- 10% market growth average & 36% gross margin
- 40% market growth & 10% gross loss
- offsets International loss
- (52% gross profit)
- Netflix leads in the industry
- AT&T's acquisition of Direct TV & Time Warner Cable (TWX)
Netflix's response was lower quality streaming in 360p, 20% reduction in data consumption streaming, 20% boost in quality
- 75% of homes with Over The Top video service on WiFi had Netflix
- 33% Prime - Largest international threat
Financial Position and Outlook
- Profitability margins - low
CASH FLOW STATEMENT
- FCF 2016 negative $1.65 billion
Edward Hoofnagel (CFA) "Any implicit error in the approach is material to the evaluation of profits/loss."
Einstein “you don’t really understand something unless you can explain it to your grandmother.”
- 2016 - $1 billion of debt
- 2015 - $1.5 billion of debt
- off balance sheet liabilities of $14 billion
- working capital is decreasing
- good liquidity
- sold 200 million in marketable securities
- Success Factor - Entertaining different key demographics and psycho-graphic segments in cost efficient ways.
continuation of shows is more cost efficient and helps retain key customers.
- Goal - To reach 60 million - 90 million homes in America
- Goal - Produce 1000 hours of original content in 2017
- Netflix management is not disclosing key accounting information on amortization data clearly for investors to understand.
- Amortization costs affect NI and FCF significantly
- Very high risk investment (Facebook, Alphabet, Netflix, Amazon (FANA))
- Costs efficiencies are crucial