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Page 1
A Market Analysis for
(Netflix, Inc.)
(Ryan O’Toole)
Full Sail University
Project & Portfolio II: Business and Marketing
(September 1st, 2019)
Page 2
EXECUTIVE SUMMARY
This report aims to inform about the current findings of Netflix, Inc. It further looks to
suggest methods to reform current issues that Netflix faces. There is a basic overview of
Netflix’s financials, history, and current value to the market today. Recommendations to remedy
high debt-to-asset ratio are included detailing a 5-year plan. Lowering this ratio will in turn
directly increase overall Net profits, making the company more profitable.
Page 3
OBJECTIVE
Suggest solutions that will assist in the decrease of Netflix’s debt-to-asset ratio and in
turn become a more profitable company?
RESEARCH METHODOLOGY
The information in this report has been procured through peer-reviewed online databases
as well as internet sources. Information sourced directly from Netflix’s financial statements are
internal and quantitative. Information in this report has been gathered over the course of the
month of August and is current as of June 30th, 2019 (Netflix Financial Statements, 2019).
Internal information regarding demographics and usage rates are inconclusive due to bias
opinions not straight from Netflix.
RESEARCH AND KEY FINDINGS
Since 1997, Netflix has been innovating the way Movie and Television viewers consume
content. Leading the world with 151 Million subscriptions in 190 countries. The main focus is on
flat-fee, commercial free, Movie and TV Show entertainment (Netflix About & Timeline). 3
Page 4
segments make up the Revenue stream for Netflix. Domestic streaming, international streaming,
and domestic DVD. As of June 30th, 2019 Netflix, has increased its revenue to $9.44B. Out of
the 3 segments the most profitable is international streaming which has increased to $4.91B in
revenue (Segment Information, 2019).
etflix, Inc. was founded in 1997 by Marc Randolph and Reed Hastings as an online
movie rental. 2007 brought along streaming services allowing instant access on personal
computers. From there Netflix has grown into producing Oscar winning original content (Netflix
About & Timeline). Founder Reed Hastings owns 2.48% of the company and is still working as
CEO. In 2002, Netflix became public and Marc Randolph decided to cash out and is no longer a
part of the company (Yu, J. 2019).
Financial information gathered from the most recent financial statements released by
Netflix on June 30th, 2019 has proven to be valuable in generating this report. From a stock
Page 5
market standpoint, everything looks good and it would be a smart investment to make a return
over time. Taking a deep dive into the rest of the financials, it is revealed that some concern is
warranted. The year-over-year and debt-to-ratio is not where it should be to gain confidence in
investors.
CONCLUSIONS
Netflix, Inc. has been leading the way Movies and TV Shows are consumed since 1997.
Giving access to a large Movie library they started out sending DVDs to members for at home
viewing. In 2007, streaming was introduced and quickly changed the entire way the public
consumes entertainment. Netflix has been at the forefront of this industry since its inception
(Netflix About & Timeline).
It is and forever will be difficult for another streaming service to close in on the numbers
that Netflix has in terms of paid memberships. Due to the expansion of creating original content
the net profits do not reflect what a success Netflix is. Netflix is special in that it plays to a lot of
different demographics. Older individuals who still want DVDs have that option. For the new
age, they have streaming and original content.
Netflix spends a lot of money and is in a lot of debt. With a det to asset ratio of 80% there
is validity in concern for possible investors. This is due in large part to the expansion of original
content creation. Netflix makes money but behind the curtain the numbers tells a different story
(Balance Sheet, 2019).
RECOMMENDATIONS
Over the course of the next 5 years Netflix will decrease debt-to-asset ratio to 30%. The
current ratio is at 80% which is cause for concern to current and potential investors. With all
Page 6
information gathered it is reasonable to suggest a 5-year plan that aims to decrease the debt-to-
asset ratio by 10% per year.
The current debt mainly stems from original content creation and licensing. The steady
increase over the past 5 years is only growing. Problems have come up as a direct result of
original content creation. Content library space is being taken up and will soon be only original
content. Whether this is Netflix’s actual strategy is unknown at this time.
This report suggests putting a cap on the amount of original content that is produced per
year for the next 5 years in order to decrease the overall debt that Netflix has. This solution will
not solve all problems but, it will decrease the amount of debt that is incurred and allow for a
solution to arise.
Page 7
REFERENCES
Balance Sheet. (2019, June 30). Financial Statements. Retrieved from
https://www.netflixinvestor.com/ir-overview/profile/default.aspx
Cashflow. (2019, June 30). Financial Statements. Retrieved from
https://www.netflixinvestor.com/ir-overview/profile/default.aspx
Income Statement. (2019, June 30). Financial Statements. Retrieved from
https://www.netflixinvestor.com/ir-overview/profile/default.aspx
Netflix About & Timeline. (n.d.). Retrieved August 19, 2019, from
https://media.netflix.com/en/about-netflix
Netflix Domestic Streaming Plans. (n.d.). Retrieved August 19, 2019, from
https://www.netflix.com/signup/planform
Netflix Media Center. (2019, June 30). About Netflix. Retrieved from
https://media.netflix.com/en/about-netflix
Segment Information. (2019, June 30). Financial Statements. Retrieved from
https://www.netflixinvestor.com/ir-overview/profile/default.aspx
Yu, J. (2019, June 25). The Top 3 Netflix Shareholders (NFLX). Retrieved from
https://www.investopedia.com/articles/insights/060716/top-3-netflix-shareholders-
nflx.asp
IMAGES
(n.d.). Netflix Logo. Retrieved from https://brand.netflix.com/en/assets/brand-logo/

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Netflix market analysis report

  • 1. Page 1 A Market Analysis for (Netflix, Inc.) (Ryan O’Toole) Full Sail University Project & Portfolio II: Business and Marketing (September 1st, 2019)
  • 2. Page 2 EXECUTIVE SUMMARY This report aims to inform about the current findings of Netflix, Inc. It further looks to suggest methods to reform current issues that Netflix faces. There is a basic overview of Netflix’s financials, history, and current value to the market today. Recommendations to remedy high debt-to-asset ratio are included detailing a 5-year plan. Lowering this ratio will in turn directly increase overall Net profits, making the company more profitable.
  • 3. Page 3 OBJECTIVE Suggest solutions that will assist in the decrease of Netflix’s debt-to-asset ratio and in turn become a more profitable company? RESEARCH METHODOLOGY The information in this report has been procured through peer-reviewed online databases as well as internet sources. Information sourced directly from Netflix’s financial statements are internal and quantitative. Information in this report has been gathered over the course of the month of August and is current as of June 30th, 2019 (Netflix Financial Statements, 2019). Internal information regarding demographics and usage rates are inconclusive due to bias opinions not straight from Netflix. RESEARCH AND KEY FINDINGS Since 1997, Netflix has been innovating the way Movie and Television viewers consume content. Leading the world with 151 Million subscriptions in 190 countries. The main focus is on flat-fee, commercial free, Movie and TV Show entertainment (Netflix About & Timeline). 3
  • 4. Page 4 segments make up the Revenue stream for Netflix. Domestic streaming, international streaming, and domestic DVD. As of June 30th, 2019 Netflix, has increased its revenue to $9.44B. Out of the 3 segments the most profitable is international streaming which has increased to $4.91B in revenue (Segment Information, 2019). etflix, Inc. was founded in 1997 by Marc Randolph and Reed Hastings as an online movie rental. 2007 brought along streaming services allowing instant access on personal computers. From there Netflix has grown into producing Oscar winning original content (Netflix About & Timeline). Founder Reed Hastings owns 2.48% of the company and is still working as CEO. In 2002, Netflix became public and Marc Randolph decided to cash out and is no longer a part of the company (Yu, J. 2019). Financial information gathered from the most recent financial statements released by Netflix on June 30th, 2019 has proven to be valuable in generating this report. From a stock
  • 5. Page 5 market standpoint, everything looks good and it would be a smart investment to make a return over time. Taking a deep dive into the rest of the financials, it is revealed that some concern is warranted. The year-over-year and debt-to-ratio is not where it should be to gain confidence in investors. CONCLUSIONS Netflix, Inc. has been leading the way Movies and TV Shows are consumed since 1997. Giving access to a large Movie library they started out sending DVDs to members for at home viewing. In 2007, streaming was introduced and quickly changed the entire way the public consumes entertainment. Netflix has been at the forefront of this industry since its inception (Netflix About & Timeline). It is and forever will be difficult for another streaming service to close in on the numbers that Netflix has in terms of paid memberships. Due to the expansion of creating original content the net profits do not reflect what a success Netflix is. Netflix is special in that it plays to a lot of different demographics. Older individuals who still want DVDs have that option. For the new age, they have streaming and original content. Netflix spends a lot of money and is in a lot of debt. With a det to asset ratio of 80% there is validity in concern for possible investors. This is due in large part to the expansion of original content creation. Netflix makes money but behind the curtain the numbers tells a different story (Balance Sheet, 2019). RECOMMENDATIONS Over the course of the next 5 years Netflix will decrease debt-to-asset ratio to 30%. The current ratio is at 80% which is cause for concern to current and potential investors. With all
  • 6. Page 6 information gathered it is reasonable to suggest a 5-year plan that aims to decrease the debt-to- asset ratio by 10% per year. The current debt mainly stems from original content creation and licensing. The steady increase over the past 5 years is only growing. Problems have come up as a direct result of original content creation. Content library space is being taken up and will soon be only original content. Whether this is Netflix’s actual strategy is unknown at this time. This report suggests putting a cap on the amount of original content that is produced per year for the next 5 years in order to decrease the overall debt that Netflix has. This solution will not solve all problems but, it will decrease the amount of debt that is incurred and allow for a solution to arise.
  • 7. Page 7 REFERENCES Balance Sheet. (2019, June 30). Financial Statements. Retrieved from https://www.netflixinvestor.com/ir-overview/profile/default.aspx Cashflow. (2019, June 30). Financial Statements. Retrieved from https://www.netflixinvestor.com/ir-overview/profile/default.aspx Income Statement. (2019, June 30). Financial Statements. Retrieved from https://www.netflixinvestor.com/ir-overview/profile/default.aspx Netflix About & Timeline. (n.d.). Retrieved August 19, 2019, from https://media.netflix.com/en/about-netflix Netflix Domestic Streaming Plans. (n.d.). Retrieved August 19, 2019, from https://www.netflix.com/signup/planform Netflix Media Center. (2019, June 30). About Netflix. Retrieved from https://media.netflix.com/en/about-netflix Segment Information. (2019, June 30). Financial Statements. Retrieved from https://www.netflixinvestor.com/ir-overview/profile/default.aspx Yu, J. (2019, June 25). The Top 3 Netflix Shareholders (NFLX). Retrieved from https://www.investopedia.com/articles/insights/060716/top-3-netflix-shareholders- nflx.asp IMAGES (n.d.). Netflix Logo. Retrieved from https://brand.netflix.com/en/assets/brand-logo/