Nelson Zhu and David Wang 2/20/09

Services 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

Statistics 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.  The stock price did not jump at that time because it was just a benchmark, not a big surprise.

Statistics Market cap - US$1.8 billion (2008) Market cap Revenue US$ billion (2008) Revenue US$ Operating income US$ 91.2 million (2007) Operating income Net income US$ 66.9 million (2007) Net income Employees (2008) Employees Reed Hastings, founder and CEO Reed Hastings

Charts

The Pros 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: 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 *Be aware that these are the most extremely citable cons

Answer to Cons Consumer Reports magazine Feb. 2 said the online DVD rental pioneer rated No. 1 among home video viewing options.  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  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 Apple TV Amazon Unbox Movie Gallery

Competitors (cont’d)

Netflix vs. Blockbuster

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 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 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 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.  Newegg had the highest ACSI score with 88 and Netflix’s score was 85.  Amazon 88, Ebay 78

Reasons to buy The recession officially began in December 2007 according to National Bureau of Economic Research's (NBER) Business Cycle Dating Committee- NBER is the largest economic research organization in the U.S. National Bureau of Economic Research Dec 21, Feb 19, Netflix, Inc. Announces Authorization Of New $150 Million Stock Buyback Thursday, 6 Mar :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 This new authorization is in addition to the $100 million repurchase authorization announced in January. s?symbol=NFLX.O&pn=4

Reasons to buy 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 Q 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 en-did-recession-start_28.html en-did-recession-start_28.html recession-proof.html recession-proof.html x-profit-up-45-in-q4-nears-10-million-total- subscribers/ x-profit-up-45-in-q4-nears-10-million-total- subscribers/