BUSMBA 515 Net Flix Finance Business Model Discussion Please read the attached NetFlix case. It has 5 things that need to be answered. It is not in regular

BUSMBA 515 Net Flix Finance Business Model Discussion Please read the attached NetFlix case. It has 5 things that need to be answered. It is not in regular question and answer form. I need some excel spreadsheets for income and balance statements. there are 3 short supplemental articles.

1. Describe Netflix’s recent performance (full financial analysis).

2. What are the challenges facing Netflix?

3. What is your forecast for the 2020 income statement?

4. What is your forecast for the 2020 balance sheet?

5. How do income and total assets fluctuate with changes in key assumptions? “Real Time” Case Netflix, Inc. (NFLX)
Corporate Finance Case, BUSMBA 515
Summer 2 2020
Dr. Egginton
Historically, for equity fund managers, Netflix, Inc. (NFLX) has been a been a gem. I mean,
NOT owning NFLX in a fund over the past decade is a kind of investment sacrilege. The 10-year
performance, even inclusive of the end of the financial crisis, looks pretty. It’s up 4021% in that
time period. Below is a 10 year chart of NFLX (white) and the S&P 500 (in green). Even
considering that we’re in a low interest rate environment and the “market” (SP500) has done
spectacularly well this past decade, NFLX has outperformed.
On the other hand, NFLX has been lagging the S&P for the past 12 months. It’s been a bit of a
ride. Below is an12 month chart comparing NFLX (white) to the S&P 500 (green).
Sample of Current Issues for Netflix
(Note: you do not need to explicitly answer the questions in the section below, the questions are
listed to help you start thinking about issues Netflix’s is facing)
First, consider article 1. What is going on here? Can Netflix cope with increased competition?
What does this mean longer term?
Second, look at article 2. Can Netflix survive if it loses some of its most watched shows? What
impact will losing shows have on the long-term performance of Netflix. Can Netflix own shows
make up for lost content?
Finally, see what you can figure out about international upstream/downstream trends. Is growth
happening overseas? What is going on geopolitically that may affect NFLX? Just as a teaser
check out article 3.
Activity Steps
Step 1: Download the articles and exhibits. Read the articles and familiarize yourself with the
financial statements found in the Excel file. This is a “real time” case, which will require you to
do your own research on Netflix and go beyond the information given in the articles (be sure and
cite any sources you use). In your report be sure to describe how you believe these issues will
impact Netflix’s future financial performance, and your financial model.
Step 2: Prepare a document that answers the following questions:
1. Describe Netflix’s recent performance (full financial analysis).
2. What are the challenges facing Netflix?
3. What is your forecast for the 2020 income statement?
4. What is your forecast for the 2020 balance sheet?
5. How do income and total assets fluctuate with changes in key assumptions?
Step 3: To complete the assignment, upload your completed document and excel spreadsheet
with your calculations to Canvas.
The brief you submit should include your thorough analysis of the situation in each case. Your
brief should answer all questions provided for the case, but it should be a professional-looking
report and NOT simply a question and response like a homework assignment. Please treat each
case as if the proposal is yours in a real work situation and you have been hired as a consultant
on the issue and bring whatever information you believe is necessary to defend your position.
You may add as many attachments as you feel is necessary to defend your recommendations, e.g.
excel spreadsheets, graphs, etc. DO NOT just write down the questions provided for your
guidance and answer them like a homework assignment. Cases written in question and
answer format will receive no credit.
You must upload each case by the due date, late cases will not be accepted under any
circumstances.
Netflix Inc.
Consolidated Income Statement
US$ in thousands
12 months ended
Revenues
Cost of revenues
Gross profit
Marketing
Technology and development
General and administrative
Operating income
Interest expense
Interest and other income (expense)
Other income (expense)
Income before income taxes
(Provision for) benefit from income taxes
Net income
Dec 31, 2019
20,156,447
(12,440,213)
7,716,234
(2,652,462)
(1,545,149)
(914,369)
2,604,254
(626,023)
84,000
(542,023)
2,062,231
(195,315)
1,866,916
Based on:10-K (filing date: 2020-01-29),10-K (filing date: 2019-01-29),10-K (filing date: 2018-01-29),10-K (filing date: 2017-01-27),10-K (filing date: 2016-01
Dec 31, 2018
15,794,341
(9,967,538)
5,826,803
(2,369,469)
(1,221,814)
(630,294)
1,605,226
(420,493)
41,725
(378,768)
1,226,458
(15,216)
1,211,242
Dec 31, 2017
11,692,713
(7,659,666)
4,033,047
(1,278,022)
(1,052,778)
(863,568)
838,679
(238,204)
(115,154)
(353,358)
485,321
73,608
558,929
K (filing date: 2017-01-27),10-K (filing date: 2016-01-28).
Dec 31, 2016
8,830,669
(6,029,901)
2,800,768
(991,078)
(852,098)
(577,799)
379,793
(150,114)
30,828
(119,286)
260,507
(73,829)
186,678
Dec 31, 2015
6,779,511
(4,591,476)
2,188,035
(824,092)
(650,788)
(407,329)
305,826
(132,716)
(31,225)
(163,941)
141,885
(19,244)
122,641
Netflix Inc.
Consolidated Balance Sheet: Assets
US$ in thousands
Cash and cash equivalents
Short-term investments
Current content assets, net
Trade receivables
Prepaid expenses
Other receivables
Other current assets (legacy)
Other current assets
Current assets
Non-current content assets, net
Property and equipment, net
Other non-current assets
Non-current assets
Total assets
Dec 31, 2019
5,018,437
—
—
454,399
180,999
524,669
—
1,160,067
6,178,504
24,504,567
565,221
2,727,420
27,797,208
33,975,712
Consolidated Balance Sheet: Liabilities and Stockholders’ Equity
US$ in thousands
Current content liabilities
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Current liabilities
Non-current content liabilities
Long-term debt
Other non-current liabilities
Non-current liabilities
Total liabilities
Preferred stock, $0.001 par value; no shares issued and outstanding
Common stock, $0.001 par value
Accumulated other comprehensive loss
Retained earnings
Stockholders’ equity
Total liabilities and stockholders’ equity
Dec 31, 2019
4,413,561
674,347
843,043
924,745
6,855,696
3,334,323
14,759,260
1,444,276
19,537,859
26,393,555
—
2,793,929
(23,521)
4,811,749
7,582,157
33,975,712
Dec 31, 2018
3,794,483
—
5,151,186
362,712
178,833
206,921
—
748,466
9,694,135
14,960,954
418,281
901,030
16,280,265
25,974,400
Dec 31, 2017
2,822,795
—
4,310,934
—
—
—
536,245
536,245
7,669,974
10,371,055
319,404
652,309
11,342,768
19,012,742
Dec 31, 2016
1,467,576
266,206
3,726,307
—
—
—
260,202
260,202
5,720,291
7,274,501
250,395
341,423
7,866,319
13,586,610
Dec 31, 2015
1,809,330
501,385
2,905,998
—
—
—
215,127
215,127
5,431,840
4,312,817
173,412
284,802
4,771,031
10,202,871
Dec 31, 2017
4,173,041
359,555
315,094
618,622
5,466,312
3,329,796
6,499,432
135,246
9,964,474
15,430,786
Dec 31, 2016
3,632,711
312,842
197,632
443,472
4,586,657
2,894,654
3,364,311
61,188
6,320,153
10,906,810
Dec 31, 2015
2,789,023
253,491
140,389
346,721
3,529,624
2,026,360
2,371,362
52,099
4,449,821
7,979,445
ers’ Equity
Dec 31, 2018
4,686,019
562,985
477,417
760,899
6,487,320
3,759,026
10,360,058
129,231
14,248,315
20,735,635
—
2,315,988
(19,582)
2,942,359
5,238,765
25,974,400
—
1,871,396
(20,557)
1,731,117
3,581,956
19,012,742
—
1,599,762
(48,565)
1,128,603
2,679,800
13,586,610
—
1,324,809
(43,308)
941,925
2,223,426
10,202,871
Netflix Inc.
Consolidated Cash Flow Statement
US$ in thousands
12 months ended
Net income
Additions to streaming content assets
Change in streaming content liabilities
Amortization of streaming content assets
Dec 31, 2019
1,866,916
(13,916,683)
(694,011)
9,216,247
Depreciation and amortization of property, equipment and intangibles
Stock-based compensation expense
Excess tax benefits from stock-based compensation
Other non-cash items
103,579
405,376
—
228,230
Foreign currency remeasurement (gain) loss on long-term debt
Deferred taxes
Other current assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Other non-current assets and liabilities
Changes in operating assets and liabilities
Adjustments to reconcile net income to net cash used in operating
activities
Net cash used in operating activities
Purchases of property and equipment
Change in other assets
Purchases of short-term investments
Proceeds from sale of short-term investments
Proceeds from maturities of short-term investments
Net cash (used in) provided by investing activities
Proceeds from issuance of debt
Debt issuance costs
Proceeds from issuance of common stock
Excess tax benefits from stock-based compensation
Other financing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
(45,576)
(94,443)
(252,113)
96,063
157,778
163,846
(122,531)
43,043
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year
(4,754,238)
(2,887,322)
(253,035)
(134,029)
—
—
—
(387,064)
4,469,306
(36,134)
72,490
—
—
4,505,662
469
1,231,745
3,812,041
5,043,786
Based on:10-K (filing date: 2020-01-29),10-K (filing date: 2019-01-29),10-K (filing date: 2018-01-29),10-K (filing date: 2017-01-27),10-K (filing date: 2016-01
Dec 31, 2018
1,211,242
(13,043,437)
999,880
7,532,088
Dec 31, 2017
558,929
(9,805,763)
900,006
6,197,817
Dec 31, 2016
186,678
(8,653,286)
1,772,650
4,788,498
Dec 31, 2015
122,641
(5,771,652)
1,162,413
3,405,382
83,157
320,657
—
81,640
71,911
182,209
—
117,864
57,528
173,675
(65,121)
119,861
62,283
124,725
(80,471)
111,008
(73,953)
(85,520)
(200,192)
199,198
150,422
142,277
2,062
293,767
140,790
(208,688)
(234,090)
74,559
114,337
177,974
(73,803)
58,977
—
(46,847)
46,970
32,247
68,706
96,751
(52,294)
192,380
—
(58,655)
18,693
51,615
48,810
72,135
(18,366)
172,887
(3,891,721)
(2,680,479)
(173,946)
(165,174)
—
—
—
(339,120)
3,961,852
(35,871)
124,502
—
(1,956)
4,048,527
(2,344,877)
(1,785,948)
(173,302)
(60,409)
(74,819)
320,154
22,705
34,329
3,020,510
(32,153)
88,378
—
255
3,076,990
(1,660,662)
(1,473,984)
(107,653)
(78,118)
(187,193)
282,484
140,245
49,765
1,000,000
(10,700)
36,979
65,121
230
1,091,630
(872,080)
(749,439)
(91,248)
(79,870)
(371,915)
259,079
104,762
(179,192)
1,500,000
(17,629)
77,980
80,471
(545)
1,640,277
29,848
(9,165)
(15,924)
1,355,219
1,467,576
2,822,795
(341,754)
1,809,330
1,467,576
(39,682)
989,246
2,822,795
3,812,041
K (filing date: 2017-01-27),10-K (filing date: 2016-01-28).
695,722
1,113,608
1,809,330
Netflix May Take an Extended Intermission;
Coming results won’t settle the question of
longer-term competition, which could impede
recovery for the battered stock
Gallagher, Dan . Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]14 Oct 2019.
ProQuest document link
FULL TEXT
Netflix has faced plenty of doubters before. This time it may take the company a while to prove them wrong—if it
can.
Heading into its third-quarter report this week, Netflix has had a rougher summer than most. Even with Friday’s
trade-inspired stock rally, the company has shed one-quarter of its market value in the past three months. That is
the worst performance of the largest tech stocks over that period, even in a choppy market that has sparked
strong declines at other big internet names such as Amazon.com, Facebook and Tencent. The selloff was sparked
by the company’s second-quarter report in mid-July when Netflix posted a rare shortfall to its own forecast for
paid-subscriber growth.
That miss wasn’t the result of the so-called streaming war ; new services coming from Walt Disney, Apple Inc.,
NBCUniversal and Time Warner aren’t up and running quite yet. But the prospect of more direct competition with
deep-pocketed media titans has cast a definite pall over Netflix, even as the company insists its recent subscriber
weakness was the result of price increases and an anemic content-release slate in the quarter. Notably, Netflix had
a similar market value to Disney in April when the latter shared launch plans for its Disney+ offering. Disney’s share
price has jumped 11% since then, while Netflix is down 22%.
Netflix has been a volatile stock so investors could be forgiven for thinking they have seen this show before.
Notwithstanding its recent miss, though, the company actually has a strong record of exceeding forecasts . It
projected the addition of 7 million new paid subscribers for the third quarter compared with 2.7 million added in
the previous period. Analysts expect the company to forecast about 9.5 million new net subscribers for the fourth
quarter, likely helped by new content including “El Camino: A Breaking Bad Movie”.
Apple’s and Disney’s streaming services will launch next month, while NBCUniversal’s Peacock network and HBO
Max from Time Warner don’t debut until the spring. Apple and Disney have priced their services well below
Netflix’s, though they also are expected to feature a more limited slate of content . The real impact of new
competition won’t be clear until later next year when more of the new services are out and have had some time to
take hold.
So even a strong third-quarter report and outlook this week from Netflix wouldn’t go far toward soothing fears
about new competition. Even with the recent selloff, Netflix still trades around 60 times forward earnings, putting
its valuation in the richest 3% of the S&P 500. The company has been able to command that sort of premium over
the years precisely because of its blockbuster expansion pace; paid-subscriber growth has averaged 27% annually
over the past five years.
A slower-growing Netflix just won’t be as binge-worthy.
Write to Dan Gallagher at dan.gallagher@wsj.com
Credit: By Dan Gallagher
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DETAILS
Subject:
Streaming media; Competition
Company / organization:
Name: Amazon.com Inc; NAICS: 334310, 454110, 518210; Name: NBCUniversal Inc;
NAICS: 512110, 515120; Name: Netflix Inc; NAICS: 512120, 518210, 532282; Name:
Apple Inc; NAICS: 334111, 334220, 511210
Publication title:
Wall Street Journal (Online); New York, N.Y.
Publication year:
2019
Publication date:
Oct 14, 2019
column:
Heard on the Street
Section:
Markets
Publisher:
Dow Jones &Company Inc
Place of publication:
New York, N.Y.
Country of publication:
United States, New York, N.Y.
Publication subject:
Business And Economics
Source type:
Newspapers
Language of publication:
English
Document type:
News
ProQuest document ID:
2304887873
Document URL:
http://libproxy.boisestate.edu/login?url=https://search.proquest.com/docview/2304
887873?accountid=9649
Copyright:
Copyright 2019 Dow Jones &Company, Inc. All Rights Reserved.
Last updated:
2019-10-15
Database:
ProQuest Central
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Netflix to Lose No. 1 Show ‘The Office’ to Comcast
in 2021; Other popular reruns could also leave the
platform, as NBCUniversal and other media
companies look to bring back hit shows to their
streaming services
Flint, Joe . Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]26 June 2019.
ProQuest document link
FULL TEXT
Netflix Inc. will lose its No. 1 show, “The Office,” in 2021 when reruns of the hit sitcom move to a new streaming
service being launched by Comcast Corp.’s NBCUniversal, the latest sign of competition over top programming
among Hollywood’s titans.
Terms of the five-year deal weren’t disclosed. People familiar with the matter said it is valued at around $500
million. Netflix had paid $100 million for its current multiyear deal.
In a statement on Twitter, Netflix said: “We’re sad that NBC has decided to take The Office back for its own
streaming platform—but members can binge watch the show to their hearts’ content ad-free on Netflix until
January 2021.”
NBCUniversal’s TV studio produced “The Office,” which ended its nine-season run on the NBC network in 2013, and
licensed reruns to Netflix, where it has been the No. 1 show for several years, accounting for 52 billion viewing
minutes in 2018.
The deal is between two divisions inside NBCUniversal—its streaming unit is acquiring the rights from the
Universal TV studio. Still, the show was shopped to other streaming services besides Netflix, including Walt Disney
Co.’s Hulu and the new services from Apple Inc. and AT&T Inc.’s WarnerMedia, people involved in the sales process
said.
The creators of “The Office” will get a share of profits from the new deal, as they did under the Netflix pact.
Reruns have been critical to the success of Netflix. Though Netflix has touted its production of originals like
“Stranger Things” and “The Crown,” non-original “library programming” made up 72% of the minutes people spent
watching Netflix in the U.S. as of October 2018, according to Nielsen data. Netflix discounts third-party research.
Other popular reruns on Netflix could also leave the platform in the coming years as NBCUniversal and other media
companies, including Disney and WarnerMedia, launch their own streaming services and look to bring back hit
shows to their platforms. Those three companies account for content that made up nearly 40% of the viewing
minutes on Netflix, according to the Nielsen data.
Another hit rerun on Netflix, the comedy “Friends,” could leave the service at the end of this year and move to the
WarnerMedia streaming platform. WarnerMedia’s Warner Bros. studio produced “Friends.”
Set in Scranton, Pa., “The Office” follows a hapless group of paper salesmen and women and their bumbling boss.
Based on the British sitcom of the same name, the show’s format was brought to the U.S. by Ben Silverman, who
was an executive producer of the show and then went on to become president of NBC Entertainment.
Earlier
* Netflix Fights to Keep Its Most Watched Shows: ‘Friends’ and ‘The Office’
Although Netflix made an offer to keep “The Office,” internally the consensus was that the program was likely to
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end up on the NBCUniversal service, a person close to the company said. Netflix has been boosting its spending on
original programming over the Past several years in anticipation of losing acquired content to rivals.
While “The Office” will be gone from Netflix in January of 2021, the show’s star, Steve Carell, will be back on the
platform in “Space Force,” an original comedy whose creator is Greg Daniels, a longtime executive producer of “The
Office.”
NBCUniversal’s streaming service will be ad-supported and is set to launch in 2020. It will be available free to
people who have an existing pay-TV subscription and available to others for a fee. It will feature the company’s
popular TV and movie franchises as well as original content and programming licensed from others.
“‘The Office’ has become a staple of pop-culture and is a rare gem whose relevance continues to grow at a time
when fans have more entertainment choices than ever before,” said Bonnie Hammer, chairman of NBCUniversal
Direct-to-Consumer and Digital Enterprises, in a statement.
Write to Joe Flint at joe.flint@wsj.com
Credit: By Joe Flint
DETAILS
Subject:
Television programs; Licensed products
Location:
United States–US
People:
Carell, Steve Hammer, Bonnie
Company / organization:
Name: Comcast Corp; NAICS: 517110, 517210, 517919; Name: NBC Entertainment;
NAICS: 515120; Name: Twitter Inc; NAICS: 519130; Name: Warner Bros
Entertainment Inc; NAICS: 512110; Name: Warner Media LLC; NAICS: 512110,
517110, 517210; Name: Walt Disney Co; NAICS: 512110, 515120, 711211, 713110;
Name: NBCUniversal Inc; NAICS: 512110, 515120; Name: Netflix Inc; NAICS: 512120,
518210, 532230; Name: AT &T Inc; NAICS: 517110, 517210
Publication title:
Wall Street Journal (Online); New York, N.Y.
Publication year:
2019
Publication date:
Jun 26, 2019
column:
Media &Marketing
Section:
Business
Publisher:
Dow Jones &Company Inc
Place of publication:
New York, N.Y.
Country of publication:
United States, New York, N.Y.
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