The more subscriptions Netflix receives, the more revenue they bring in and the more willing they are to pay the high fees to get films from the studios and the cycle is brought full circle, the more films, the more subscribers (Roth, 2009).

Netflix is an existential threat for the TV industry. It is allowing consumers to watch what they want, at the time they want. Members can play, pause and resume watching, all without commercials or commitments. In addition, consumers can watch the entire seasons of their favorite shows at once on Netflix, instead of having to wait for the once-a-week programming model of the TV networks. Finally, Netflix is offering the consumer the possibility to watch their shows/movie

By providing information on assets, liabilities, and stockholders’ equity, the balance sheet provides a basis for computing rates of return and evaluating the capital structure of the enterprise. As our opening story indicates, analysts also use information in the balance sheet to assess a company’s risk2 and future cash flows. In this regard, analysts use the balance sheet to assess a company’s liquidity, solvency, and financial flexibility. Liquidity describes “the amount of time that is expected to elapse until an asset is realized or otherwise converted into cash or until a liability has to be paid.”3 Creditors are interested in short-term liquidity ratios, such as the ratio of cash (or near cash) to short-term liabilities. These ratios indicate whether a company, like Amazon, will have the resources to pay its current and maturing obligations. Similarly, stockholders assess liquidity to evaluate the possibility of future cash dividends or the buyback of shares. In general, the greater Amazon’s liquidity, the lower its risk of failure.

Netflix is taking the online entertainment rental market by storm. Reed Hastings and March Randolph began a movie rental company that required members to subscribe to rental TV show series and movies by mail in 1997. This was the newest way to rent movies to avoid lengthy drives and ridiculous late fees since retail stores such as Blockbuster and Hollywood rental were almost extinct. By 2005, the company already had 4.2 million customers subscribed to the movie service (Netflix.com). In 2007, Netflix evolved to digital technology. The company incorporated a new streaming service plan to customers that would make the service accessible at one’s fingertips. The convenience of watching movies went from receiving and sending DVD’s by mail to viewing a large selection of movies over the internet and television. According to Netflix.com, every year after introducing TV shows and movies on the internet, this company advanced to a series of strategic changes in a matter of no time including: (1) renting video games (2) offering service on most digital technology devices (i.e., I Pads, Video game devices, Mobile phones) (3) launching in different countries. In 2007, the company’s financial growth increased by more than half due to domestic and international sales. At this point, Thompson (2014) reported about the organization, “Already solidly entrenched as the biggest and best-known internet subscription service for watching TV shows and movies, the only question

In the past Netflix had to address server complaints about how the steaming capability has slowed down there services to their customers, which could also be due to the peak hours that most subscribers stream although the streaming capability might be the internet providers. When Netflix presented their product line for premium cable television networks such as HBO and Showtime, the issue would start to improve their internal infrastructure. Netflix will be able to deliver the resources and services to all