Analyse Stratégique de netflix (document en anglais)

Threats

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Studio Power

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The major entertainment studios in Hollywood control film release windows and distribution rights, which are two primary determinants for Netflix’s acquisition costs and profits. Therefore, if the studios decide to decrease the 4-6 week gap between DVD releases and VOD releases, Netflix would lose a major strategic advantage.

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Intensely Competitive Market

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The home video industry covers a broad range of viewing platforms, services, prices, and technologies. There are a number of unique competitors that could potentially provide home video cheaper than Netflix. Since most viewers subscribe to a handful of these competitors, and few have switching or “sticky” fees, if a new competitor emerges with greater streaming capacity and lower prices, Netflix’s business model could be severely jeopardized.

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Unpredictable Video Rental Industry

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The industry is continually evolving due to technological and formatting innovations. Products, prices, and consumer preferences are subject to quick

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change, creating highly erratic and unpredictable markets in which new entrants are always a threat and a malleable business model is essential to succeed

Financial Analysis

Overview

Although most firms are experiencing financial losses due to a grim economic climate, Netflix has maintained robust profits. The company’s continued growth suggests that Netflix may be insulated from recessions due to its business model, which offers a form of “escapism” by providing relatively cheap video entertainment. Netflix’s success is evident in a handful of key financials. In 2008, Netflix earned revenue of about $1.4 billion, a growth of 12% from 2007. Net income for 2008 was about $83 million. Netflix has experienced growth in revenue and EPS since the company went public in 2002 (See Figure 1). Netflix is also predicted to grow more than 14% a year for the next five years which, given the financial forecast, is an impressive feat.

Figure 1 Netflix, Inc. Revenue and Income$0$200$400$600$800$1,000$1,200$1,400$1,600Dec-03Dec 04Dec 05Dec 06Dec 07Dec 08YearMillions of DollarsRevenueNet Income

As a subscription-based company, Netflix’s income comes almost exclusively from subscription fees. In the immediate future, Netflix can continue outperforming analyst expectations and maintain an edge over competitors by increasing profitability through

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subscription based growth, reducing churn, and pricing competitively. By analyzing key ratios from Netflix’s financial statements, information pertaining to the company’s liquidity, leverage, and profitability give insight regarding Netflix’s financial health compared to industry averages and provide context for later strategic recommendations. Following an overview of financial statement highlights, an analysis of Netflix’s historical and current stock prices depict market sentiments about Netflix’s growth potential and the perceived value of the company.

Financial Statement Analysis

Analyzing Netflix’s 2008 financials, the Oasis Entertainment Division focused on key ratios pertinent to strategic recommendations presented later in the report. These ratios measure crucial aspects of Netflix’s business including liquidity, leverage, and profitability.

Figure 2

Liquidity ratios provide information about a company’s ability to satisfy short-term obligations. Specifically, the Current Ratio measures a company’s ability to pay obligations within the next 12 months and can be calculated by dividing current assets by current liabilities. Looking at Figure 2, it is evident that Netflix outperforms both its industry and greatest competitor, Blockbuster. Netflix’s high liquidity is evident in the company’s substantial amount of available cash; the company has Cash and Short Term Investments equaling about 300 million. Netflix’s greater than one Current Ratio also indicates that its assets outweigh current liabilities and that Netflix is, at present, a financially sound company.

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