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Netflix Valuation Project
- 1. By: Alicia Soetaniman,Annabel Ie, Agnes Yuwono, Larissa Gunawan
- 2. 1 2 34 5 6 7 8 Business Model Company & Industry Analysis Benchmarking Analysis Assumptions & Forecasting DCF Precedent Transactions & Comparable Analysis Scenario Analysis M&A Analysis & Valuation TABLE OF CONTENTS
- 3. 1997: - World’s firstOnline DVD Rentals 2007: - Introduced Subscription- based streaming service 2021: - Subscription: $29 Bn - DVD Rentals: $182 Mn (0.58% of total revenues ) 2021: - More Original Content (21% in 2019 à 34%) - Launched mobile games (stranger things) 2022: - Introduced Ad-Supported Tiers - Expansion of Gaming NETFLIX’S BUSINESS MODEL 2023: Should Netflix expand its Gaming Development?
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- 5. INDUSTRY LANDSCAPE The highestnumber of subscribers in 78 countries and over 220 million customers globally. #1 Most subscribed streaming platform 53.7%Of total industry revenue are Netflix’s They are the leader & holds the largest market share in the video streaming services industry. 9of 10Popular original series are Netflix-produced Leads the ranking of Oscar nominations by a studio. - 105 Emmy nominations, won 27 Academy Awards & 22 Oscar
- 6. PORTER’S 5 FORCESANALYSIS Bargaining Power of Suppliers: MED-HIGH Competitive Rivalry: HIGH Threat of Substitution: LOW Threat of New Entrants: LOW Bargaining Power of Buyers: LOW - Some content are only available for limited time - Starting to decrease with its own production division - Has the most personalized & advertised content - Offers wide range of content for various age groups - 60% of population prefers online streaming services - Viewers have freedom to choose preferred content - Competitors creating its own original content - Others offering competitive pricing & moving series to their own platform - Requires large sum of initial investment - Challenging to grow platform & get higher-rated content licensing
- 7. MARKET POSITION, PERFORMANCE,OUTLOOK Revenue-Based United States Canada Subscriber-Based Europe Middle East Africa Market Position Performance Forecast Outlook A leading company however, increased competition resulted in market share decline from 46% in 2020 to 33%. Netflix may keep their position in the industry given their diversification efforts in order to gain a competitive advantage.
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- 9. WARNER BROS (HBO)BENCHMARK
- 10. AMAZON (PRIME VIDEO)BENCHMARK
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- 13. ASSUMPTIONS • Cancellation rateat 3% each year • 16% of new gross joins for the first 3 years & down to 13% • Ad revenue growth at 3.2% • 3.8% annual subscription price increase • Expenses growth rates - Marketing at 11% - R&D at 23% - G&A at 23% • Constant capex at $17B
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- 15. FREE CASH FLOWPROJECTIONS
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- 17. SENSITIVITY ANALYSIS –GORDON GROWTH
- 18. SENSITIVITY ANALYSIS –EXIT MULTIPLE
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- 22. IMPLIED EV OFNETFLIX FROM COMPS
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- 28. BULLISH SCENARIO EFFECTON DCF
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- 30. BEARISH SCENARIO EFFECTON DCF
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- 32. STRATEGIC ALTERNATIVES I. II. IV. III. Investand focus more on original content by finding local authors/directors to bolster their production. Monetize Netflix’s best shows and IPs by holding special events and selling merchandises based on their characters. Focus on acquiring the right gaming companies & capitalize on their family- friendly image to develop multiplayer, interactive games Create a community-like environment by enhancing its social features which allows people to share their thoughts and favorite movies.
- 33. POTENTIAL STRATEGIC BUYERS COMCAST •Already strong relationship with Netflix (from deal on its X1 platform) • COMCAST: Since it struggles to make streaming impact, it can leverage Netflix, penetrating mkt. NETFLIX: In 2022, experienced subscriber loss, by being acquired, could gain access to not only large and previously untapped platform, but (most likely) new content from Comcast as well. TENCENT HOLDINGS • In 2020, Tencent acquired Iflix (’Netflix of Asia’) in hopes of becoming a streaming giant • TENCENT : Gain access to its original content, enhancing WeTV content, global expansion • NETFLIX : Capitalize Tencent’s Experience in the video game industry for future gaming expansion
- 35. APPENDIX: REVENUE BUILDASSUMPTIONS
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