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Posted on Jul 15, 2024

Please answer the following questions based on the case: Netflixs 2020 Strategy for Battling Rivals in the Global Market for Streamed Video Subscribers. What concerns

Please answer the following questions based on the case: "Netflixs 2020 Strategy for Battling Rivals in the Global Market for Streamed Video Subscribers.

What concerns do you have about Netflixs situation, given the financial data contained in case Exhibits 2, 3, 6, and 7?

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EXHIBIT 2 Selected Balance Sheet and Cash Flow Data for Netflix, 2015-2019 (in millions) 2015 2016 2017 2018 2019 $1,809.3 5,431.8 $ 1,467.6 5.720.3 $ 2.822.8 7,670.0 $ 3,794.5 9,694.1 $ 5,018.4 6,178.5 Selected Balance Sheet Data Cash and cash equivalents Current assets Total current and non-current content assets Total assets Current liabilities Long-term debt Stockholders' equity Cash Flow Data Net cash (used in provided by operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities 7,218.8 10,202.9 3.529.6 2.371.4 2.223.4 14,682.0 13,586.6 4,586.7 3,364.3 2,679.8 20.112.20 19,012.7 5,466.3 6,499.4 3,582.0 20.107.5 25,974.4 6,487.3 10,360.1 5,238.8 $24,504.5 33,975.7 6,855.7 14.759.3 7.582.2 $ (749.4) $(1,474.0) $ (1.785.9) $(2,680.5) $ (2,887.3) (179.2) 49.8 34.3 (339.1) (387.1) 1.640.3 1,091.3 3,077.0 4,048.5 4,505.7 All of Netflix's long-term debt consisted of senior unsecured notes that were issued at various points in time and had various maturity dates and various fixed rates of interest Sources: Company 10-K Reports 2011, 2015, 2017 and 2019. EXHIBIT 3 The Percentage of Internet Users in Selected Countries Who Watched Online Video Content on Any Device as of January 2018 Percentage of Internet Users Watching Online Video Content on Any Device Country 95% 92% 91% 88% 88% Saudi Arabia China New Zealand Mexico Australia Spain India Brazil United States Canada France Germany South Korea Japan 86% 85% 85% 85% 83% 81% 76% 71% 69% Source: Statista, www.statista.com (accessed April 10, 2018). EXHIBIT 6 Netflix's Performance by Geographic Region, 2019 (in millions, except for average monthly revenues per paid subscriber) Three months ended March 31, June 30, 2019 2019 Sept. 30, 2019 Dec. 31, 2019 Full Year 2019 $ UCAN Streaming Revenue $ 2,257 $ 2,501 $ 2,621 $ 2,672 $10,051.2 Paid Memberships 66.63 66.50 67.11 67.66 67.66 Paid Net Additions 1.88 -0.13 0.61 0.55 2.91 Average Monthly Revenue per Paid Subscriber $ 11.45 $ 12.52 $ 13.08 $ 13.22 $ 12.57 EMEA Streaming Revenue $ 1,233 $ 1,319 $ 1,428 $ 1,563 $ 5,543.1 Paid Memberships 42.54 44.23 47.36 51.78 51.78 Pald Net Additions 4.72 1.69 3.13 4.42 13.96 Average Monthly Revenue per Paid Subscriber $ 10.23 $ 10.13 $ 10.40 $ 10.51 $ 10.33 LATAM Streaming Revenue $ 630 $ 677 $ 741 746 $ 2,795.4 Paid Memberships 27.55 27.89 29.38 31.42 31.42 Paid Net Additions 1.47 0.34 1.49 2.04 5.34 Average Monthly Revenue per Paid Subscriber $ 7.84 $ 8.14 $ 8.63 $ 8.18 $ 8.21 APAC Streaming Revenue $ 320 $ 349 $ 382 $ 418 $ 1.469.5 Paid Memberships 12.14 12.94 14.49 16.23 16.23 Paid Net Additions 1.53 0.80 1.54 1.75 5.63 Average Monthly Revenue per Paid Subscriber $ 9.37 $9.29 $9.29 $ 9.07 $ 9.24 Total Streaming Revenue $4,440.0 $4,846.0 $5.173.0 $5,399.0 $19.859.2 Paid Memberships 148,860 151,510 158,334 167,090 167,090 Paid Net Additions 9.60 3.43 6.77 8.76 27.83 Average Monthly Revenue per Paid Not Not Subscriber reported reported $ 11.13 10.82 Source: Company website, Excel spreadsheet regional information for 2019. posted in the investor Relations section as part of the company's report of Fourth Quarter 2019 Financial Results, www.netflix.com, accessed February 15, 2020 $ 11.06 $ EXHIBIT 7 The Growing Financial Strain of Netflix's Strategic Emphasis on Producing Original Content In-House, 2015-2019 (in millions of dollars) 2019 2018 2017 2016 2015 Streaming content obligations at year-end Additions to streaming content assets Additions to DVD content assets Amortization of streaming content assets Amortization of DVD content assets Net cash used in operating activities Proceeds from Issuance of debt Proceeds from issuance of common stock Outstanding senior notes $19,490.1 13,916.7 Note 1 9,216.2 2.7 (2,887.3) 4,469.3 72.5 14,893.0 $19,285.9 13,043.4 38.6 7,532.1 41.2 (2,680.5) 3,921.8 124.5 10,360.0 $ 17,694.6 9,805.8 53.7 6,197.8 60.7 (1.785.9) 3,020.5 88.4 6,499.4 $14,479.5 8,653.3 77.2 4.788.5 79.0 (1,474.0) 1,000.0 37.0 3,364.3 $10,902.2 5,771.6 78.0 3,405.4 79.4 (749.4) 1,500.0 78.0 2,371.4 Note 1: This item was reclassified and merged into a different accounting category on the company's Cash Flow Statement. Source: Company 10-K Reports 2019, 2018, 2017, 2016, and 2015. EXHIBIT 2 Selected Balance Sheet and Cash Flow Data for Netflix, 2015-2019 (in millions) 2015 2016 2017 2018 2019 $1,809.3 5,431.8 $ 1,467.6 5.720.3 $ 2.822.8 7,670.0 $ 3,794.5 9,694.1 $ 5,018.4 6,178.5 Selected Balance Sheet Data Cash and cash equivalents Current assets Total current and non-current content assets Total assets Current liabilities Long-term debt Stockholders' equity Cash Flow Data Net cash (used in provided by operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities 7,218.8 10,202.9 3.529.6 2.371.4 2.223.4 14,682.0 13,586.6 4,586.7 3,364.3 2,679.8 20.112.20 19,012.7 5,466.3 6,499.4 3,582.0 20.107.5 25,974.4 6,487.3 10,360.1 5,238.8 $24,504.5 33,975.7 6,855.7 14.759.3 7.582.2 $ (749.4) $(1,474.0) $ (1.785.9) $(2,680.5) $ (2,887.3) (179.2) 49.8 34.3 (339.1) (387.1) 1.640.3 1,091.3 3,077.0 4,048.5 4,505.7 All of Netflix's long-term debt consisted of senior unsecured notes that were issued at various points in time and had various maturity dates and various fixed rates of interest Sources: Company 10-K Reports 2011, 2015, 2017 and 2019. EXHIBIT 3 The Percentage of Internet Users in Selected Countries Who Watched Online Video Content on Any Device as of January 2018 Percentage of Internet Users Watching Online Video Content on Any Device Country 95% 92% 91% 88% 88% Saudi Arabia China New Zealand Mexico Australia Spain India Brazil United States Canada France Germany South Korea Japan 86% 85% 85% 85% 83% 81% 76% 71% 69% Source: Statista, www.statista.com (accessed April 10, 2018). EXHIBIT 6 Netflix's Performance by Geographic Region, 2019 (in millions, except for average monthly revenues per paid subscriber) Three months ended March 31, June 30, 2019 2019 Sept. 30, 2019 Dec. 31, 2019 Full Year 2019 $ UCAN Streaming Revenue $ 2,257 $ 2,501 $ 2,621 $ 2,672 $10,051.2 Paid Memberships 66.63 66.50 67.11 67.66 67.66 Paid Net Additions 1.88 -0.13 0.61 0.55 2.91 Average Monthly Revenue per Paid Subscriber $ 11.45 $ 12.52 $ 13.08 $ 13.22 $ 12.57 EMEA Streaming Revenue $ 1,233 $ 1,319 $ 1,428 $ 1,563 $ 5,543.1 Paid Memberships 42.54 44.23 47.36 51.78 51.78 Pald Net Additions 4.72 1.69 3.13 4.42 13.96 Average Monthly Revenue per Paid Subscriber $ 10.23 $ 10.13 $ 10.40 $ 10.51 $ 10.33 LATAM Streaming Revenue $ 630 $ 677 $ 741 746 $ 2,795.4 Paid Memberships 27.55 27.89 29.38 31.42 31.42 Paid Net Additions 1.47 0.34 1.49 2.04 5.34 Average Monthly Revenue per Paid Subscriber $ 7.84 $ 8.14 $ 8.63 $ 8.18 $ 8.21 APAC Streaming Revenue $ 320 $ 349 $ 382 $ 418 $ 1.469.5 Paid Memberships 12.14 12.94 14.49 16.23 16.23 Paid Net Additions 1.53 0.80 1.54 1.75 5.63 Average Monthly Revenue per Paid Subscriber $ 9.37 $9.29 $9.29 $ 9.07 $ 9.24 Total Streaming Revenue $4,440.0 $4,846.0 $5.173.0 $5,399.0 $19.859.2 Paid Memberships 148,860 151,510 158,334 167,090 167,090 Paid Net Additions 9.60 3.43 6.77 8.76 27.83 Average Monthly Revenue per Paid Not Not Subscriber reported reported $ 11.13 10.82 Source: Company website, Excel spreadsheet regional information for 2019. posted in the investor Relations section as part of the company's report of Fourth Quarter 2019 Financial Results, www.netflix.com, accessed February 15, 2020 $ 11.06 $ EXHIBIT 7 The Growing Financial Strain of Netflix's Strategic Emphasis on Producing Original Content In-House, 2015-2019 (in millions of dollars) 2019 2018 2017 2016 2015 Streaming content obligations at year-end Additions to streaming content assets Additions to DVD content assets Amortization of streaming content assets Amortization of DVD content assets Net cash used in operating activities Proceeds from Issuance of debt Proceeds from issuance of common stock Outstanding senior notes $19,490.1 13,916.7 Note 1 9,216.2 2.7 (2,887.3) 4,469.3 72.5 14,893.0 $19,285.9 13,043.4 38.6 7,532.1 41.2 (2,680.5) 3,921.8 124.5 10,360.0 $ 17,694.6 9,805.8 53.7 6,197.8 60.7 (1.785.9) 3,020.5 88.4 6,499.4 $14,479.5 8,653.3 77.2 4.788.5 79.0 (1,474.0) 1,000.0 37.0 3,364.3 $10,902.2 5,771.6 78.0 3,405.4 79.4 (749.4) 1,500.0 78.0 2,371.4 Note 1: This item was reclassified and merged into a different accounting category on the company's Cash Flow Statement. Source: Company 10-K Reports 2019, 2018, 2017, 2016, and 2015