Nelson Zhu and David Wang
2/20/09
Services
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Established in 1997
and headquartered in
Los Gatos, California
Flat-rate subscription
based DVD rentals
DVDs sent by USPS
usually arrive in ~ 2
days
Some movies can be
viewed instantly online
http://www.netflix.com/
Statistics
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100,000 titles
10 million subscribers (Feb. 5)
55 million discs
On average, Netflix ships 1.9 million DVDs to
customers each day.
On February 25, 2007, Netflix announced the
billionth DVD delivery.
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The stock price did not jump at that time because
it was just a benchmark, not a big surprise.
Statistics
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Market cap - US$1.8 billion (2008)
Revenue US$ -1.365 billion (2008)
Operating income US$ 91.2 million (2007)
Net income US$ 66.9 million (2007)
Employees 2000+ (2008)
Reed Hastings, founder and CEO
Charts
The Pros
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No late fees
Automated on-line ordering
Large selection of special interest DVDs such
as anime and foreign films
Web site keeps track of your rental history No guessing if you already seen a movie
Web site makes recommendations based on
your ratings
The Cons:
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Poor/nonexistent customer service
Monthly subscription fee (even if you don't rent anything)
Slow turnaround time (from the time you return a movie and get
one back is approx. 1 wk.)- (throttle)
Frequent renters get penalized with even slower turnaround time
service deteriorates after free trial (bait and switch)
Long waits on new releases
No shipments on Saturday, Sunday or holidays
Most DVDs are badly scratched and may not play (advice)
Broken & lost DVDs through the mail
Rentals do not arrive in the order requested
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*Be aware that these are the most extremely citable cons
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Answer to Cons
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Consumer Reports magazine Feb. 2 said the online
DVD rental pioneer rated No. 1 among home video
viewing options.
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If people were as dissatisfied as the cons suggest, Netflix
would not be ranked so high.
Netflix posted a 45 percent leap in fourth quarter 2008
profits, compared to the same period in 2007.
Hastings said in a conference call to analysts that his
company will boost its investments "substantially" in video
streaming this year.
Hastings doesn't think DVD will peak until sometime
between 2013 and 2018.
Competitors
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Apple TV
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Movie Gallery
Amazon Unbox
Competitors (cont’d)
Netflix vs. Blockbuster
Netflix vs. Blockbuster
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Blockbuster has 3 million subscribers vs.
Netflix’s recent milestone of 10 million subs.
Blockbuster has 9000 retail stores with 40
distribution center while Netflix has 50
shipping centers
Ability to return in store, rather than wait for
the mail
Blockbuster rents video games, which
recently surpassed films as an industry
Netflix vs. Blockbuster
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Netflix offers online streaming to Xbox 360 and
PS3 consoles in addition to instant viewing
online, Blockbuster has no streaming
capabilities
Amazon Unbox and Apple TV are paid
streaming services while Hulu and Veoh are free
Net income for Blockbuster: -$73 million (2007)
Netflix: $66.95 million
Blockbuster has more assets and is generally a
larger company, but profits are significantly less
Reasons to buy
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Consumer Reports magazine Feb. 2 said the online
DVD rental pioneer rated No. 1 among home video
viewing options.
After collecting consumer opinions about the Web's
40 largest retailers last year, Ann Arbor, Mich.,
research firm ForeSeeResults rated Netflix as "the
cream of the crop in customer satisfaction.“
Over 90 percent of surveyed subscribers say that
they would recommend Netflix to a friend.
Reasons to buy
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American Customer Satisfaction Index
(ACSI) The ACSI is produced by the
University of Michigan’s Ross School of
Business in partnership with the American
Society for Quality and CFI Group.
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Newegg had the highest ACSI score with 88 and
Netflix’s score was 85.
Amazon 88, Ebay 78
Reasons to buy
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The recession officially began in December 2007 according to National
Bureau of Economic Research's (NBER) Business Cycle Dating CommitteeNBER is the largest economic research organization in the U.S.
Feb 19, 2009- 37.09
Dec 21, 2007- 28.10National Bureau of Economic Research
Netflix, Inc. Announces Authorization Of New $150 Million Stock Buyback
Thursday, 6 Mar 2008 04:30pm EST
Netflix, Inc. announced that its Board of Directors has authorized a stock repurchase
program that enables the Company to purchase up to $150 million of its common
stock through the end of 2008. This new authorization is in addition to the $100
million repurchase authorization announced in January.
http://www.reuters.com/finance/stocks/keyDevelopment
s?symbol=NFLX.O&pn=4
Reasons to buy
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In Q4 2008, everyone knew that there was a
recession.
Net income rise to $22.7 million in Q4 2008, up from
$15.7 million in Q4 2007.
Revenue was up by 19 percent
Subscriber growth was pegged at an amazing 26
percent.
Q4 saw 9.4 million subscribers, decimating its own
forecast of ending Q4 with 9.15 million customers
Sources
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http://pickyinvestor.blogspot.com/2008/03/wh
en-did-recession-start_28.html
http://www.manuelsweb.com/netflix.htm
http://www.cdfreaks.com/news/15455-Netflixrecession-proof.html
http://www.engadgethd.com/2009/01/26/netfli
x-profit-up-45-in-q4-nears-10-million-totalsubscribers/