Assumptions-1

NetFlix purch cost per DVD

Paid subscription (monthly)
Free trial months
the number of DVDs for first subscription month
DVDs watched per month
Shipping cost (RT) per DVD
NetFlx purtust t DVD stock per subscriber
New release percentage
New release expire percentage

SUBSCRIBER
DISCOUNT RATE
MONTHLY DISCOUTN RATE

$
$

17.55
19.95
1
4
4.3
1.00
5.6
20%
10%
120,000
20%
0.02

MONTHLY CALCULATION

NEW SUBSCRIBER
OLD SUBSCRIBER
% REMAIN AFTER 1MONTH
% REMAIN AFTER 6MONTH
% REMAIN AFTER 5YEAR

$
$

3,360
84,000
0.70
0.40
0.28

TOTAL SUBSCRIBER
COST OF DVD PER NEW SUB
COS OF DVD PER OLD SUB
TOTAL REVENU OF NEW SUB
TOTAL REVENU OF OLD SUB
REVENUE

$
$
$
-

87,360
17.55
19.95

COST OF DVD
COGS

$
$

4.3
375,648

GROSS MARGIN
OPERATING EXPENES
PRODUCT DEVELOPMENT
SALES AND MKT
GENERANAL AND ADMINISTRATION
STOCK BASE ON COMPANSATION
TOTAL OPERATING EXPENSES
OPERATING INCOME
NET INCOME

EBIT
ADD-DEP
CAPX
NWC

$
$
$
$
$

FREE CASH FLOW

$
$
$
$
$

2,842
6,808
608
1,265
11,522
#VALUE!

PV OF FCF
TOTAL PV
INITIAL INVESTMENT

(393,490,011)
26,000,000
(419,490,011)

CAPEX
# of Discs at the end of 1999
# of discs per new subscriber
# of discs required for new subscribers
# of discs per old subscriber
# of discs required for old subscribers
total discs
price per discs for new subscriber
price per discs for old subscriber
total cost of discs

$
$
$
$
$
$
$
$

5.6
18,816
0.6
50,400
689,216
17.55
19.95
1,335,700.8

DEPRESIATION
library net 1999
value of new lib

8,695,000
8,732,103

Assumptions-1
GROWTH IN SUBSCRIBER PER MONTH
PRODUCT DEVELOPMENT
VALU PER NEW SUBSCRIBER
SALES AND MKT
G AND A
STOCK BASE ON COMPANSATION

4%
16%
39.50
4%
2%
1%

YEAR 2000
2

3,494.400
87,360
0.70
0.40
0.28

3,634.176
90,854
0.70
0.40
0.28

3,779.543
94,489
0.70
0.40
0.28

3,930.725
98,268
0.70
0.40
0.28

4,087.954
102,199
0.70
0.40
0.28

$
$
$
$
$
$

90,854
17.55
19.95
61,327
1,742,832
1,804,159

$
$
$
$
$
$

94,489
17.55
19.95
63,780
1,812,545
1,876,325

$
$
$
$
$
$

98,268
17.55
19.95
66,331
1,885,047
1,951,378

$
$
$
$
$
$

102,199
17.55
19.95
68,984
1,960,449
2,029,433

$
$
$
$
$
$

106,287
17.55
19.95
71,744
2,038,867
2,110,611

$
$

4.3
390,674

$
$

4.3
406,301

$
$

4.3
422,553

$
$

4.3
439,455

$
$

4.3
457,033

1,413,485

1,470,024

1,528,825

1,589,978

1,653,577

$
$
$
$
$
$
$

3,297
7,080
620
1,277
12,274
1,401,211
1,401,211

$
$
$
$
$
$
$

3,824
7,363
632
1,290
13,110
1,456,914
1,456,914

$
$
$
$
$
$
$

4,436
7,658
645
1,303
14,042
1,514,783
1,514,783

$
$
$
$
$
$
$

5,146
7,964
658
1,316
15,084
1,574,894
1,574,894

$
$
$
$
$
$
$

5,969
8,283
671
1,329
16,252
1,637,325
1,637,325

$
$
$
$
$

1,401,211
38,587
1,389,129
50,669

$
$
$
$
$

1,456,914
40,130
1,444,694
52,351

$
$
$
$
$

1,514,783
41,736
1,502,482
54,037

$
$
$
$
$

1,574,894
43,405
1,562,581
55,718

$
$
$
$
$

1,637,325
45,141
1,625,084
57,382

49,021

49,818

50,580

51,298

51,964

$
$
$
$
$
$
$
$

5.6
19,568.64
0.6
52,416
71,985
17.55
19.95
1,389,128.83

$
5.6
$
20,351.39
$
0.6
$
54,513
$
74,864
$
17.55
$
19.95
$ 1,444,693.99

$
5.6
$
21,165.44
$
0.6
$
56,693
$
77,859
$
17.55
$
19.95
$ 1,502,481.74

$
5.6
$
22,012.06
$
0.6
$
58,961
$
80,973
$
17.55
$
19.95
$ 1,562,581.01

$
5.6
$
22,892.54
$
0.6
$
61,319
$
84,212
$
17.55
$
19.95
$ 1,625,084.26

38,586.91

40,130.39

41,735.60

43,405.03

45,141.23

AR 2000
7

4,251.472
106,287
0.70
0.40
0.28

4,421.531
110,538
0.70
0.40
0.28

$
$
$
$
$
$

110,538
17.55
19.95
74,613
2,120,422
2,195,035

$
$
$
$
$
$

114,960
17.55
19.95
77,598
2,205,238
2,282,836

$
$

4.3
475,315

$
$

4.3
494,327

1,719,720

1,788,509

$
$
$
$
$
$
$

6,924
8,614
685
1,342
17,565
1,702,155
1,702,155

$
$
$
$
$
$
$

$
$
$
$
$

1,702,155
46,947
1,690,088
59,014

$
$
$
$
$

4,598.392
114,960
0.70
0.40
0.28

10

4,782.328
119,558
0.70
0.40
0.28

11

4,973.621
124,341
0.70
0.40
0.28

$
119,558
$
17.55
$
19.95
$
80,702
$ 2,293,448
$ 2,374,150

$
124,341
$
17.55
$
19.95
$
83,930
$ 2,385,186
$ 2,469,116

$
$
$
$
$
$

129,314
17.55
19.95
87,287
2,480,593
2,567,880

$
$

$
$

4.3
534,664

$
$

4.3
556,051

$ 1,860,050

$ 1,934,452

2,011,830

8,032
8,959
698
1,356
19,045
1,769,464
1,769,464

$
9,317
$
9,317
$
712
$
1,369
$
20,716
$ 1,839,334
$ 1,839,334

$
10,808
$
9,690
$
727
$
1,383
$
22,607
$ 1,911,844
$ 1,911,844

$
$
$
$
$
$
$

12,537
10,077
741
1,397
24,752
1,987,077
1,987,077

1,769,464
48,825
1,757,691
60,598

$ 1,839,334
$
50,778
$ 1,827,999
$
$
62,113

$ 1,911,844
$
52,809
$ 1,901,119
$
$
63,534

$
$
$
$
$

1,987,077
54,921
1,977,163
64,835

4.3
514,100

52,566

53,092

$
5.6
$
23,808.24
$
0.6
$
63,772
$
87,580
$
17.55
$
19.95
$ 1,690,087.63

$
5.6
$
24,760.57
$
0.6
$
66,323
$
91,084
$
17.55
$
19.95
$ 1,757,691.13

46,946.88

48,824.75

53,527

$
5.6
$ 25,751.00
$
0.6
$
68,976
$
94,727
$
17.55
$
19.95
########

50,777.74

53,855

$
5.6
$ 26,781.04
$
0.6
$
71,735
$
98,516
$
17.55
$
19.95
########

52,808.85

54,056

$
5.6
$ 27,852.28
$
0.6
$
74,604
$
102,457
$
17.55
$
19.95
$ 1,977,163.5

54,921.21

YE
12

5,172.566
129,314
0.70
0.40
0.28

5,379.468
134,487
0.70
0.40
0.28

5,594.647
139,866
0.70
0.40
0.28

5,818.433
145,461
0.70
0.40
0.28

6,051.170
151,279
0.70
0.40
0.28

6,293.217
157,330
0.70
0.40
0.28

$
$
$
$
$
$

134,487
17.55
19.95
90,779
2,579,817
2,670,596

$
$
$
$
$
$

139,866
17.55
19.95
94,410
2,683,010
2,777,419

$
145,461
$
17.55
$
19.95
$
98,186
$ 2,790,330
$ 2,888,516

$
151,279
$
17.55
$
19.95
$
102,113
$ 2,901,943
$ 3,004,057

$
157,330
$
17.55
$
19.95
$
106,198
$ 3,018,021
$ 3,124,219

$
163,624
$
17.55
$
19.95
$
110,446
$ 3,138,742
$ 3,249,188

$
$

4.3
578,293

$
$

4.3
601,425

$
$

$
$

$
$

$
$

2,092,303

2,175,995

$ 2,263,035

$ 2,353,556

$ 2,447,698

$ 2,545,606

$
$
$
$
$
$
$

14,543
10,480
756
1,411
27,190
2,065,113
2,065,113

$
$
$
$
$
$
$

16,870
10,900
771
1,425
29,966
2,146,029
2,146,029

$
19,569
$
11,336
$
786
$
1,439
$
33,131
$ 2,229,904
$ 2,229,904

$
22,701
$
11,789
$
802
$
1,454
$
36,745
$ 2,316,811
$ 2,316,811

$
26,333
$
12,261
$
818
$
1,468
$
40,879
$ 2,406,819
$ 2,406,819

$
30,546
$
12,751
$
835
$
1,483
$
45,614
$ 2,499,992
$ 2,499,992

$
$
$
$
$

2,065,113
57,118
2,056,250
65,981

$
$
$
$
$

2,146,029
59,403
2,138,500
66,932

$ 2,229,904
$
61,779
$ 2,224,040
$
$
67,643

$ 2,316,811
$
64,250
$ 2,313,002
$
$
68,059

$ 2,406,819
$
66,820
$ 2,405,522
$
$
68,117

$ 2,499,992
$
69,493
$ 2,501,743
$
$
67,742

4.3
625,482

4.3
650,501

4.3
676,521

4.3
703,582

54,109

65,835

$
5.6
$
28,966.37
$
0.6
$
77,588
$
106,555
$
17.55
$
19.95
$ 2,056,250.0

$
5.6
$
30,125.02
$
0.6
$
80,692
$
110,817
$
17.55
$
19.95
$ 2,138,500.0

57,118.06

59,402.78

65,443

$
5.6
$ 31,330.02
$
0.6
$
83,920
$
115,250
$
17.55
$
19.95
########

61,778.89

64,767

$
5.6
$ 32,583.22
$
0.6
$
87,276
$
119,860
$
17.55
$
19.95
########

64,250.04

63,759

$
5.6
$ 33,886.55
$
0.6
$
90,768
$
124,654
$
17.55
$
19.95
########

66,820.05

62,369

$
5.6
$ 35,242.02
$
0.6
$
94,398
$
129,640
$
17.55
$
19.95
########

69,492.85

YEAR 2001
6

6,544.946
163,624
0.70
0.40
0.28

6,806.743
170,169
0.70
0.40
0.28

7,079.013
176,975
0.70
0.40
0.28

7,362.174
184,054
0.70
0.40
0.28

10

7,656.661
191,417
0.70
0.40
0.28

11

7,962.927
199,073
0.70
0.40
0.28

$
170,169
$
17.55
$
19.95
$
114,864
$ 3,264,292
$ 3,379,155

$
176,975
$
17.55
$
19.95
$
119,458
$ 3,394,863
$ 3,514,322

$
184,054
$
17.55
$
19.95
$
124,237
$ 3,530,658
$ 3,654,895

$
191,417
$
17.55
$
19.95
$
129,206
$ 3,671,884
$ 3,801,090

$
$
$
$
$
$

199,073
17.55
19.95
134,374
3,818,760
3,953,134

$
$
$
$
$
$

207,036
17.55
19.95
139,749
3,971,510
4,111,259

$
$

$
$

$
$

$
$

4.3
823,091

$
$

4.3
856,015

$
$

4.3
890,255

4.3
731,725

4.3
760,994

4.3
791,434

$ 2,647,431

$ 2,753,328

$ 2,863,461

$ 2,977,999

3,097,119

3,221,004

$
35,433
$
13,261
$
851
$
1,498
$
51,043
$ 2,596,388
$ 2,596,388

$
41,102
$
13,791
$
868
$
1,513
$
57,275
$ 2,696,053
$ 2,696,053

$
47,679
$
14,343
$
886
$
1,528
$
64,435
$ 2,799,026
$ 2,799,026

$
55,307
$
14,917
$
903
$
1,543
$
72,671
$ 2,905,329
$ 2,905,329

$
$
$
$
$
$
$

64,157
15,513
921
1,558
82,150
3,014,969
3,014,969

$
$
$
$
$
$
$

74,422
16,134
940
1,574
93,070
3,127,934
3,127,934

$ 2,596,388
$
72,273
$ 2,601,812
$
$
66,848

$ 2,696,053
$
75,163
$ 2,705,885
$
$
65,332

$ 2,799,026
$
78,170
$ 2,814,120
$
$
63,075

$ 2,905,329
$
81,297
$ 2,926,685
$
$
59,941

$
$
$
$
$

3,014,969
84,549
3,043,752
55,766

$
$
$
$
$

3,127,934
87,931
3,165,502
50,363

60,536

$
5.6
$ 36,651.70
$
0.6
$
98,174
$
134,826
$
17.55
$
19.95
########

72,272.56

58,193

$
5.6
$ 38,117.76
$
0.6
$
102,101
$
140,219
$
17.55
$
19.95
########

75,163.47

55,263

$
5.6
$ 39,642.47
$
0.6
$
106,185
$
145,828
$
17.55
$
19.95
########

78,170.00

51,655

$
5.6
$ 41,228.17
$
0.6
$
110,433
$
151,661
$
17.55
$
19.95
########

81,296.80

47,269

41,990

$
5.6
$ 42,877.30
$
0.6
$
114,850
$
157,727
$
17.55
$
19.95
$ 3,043,752.3

$
5.6
$ 44,592.39
$
0.6
$
119,444
$
164,036
$
17.55
$
19.95
$ 3,165,502.4

84,548.68

87,930.62

12

8,281.444
207,036
0.70
0.40
0.28

8,612.702
215,318
0.70
0.40
0.28

8,957.210
223,930
0.70
0.40
0.28

9,315.498
232,887
0.70
0.40
0.28

9,688.118
242,203
0.70
0.40
0.28

$
$
$
$
$
$

215,318
17.55
19.95
145,339
4,130,370
4,275,710

$
$
$
$
$
$

223,930
17.55
19.95
151,153
4,295,585
4,446,738

$
$
$
$
$
$

232,887
17.55
19.95
157,199
4,467,409
4,624,608

$
$
$
$
$
$

242,203
17.55
19.95
163,487
4,646,105
4,809,592

$
$
$
$
$
$

251,891
17.55
19.95
170,026
4,831,949
5,001,976

$
$

4.3
925,865

$
$

4.3
962,900

$
$

4.3
1,001,416

$
$

4.3
1,041,473

$
$

4.3
1,083,132

3,349,844

3,483,838

3,623,191

3,768,119

3,918,844

$
$
$
$
$
$
$

86,329
16,779
959
1,590
105,657
3,244,187
3,244,187

$
$
$
$
$
$
$

100,142
17,451
978
1,606
120,176
3,363,662
3,363,662

$
$
$
$
$
$
$

116,165
18,149
997
1,622
136,932
3,486,259
3,486,259

$
$
$
$
$
$
$

134,751
18,875
1,017
1,638
156,281
3,611,838
3,611,838

$
$
$
$
$
$
$

156,311
19,630
1,038
1,654
178,633
3,740,211
3,740,211

$
$
$
$
$

3,244,187
91,448
3,292,123
43,513

$
$
$
$
$

3,363,662
95,106
3,423,807
34,960

$
$
$
$
$

3,486,259
98,910
3,560,760
24,410

$
$
$
$
$

3,611,838
102,866
3,703,190
11,515

$
$
$
$
$

3,740,211
106,981
3,851,318
(4,125)

35,684

34,387

23,616

10,958

(3,861)

$
5.6
$ 46,376.09
$
0.6
$
124,222
$
170,598
$
17.55
$
19.95
$ 3,292,122.5

$
5.6
$
48,231.13
$
0.6
$
129,191
$
177,422
$
17.55
$
19.95
$ 3,423,807.4

$
5.6
$ 50,160.38
$
0.6
$
134,358
$
184,519
$
17.55
$
19.95
$ 3,560,759.7

$
5.6
$ 52,166.79
$
0.6
$
139,732
$
191,899
$
17.55
$
19.95
$ 3,703,190.1

$
5.6
$ 54,253.46
$
0.6
$
145,322
$
199,575
$
17.55
$
19.95
$ 3,851,317.7

91,447.85

95,105.76

98,909.99

102,866.39

106,981.05

YEAR 2002
6

10,075.643
251,891
0.70
0.40
0.28

10,478.669
261,967
0.70
0.40
0.28

10,897.816
272,445
0.70
0.40
0.28

11,333.728
283,343
0.70
0.40
0.28

11,787.077
294,677
0.70
0.40
0.28

$
$
$
$
$
$

261,967
17.55
19.95
176,828
5,025,227
5,202,055

$
$
$
$
$
$

272,445
17.55
19.95
183,901
5,226,236
5,410,137

$
$
$
$
$
$

283,343
17.55
19.95
191,257
5,435,286
5,626,542

$
$
$
$
$
$

294,677
17.55
19.95
198,907
5,652,697
5,851,604

$
$
$
$
$
$

306,464
17.55
19.95
206,863
5,878,805
6,085,668

$
$

4.3
1,126,457

$
$

4.3
1,171,515

$
$

4.3
1,218,376

$
$

4.3
1,267,111

$
$

4.3
1,317,795

4,075,598

4,238,622

4,408,166

4,584,493

4,767,873

$
$
$
$
$
$
$

181,321
20,415
1,058
1,671
204,465
3,871,133
3,871,133

$
$
$
$
$
$
$

210,332
21,231
1,080
1,688
234,331
4,004,291
4,004,291

$
$
$
$
$
$
$

243,985
22,081
1,101
1,704
268,871
4,139,295
4,139,295

$
$
$
$
$
$
$

283,023
22,964
1,123
1,721
308,831
4,275,662
4,275,662

$
$
$
$
$
$
$

328,307
23,882
1,146
1,739
355,073
4,412,800
4,412,800

$
$
$
$
$

3,871,133
111,260
4,005,370
(22,977)

$
$
$
$
$

4,004,291
115,711
4,165,585
(45,584)

$
$
$
$
$

4,139,295
120,339
4,332,209
(72,575)

$
$
$
$
$

4,275,662
125,153
4,505,497
(104,683)

$
$
$
$
$

4,412,800
130,159
4,685,717
(142,759)

(21,155) $

(41,280) $

(64,645) $

(91,716) $

(123,025)

$
5.6
$
56,423.60
$
0.6
$
151,135
$
207,558
$
17.55
$
19.95
$ 4,005,370.4

$
5.6
$
58,680.55
$
0.6
$
157,180
$
215,861
$
17.55
$
19.95
$ 4,165,585.2

$
5.6
$
61,027.77
$
0.6
$
163,467
$
224,495
$
17.55
$
19.95
$ 4,332,208.6

$
5.6
$
63,468.88
$
0.6
$
170,006
$
233,475
$
17.55
$
19.95
$ 4,505,497.0

$
5.6
$
66,007.63
$
0.6
$
176,806
$
242,814
$
17.55
$
19.95
$ 4,685,716.9

111,260.29

115,710.70

120,339.13

125,152.69

130,158.80

10

12,258.560
306,464
0.70
0.40
0.28

11

12,748.903
318,723
0.70
0.40
0.28

12

13,258.859
331,471
0.70
0.40
0.28

13,789.213
344,730
0.70
0.40
0.28

14,340.782
358,520
0.70
0.40
0.28

$
$
$
$
$
$

318,723
17.55
19.95
215,138
6,113,957
6,329,095

$
$
$
$
$
$

331,471
17.55
19.95
223,743
6,358,515
6,582,259

$
$
$
$
$
$

344,730
17.55
19.95
232,693
6,612,856
6,845,549

$
$
$
$
$
$

358,520
17.55
19.95
242,001
6,877,370
7,119,371

$
$
$
$
$
$

372,860
17.55
19.95
251,681
7,152,465
7,404,146

$
$

4.3
1,370,507

$
$

4.3
1,425,327

$
$

4.3
1,482,340

$
$

4.3
1,541,634

$
$

4.3
1,603,299

4,958,588

5,156,931

5,363,208

5,577,737

5,800,846

$
$
$
$
$
$
$

380,836
24,838
1,169
1,756
408,598
4,549,990
4,549,990

$
$
$
$
$
$
$

441,769
25,831
1,192
1,774
470,566
4,686,365
4,686,365

$
$
$
$
$
$
$

512,453
26,864
1,216
1,791
542,324
4,820,884
4,820,884

$
$
$
$
$
$
$

594,445
27,939
1,240
1,809
625,433
4,952,304
4,952,304

$
$
$
$
$
$
$

689,556
29,056
1,265
1,827
721,705
5,079,141
5,079,141

$
$
$
$
$

4,549,990
135,365
4,873,146
(187,791)

$
$
$
$
$

4,686,365
140,780
5,068,071
(240,926)

$
$
$
$
$

4,820,884
146,411
5,270,794
(303,499)

$
$
$
$
$

4,952,304
152,267
5,481,626
(377,055)

$
$
$
$
$

5,079,141
158,358
5,700,891
(463,392)

(159,180) $

(200,872) $

(248,894) $

(370,874) $

(448,323)

$
5.6
$
68,647.94
$
0.6
$
183,878
$
252,526
$
17.55
$
19.95
$ 4,873,145.5

$
5.6
$
71,393.86
$
0.6
$
191,234
$
262,627
$
17.55
$
19.95
$ 5,068,071.4

$
5.6
$
74,249.61
$
0.6
$
198,883
$
273,132
$
17.55
$
19.95
$ 5,270,794.2

$
5.6
$
77,219.59
$
0.6
$
206,838
$
284,058
$
17.55
$
19.95
$ 5,481,626.0

$
5.6
$ 80,308.38
$
0.6
$
215,112
$
295,420
$
17.55
$
19.95
$ 5,700,891.0

135,365.15

140,779.76

146,410.95

152,267.39

158,358.08

14,914.413
372,860
0.70
0.40
0.28

15,510.990
387,775
0.70
0.40
0.28

YEAR 2003
6

16,131.429
403,286
0.70
0.40
0.28

16,776.686
419,417
0.70
0.40
0.28

17,447.754
436,194
0.70
0.40
0.28

18,145.664
453,642
0.70
0.40
0.28

$
$
$
$
$
$

387,775
17.55
19.95
261,748
7,438,564
7,700,312

$
$
$
$
$
$

403,286
17.55
19.95
272,218
7,736,106
8,008,324

$
$
$
$
$
$

419,417
17.55
19.95
283,107
8,045,550
8,328,657

$
$
$
$
$
$

436,194
17.55
19.95
294,431
8,367,372
8,661,803

$
$
$
$
$
$

453,642
17.55
19.95
306,208
8,702,067
9,008,275

$
$
$
$
$
$

471,787
17.55
19.95
318,456
9,050,150
9,368,606

$
$

4.3
1,667,431

$
$

4.3
1,734,129

$
$

4.3
1,803,494

$
$

4.3
1,875,634

$
$

4.3
1,950,659

$
$

4.3
2,028,685

6,032,880

6,274,195

6,525,163

6,786,170

7,057,616

7,339,921

$
$
$
$
$
$
$

799,885
30,219
1,290
1,846
833,240
5,199,640
5,199,640

$
$
$
$
$
$
$

927,867
31,427
1,316
1,864
962,474
5,311,721
5,311,721

$
$
$
$
$
$
$

1,076,326
32,685
1,342
1,883
1,112,235
5,412,928
5,412,928

$
$
$
$
$
$
$

1,248,538
33,992
1,369
1,902
1,285,800
5,500,369
5,500,369

$
$
$
$
$
$
$

1,448,304
35,352
1,397
1,921
1,486,972
5,570,644
5,570,644

$
$
$
$
$
$
$

1,680,032
36,766
1,424
1,940
1,720,162
5,619,759
5,619,759

$
$
$
$
$

5,199,640
164,692
5,928,927
(564,594)

$
$
$
$
$

5,311,721
171,280
6,166,084
(683,083)

$
$
$
$
$

5,412,928
178,131
6,412,727
(821,668)

$
$
$
$
$

5,500,369
185,257
6,669,236
(983,610)

$ 5,570,644
$
192,667
$ 6,936,006
$
$ (1,172,695)

$ 5,619,759
$
200,373
$ 7,213,446
$
$ (1,393,313)

(537,280) $

(639,380) $

(756,490) $

(890,741) $ (1,044,564) $ (1,220,731)

$
5.6
$ 83,520.71
$
0.6
$
223,716
$
307,237
$
17.55
$
19.95
$ 5,928,926.7

$
5.6
$ 86,861.54
$
0.6
$
232,665
$
319,526
$
17.55
$
19.95
$ 6,166,083.7

$
5.6
$ 90,336.00
$
0.6
$
241,971
$
332,307
$
17.55
$
19.95
$ 6,412,727.1

$
5.6
$ 93,949.44
$
0.6
$
251,650
$
345,600
$
17.55
$
19.95
$ 6,669,236.2

$
5.6
$ 97,707.42
$
0.6
$
261,716
$
359,424
$
17.55
$
19.95
$ 6,936,005.6

$
5.6
$ 101,615.72
$
0.6
$
272,185
$
373,801
$
17.55
$
19.95
$ 7,213,445.8

164,692.41

171,280.10

178,131.31

185,256.56

192,666.82

200,373.50

18,871.491
471,787
0.70
0.40
0.28

10

19,626.350
490,659
0.70
0.40
0.28

11

20,411.404
510,285
0.70
0.40
0.28

12

21,227.860
530,697
0.70
0.40
0.28

22,076.975
551,924
0.70
0.40
0.28

$
$
$
$
$
$

490,659
17.55
19.95
331,195
9,412,156
9,743,351

$
510,285
$
17.55
$
19.95
$
344,442
$ 9,788,642
$ 10,133,085

$
530,697
$
17.55
$
19.95
$
358,220
$ 10,180,188
$ 10,538,408

$
551,924
$
17.55
$
19.95
$
372,549
$ 10,587,395
$ 10,959,944

$
574,001
$
17.55
$
19.95
$
387,451
$ 11,010,891
$ 11,398,342

$
$

4.3
2,109,833

$
$

4.3
2,194,226

$
$

4.3
2,281,995

$
$

4.3
2,373,275

$
$

4.3
2,468,206

7,633,518

7,938,859

8,256,413

8,586,670

8,930,136

$
$
$
$
$
$
$

1,948,837
38,236
1,453
1,959
1,990,486
5,643,032
5,643,032

$
$
$
$
$
$
$

2,260,651
39,766
1,482
1,979
2,303,878
5,634,981
5,634,981

$
$
$
$
$
$
$

2,622,356
41,356
1,512
1,999
2,667,222
5,589,191
5,589,191

$
$
$
$
$
$
$

3,041,932
43,011
1,542
2,019
3,088,504
5,498,166
5,498,166

$
$
$
$
$
$
$

3,528,642
44,731
1,573
2,039
3,576,984
5,353,152
5,353,152

$
$
$
$
$

5,353,152
8,776,260
8,776,260
5,353,152

$ 5,643,032
$
208,388
$ 7,501,984
$
$ (1,650,563)

$ 5,634,981
$
216,724
$ 7,802,063
$
$ (1,950,358)

$ 5,589,191
$
225,393
$ 8,114,146
$
$ (2,299,562)

$ 5,498,166
$
234,409
$ 8,438,711
$
$ (2,706,137)

$ (1,422,410) $ (1,653,212) $ (1,917,258) $ (2,219,252) $

$
5.6
$ 105,680.35
$
0.6
$
283,072
$
388,753
$
17.55
$
19.95
$ 7,501,983.7

$
5.6
$ 109,907.56
$
0.6
$
294,395
$
404,303
$
17.55
$
19.95
$ 7,802,063.0

$
5.6
$ 114,303.86
$
0.6
$
306,171
$
420,475
$
17.55
$
19.95
$ 8,114,145.6

$
5.6
$ 118,876.02
$
0.6
$
318,418
$
437,294
$
17.55
$
19.95
$ 8,438,711.4

208,388.44

216,723.97

225,392.93

234,408.65

5,265,396

$
5.6
$ 123,631.06
$
0.6
$
331,155
$
454,786
$
17.55
$
19.95
$ 8,776,259.8

8,776,260

22,960.054
574,001
0.70
0.40
0.28

23,878.456
596,961
0.70
0.40
0.28

24,833.594
620,840
0.70
0.40
0.28

$
596,961
$
17.55
$
19.95
$
402,949
$ 11,451,327
$ 11,854,276

$
620,840
$
17.55
$
19.95
$
419,067
$ 11,909,380
$ 12,328,447

$
$
$
$
`
$

645,673
17.55
19.95
435,830

$
$

4.3
2,566,934

$
$

4.3
2,669,611

$
$

9,287,342

$
$
$
$
$
$
$

4,093,224
46,520
1,604
2,059
4,143,408
5,143,934
5,143,934

$
$
$
$
$

5,143,934
9,127,310
9,127,310
5,143,934

YEAR 2004
6

25,826.938
645,673
0.70
0.40
0.28

26,860.016
671,500
0.70
0.40
0.28

435,830

$
$
$
$
$
$

671,500
17.55
19.95
453,263
12,881,185
13,334,448

$
$
$
$
$
$

698,360
17.55
19.95
471,393
13,396,433
13,867,826

4.3
2,776,396

$
$

4.3
2,887,452

$
$

4.3
3,002,950

9,658,835

$ (2,340,566) $

10,446,996

10,864,876

$
$
$
$
$
$
$

4,748,140
48,381
1,636
2,080
4,800,237
4,858,598
4,858,598

$ 5,507,843 $
$
50,316 $
$
1,669 $
$
2,100 $
$ 5,561,929 $
$ (7,902,495) $
$ (7,902,495) $

6,389,097
52,329
1,702
2,121
6,445,250
4,001,746
4,001,746

$
$
$
$
$
$
$

7,411,353
54,422
1,736
2,143
7,469,654
3,395,222
3,395,222

$
$
$
$
$

4,858,598
9,492,403
9,492,403
4,858,598

$ (7,902,495) $
$ 9,872,099 $
$ 9,872,099 $
$
$
$ (7,902,495) $

4,001,746
10,266,983
10,266,983
4,001,746

$
$
$
$
$

3,395,222
10,677,662
10,677,662
3,395,222

4,976,663

4,623,546

$ (7,396,902) $

3,684,314

3,074,657

$
5.6
$ 128,576.30
$
0.6
$
344,401
$
472,977
$
17.55
$
19.95
$ 9,127,310.2

$
5.6
$ 133,719.35
$
0.6
$
358,177
$
491,896
$
17.55
$
19.95
$ 9,492,402.6

$
5.6
$ 139,068.13
$
0.6
$
372,504
$
511,572
$
17.55
$
19.95
$ 9,872,098.7

$
5.6
$
144,630.85
$
0.6
$
387,404
$
532,035
$
17.55
$
19.95
$ 10,266,982.7

$
5.6
$
150,416.09
$
0.6
$
402,900
$
553,316
$
17.55
$
19.95
$ 10,677,662.0

9,127,310

9,492,403

9,872,099

10,266,983

10,677,662

YEAR 2004
7

27,934.416
698,360
0.70
0.40
0.28

29,051.793
726,295
0.70
0.40
0.28

$
$
$
$
$
$

726,295
17.55
19.95
490,249
13,932,290
14,422,539

$
$
$
$
$
$

755,347
17.55
19.95
509,859
14,489,582
14,999,441

$
$

4.3
3,123,068

$
$

4.3
3,247,990

11,299,471

$
$
$
$
$
$
$

8,597,170
56,599
1,771
2,164
8,657,704
2,641,767
2,641,767

$
$
$
$
$

2,641,767
11,104,768
11,104,768
2,641,767

30,213.865
755,347
0.70
0.40
0.28

10

31,422.419
785,560
0.70
0.40
0.28

11

32,679.316
816,983
0.70
0.40
0.28

$
785,560
$
17.55
$
19.95
$
530,253
$ 15,069,165
$ 15,599,418

$
$
$
$
$
$

816,983
17.55
19.95
551,463
15,671,932
16,223,395

$
$
$
$
$
$

849,662
17.55
19.95
573,522
16,298,809
16,872,331

$
$

4.3
3,377,910

$
$

4.3
3,513,026

$
$

4.3
3,653,548

11,751,450

$ 12,221,508

12,710,369

13,218,783

$
$
$
$
$
$
$

9,972,717
58,863
1,807
2,186
10,035,572
1,715,878
1,715,878

$ 11,568,351
$
61,218
$
1,843
$
2,208
$ 11,633,619
$
587,889
$
587,889

$
$
$
$
$
$
$

13,419,288
63,666
1,880
2,230
13,487,063
(776,695)
(776,695)

$
$
$
$
$
$
$

15,566,374
66,213
1,917
2,252
15,636,756
(2,417,972)
(2,417,972)

$
$
$
$
$

1,715,878
11,548,959
11,548,959
1,715,878

$
587,889
$ 12,010,918
$ 12,010,918
$
$
587,889

$
$
$
$
$

(776,695)
12,491,354
12,491,354
(776,695)

$
$
$
$
$

(2,417,972)
12,991,008
12,991,008
(2,417,972)

2,353,122

1,503,342

506,627

(658,361) $

(2,015,983)

$
5.6
$
156,432.73
$
0.6
$
419,016
$
575,449
$
17.55
$
19.95
$ 11,104,768.5

$
5.6
$
162,690.04
$
0.6
$
435,777
$
598,467
$
17.55
$
19.95
$ 11,548,959.2

$
5.6
$ 169,197.64
$
0.6
$
453,208
$
622,406
$
17.55
$
19.95
#########

$
5.6
$ 175,965.55
$
0.6
$
471,336
$
647,302
$
17.55
$
19.95
$ 12,491,354.3

$
5.6
$ 183,004.17
$
0.6
$
490,190
$
673,194
$
17.55
$
19.95
$ 12,991,008.5

$ 12,010,918

11,104,768

11,548,959

12,491,354

12,991,008

12

33,986.489
849,662
0.70
0.40
0.28

35,345.948
883,649
0.70
0.40
0.28

36,759.786
918,995
0.70
0.40
0.28

38,230.177
955,754
0.70
0.40
0.28

39,759.385
993,985
0.70
0.40
0.28

$
$
$
$
$
$

883,649
17.55
19.95
596,463
16,950,761
17,547,224

$
$
$
$
$
$

918,995
17.55
19.95
620,321
17,628,792
18,249,113

$
$
$
$
$
$

955,754
17.55
19.95
645,134
18,333,943
18,979,078

$
$
$
$
$
$

993,985
17.55
19.95
670,940
19,067,301
19,738,241

$
$
$
$
`
$

1,033,744
17.55
19.95
697,777

$
$

4.3
3,799,689

$
$

4.3
3,951,677

$
$

4.3
4,109,744

$
$

4.3
4,274,134

$
$

4.3
4,445,099

13,747,535

14,297,436

14,869,333

15,464,107

(3,747,322)

$
$
$
$
$
$
$

18,056,993
68,861
1,955
2,275
18,130,085
(4,382,550)
(4,382,550)

$
$
$
$
$
$
$

20,946,112
71,616
1,995
2,297
21,022,020
(6,724,584)
(6,724,584)

$
$
$
$
$
$
$

24,297,490
74,481
2,034
2,320
24,376,326
(9,506,992)
(9,506,992)

$ 28,185,089 $ 32,694,703
$
77,460 $
80,558
$
2,075 $
2,117
$
2,343 $
2,367
$ 28,266,967 $ 32,779,745
$ (12,802,860) $ (36,527,067)
$ (12,802,860) $ (36,527,067)

$
$
$
$
$

(4,382,550)
13,510,649
13,510,649
(4,382,550)

$
$
$
$
$

(6,724,584)
14,051,075
14,051,075
(6,724,584)

$
$
$
$
$

(9,506,992)
14,613,118
14,613,118
(9,506,992)

$ (12,802,860) $ (36,527,067)
$ 15,197,642 $ 15,805,548
$ 15,197,642 $ 15,805,548
$
$
$ (12,802,860) $ (36,527,067)

697,777

(3,594,048) $

(6,614,345) $

(9,197,842) $ (12,183,477) $ (34,190,107)

$
5.6
$ 190,324.34
$
0.6
$
509,797
$
700,122
$
17.55
$
19.95
$ 13,510,648.8

$
5.6
$ 197,937.31
$
0.6
$
530,189
$
728,127
$
17.55
$
19.95
$ 14,051,074.7

$
5.6
$ 205,854.80
$
0.6
$
551,397
$
757,252
$
17.55
$
19.95
$ 14,613,117.7

$
5.6
$ 214,088.99
$
0.6
$
573,453
$
787,542
$
17.55
$
19.95
$ 15,197,642.4

$
5.6
$ 222,652.55
$
0.6
$
596,391
$
819,043
$
17.55
$
19.95
#########

13,510,649

14,051,075

14,613,118

15,197,642

15,805,548

YEAR 2005
6

41,349.760
1,033,744
0.70
0.40
0.28

43,003.750
1,075,094
0.70
0.40
0.28

44,723.900
1,118,098
0.70
0.40
0.28

46,512.856
1,162,821
0.70
0.40
0.28

48,373.371
1,209,334
0.70
0.40
0.28

$
$
$
$
$
$

1,075,094
17.55
19.95
725,688
20,623,193
21,348,881

$
$
$
$
$
$

1,118,098
17.55
19.95
754,716
21,448,120
22,202,836

$
$
$
$
$
$

1,162,821
17.55
19.95
784,904
22,306,045
23,090,950

$
$
$
$
$
$

1,209,334
17.55
19.95
816,301
23,198,287
24,014,588

$
$
$
$
$
$

1,257,708
17.55
19.95
848,953
24,126,219
24,975,171

$
$

4.3
4,622,903

$
$

4.3
4,807,819

$
$

4.3
5,000,132

$
$

4.3
5,200,137

$
$

4.3
5,408,143

16,725,978

17,395,017

18,090,818

18,814,450

19,567,028

$ 37,925,855 $ 43,993,992 $ 51,033,031 $ 59,198,316 $ 68,670,046

$
83,781 $
87,132 $
90,617 $
94,242 $
98,011
$
2,159 $
2,202 $
2,246 $
2,291 $
2,337
$
2,391 $
2,414 $
2,439 $
2,463 $
2,488
$ 38,014,185 $ 44,085,741 $ 51,128,333 $ 59,297,312 $ 68,772,882
$ (21,288,208) $ (26,690,724) $ (33,037,515) $ (40,482,861) $ (49,205,854)
$ (21,288,208) $ (26,690,724) $ (33,037,515) $ (40,482,861) $ (49,205,854)

$ (21,288,208) $ (26,690,724)
$ 16,437,770 $ 17,095,281
$ 16,437,770 $ 17,095,281
$
$
$ (21,288,208) $ (26,690,724)

$ (33,037,515) $ (40,482,861)
$ 17,779,092 $ 18,490,256
$ 17,779,092 $ 18,490,256
$
$
$ (33,037,515) $ (40,482,861)

$ (49,205,854)
$ 19,229,866
$ 19,229,866
$
$ (49,205,854)

$ (19,599,553) $ (24,170,678) $ (29,427,765) $ (35,468,476) $ (42,404,262)

$
5.6
$ 231,558.66
$
0.6
$
620,246
$
851,805
$
17.55
$
19.95
#########

$
5.6
$ 240,821.00
$
0.6
$
645,056
$
885,877
$
17.55
$
19.95
#########

$
5.6
$ 250,453.84
$
0.6
$
670,859
$
921,312
$
17.55
$
19.95
#########

$
5.6
$ 260,472.00
$
0.6
$
697,693
$
958,165
$
17.55
$
19.95
#########

$
5.6
$ 270,890.88
$
0.6
$
725,601
$
996,491
$
17.55
$
19.95
#########

16,437,770

17,095,281

17,779,092

18,490,256

19,229,866

10

50,308.305
1,257,708
0.70
0.40
0.28

11

52,320.638
1,308,016
0.70
0.40
0.28

12

54,413.463
1,360,337
0.70
0.40
0.28

$
$
$
$
$
$

1,308,016
17.55
19.95
882,911
25,091,267
25,974,178

$
$
$
$
$
$

1,360,337
17.55
19.95
918,227
26,094,918
27,013,145

$
$
$
$
$
$

1,414,750
17.55
19.95
954,956
27,138,715
28,093,671

$
$

4.3
5,624,469

$
$

4.3
5,849,447

$
$

4.3
6,083,425

20,349,710

21,163,698

22,010,246

$ 79,657,254 $ 92,402,414 $
$
101,932 $
106,009 $
$
2,384 $
2,431 $
$
2,512 $
2,538 $
$ 79,764,082 $ 92,513,393 $
$ (59,414,372) $ (71,349,695) $
$ (59,414,372) $ (71,349,695) $

107,186,801
110,249
2,480
2,563
107,302,093
(85,291,847)
(85,291,847)

$ (59,414,372) $ (71,349,695)
$ 19,999,061 $ 20,799,023
$ 19,999,061 $ 20,799,023
$
$
$ (59,414,372) $ (71,349,695)

(85,291,847)
21,630,984
21,630,984
(85,291,847)

$
$
$
$
$

$ (50,362,313) $ (59,487,770) $

(69,946,261)

$
5.6
$ 281,726.51
$
0.6
$
754,625
$
1,036,351
$
17.55
$
19.95
#########

$
5.6
$ 292,995.57
$
0.6
$
784,810
$
1,077,805
$
17.55
$
19.95
#########

$
5.6
$
304,715.39
$
0.6
$
816,202
$
1,120,917
$
17.55
$
19.95
$ 21,630,984.01

19,999,061

20,799,023

21,630,984

NetFlix.com
Assumptions
NetFlix purch cost per DVD
Paid subscription (monthly)
Free trial months
the number of DVDs for first subscription month
DVDs watched per month
Shipping cost (RT) per DVD
NetFlx purtust t DVD stock per subscriber
New release percentage
New release expire percentage

New Subscriber Model

Month
Subsription status
Revenue
Shipping (initial stock)
Shipping (Movies watched)
Total shipping
Purchase DVDs (initial stock)
Purchase DVDs (new releases)
Total DVD CAPEX
new release
Net revenue

ANNUAL DISCOUNT RATE

MONTHLY DISCOUNT RATE

PROB-M-1
PROB-M-6
PROB-Y-5
EXPACTED VALUE
EXP-VALU-YEARLY
MONTHLY PV
YEARLY-PV

$ 17.55
$ 20.00
1
4
4.3
$ 1.00
5.6
20%
10%

M1
Paid
4.00
4.30
8.30
98.28
98.28
88.45
(106.58)

M2
Paid
20.00

M3
Paid
20.00

4.30
4.30

4.30
4.30

9.83
9.83

9.83
9.83

5.87

5.87

20%
0.02

30%
42%
28%

1
(106.58)
(106.58)
(106.58)
(106.58)
-104.8328
39.5340

2
88.45
5.87
5.87
30.65
29.6494

1.666667

M4
Paid
20.00

M5
Paid
20.00

M6
Paid
20.00

M7
Paid
20.00

M8
Paid
20.00

M9
Paid
20.00

M10
Paid
20.00

M11
Paid
20.00

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

5.87

5.87

5.87

5.87

5.87

5.87

5.87

5.87

10

5.87
5.87
4.11

5.87
5.87
4.11

5.87
5.87
4.11

5.87
5.87
4.11

88.45
5.87
38.79

5.87
1.64

5.87
1.64

5.87
1.64

3.9115

3.8474

3.7843

3.7223

34.5553

1.4405

1.4169

1.3937

YEAR 2000
6

Y1
Paid
20.00

Y2
Paid
20.00

Y3
Paid
20.00

Y4
Paid
20.00

Y5
Paid
20.00

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

4.30
4.30

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

9.83
9.83

5.87

5.87

5.87

5.87

5.87

(12.48)
-14.9731

11

5.87
1.64

12

5.87
1.64
(12.48)
1.3708
1.3483
-18.3922

YEAR 2001
6

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.6172

1.5907

1.5646

1.5390

1.5137

1.4889

YEAR 2001
7

10

11

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.4645

1.4405

1.4169

1.3937

1.3708

12

5.87
1.64
19.73
1.3483
17.7489

5.87
1.64

5.87
1.64

1.6172

1.5907

5.87
1.64

5.87
1.64

5.87
1.64

1.5646

1.5390

1.5137

YEAR 2002
6

10

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.4889

1.4645

1.4405

1.4169

1.3937

11

5.87
1.64
1.3708

12

5.87
1.64
19.73
1.3483
17.7489

YEAR 2003
6

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.6172

1.5907

1.5646

1.5390

1.5137

1.4889

YEAR 2003
7

10

11

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.4645

1.4405

1.4169

1.3937

1.3708

12

5.87
1.64
19.73
1.3483
17.7489

5.87
1.64

5.87
1.64

1.6172

1.5907

5.87
1.64

5.87
1.64

5.87
1.64

1.5646

1.5390

1.5137

YEAR 2004
6

10

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.4889

1.4645

1.4405

1.4169

1.3937

11

5.87
1.64
1.3708

12

5.87
1.64
19.73
1.3483
17.7489

YEAR 2005
6

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.6172

1.5907

1.5646

1.5390

1.5137

1.4889

YEAR 2005
7

10

11

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

5.87
1.64

1.4645

1.4405

1.4169

1.3937

1.3708

12

88.45
24.77
42.85
20.3106
36.7111

Monthly Shipping

Initail Shipping
Total Shipping Cost

First Month
4.3
4
8.3

Cost Per DVD

17.55
DVD Per Subscriber 5.6
Total Cost

Over All Cost

One month leave

Six Months Leaves
Stay

Subscriber Growth Rate

2 Mont
3 Month
4Months
6Months
old Subscriber
Total Subscriber

98.28

106.58

30%
42%
28%

1
-106.58
-106.58
-106.58

2
79
5.9
5.9

3
5.9
5.9

10

11

5.9
5.9

5.9
5.9

5.9
5.9

79
5.9

5.9

5.9

5.9

5.9

12 Year 1

5.9

year2

65

Year3

65

Year 5

65

65