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Qwikster was a big blunder, but it never came close to actually killing Netflix. And now the company has taken steps to move even further away from the precipice where one huge mistake could prove fatal.
Here’s why the next Qwikster-style blunder won’t kill netflix
Here’s Why the Next Qwikster-Style Blunder Won’t Kill Netflix
Could Qwikster have killed Netflix?
badly with the ill-
The stock chart
won’t let investors
Was the company
ever in real danger?
The market pain sure was real!
Qwikster And the Plunging Netflix Stock (2011)
• Netflix CEO Reed Hastings
apologized and killed Qwikster
in the cradle.
• Subscriber growth took a hit,
and Netflix still walks on
• The real business damage?
Let’s have a look…
Sales never slowed down
Meanwhile, revenue soared…
Earnings? Mostly okay
… and earnings fell in 2012 but
hardly to disastrous levels
Netflix can control its costs
• Netflix could
• Marketing and
spring to mind.
Didn’t Netflix run out of cash, though?
Can you find the Qwikster episode on this
chart of Netflix cash and debt balances?
More cash, more debt. What’s the point?
Why raise debt, only to boost cash balances?
• With no debt and minimal cash on hand, the next
misstep could actually kill the company.
• This is the safety net under Netflix’s high-wire
international growth act.
• And interest rates are at historically low levels. Why not
take advantage while rates are affordable?
Netflix debt vs. interest rates
Strike while the
iron is hot
Great content doesn’t come cheap
It’s all about high-quality content.
• If Netflix wants to win customers over from TV networks and other online video
services, top-notch content is the way to do it.
• The company’s original titles have won Emmys, Golden Globes, and even an Oscar
– although buying the Oscar winner isn’t quite the same as producing a hit from
• An exclusive license from Dreamworks Animation (NYSE: DWA) joins up with
another exclusive contract with Walt Disney (NYSE: DIS) in 2016.
• Quality content wins, both in domestic and overseas markets.
• You have to spend money now to make money later. Netflix knows this, and acts
How borrowed money is helping Netflix today
Taking on debt gave Netflix some extra breathing room – and flexibility to try new strategies.
• Today, the company spends nearly 10% of its content budget on original shows, like
Orange Is the New Black and House of Cards.
• Domestic growth is back on track: U.S. subscriber counts increased by 35% over the last 4
• International subscribers nearly doubled year-over-year, growing by 85%.
• This week, Netflix announced another 6 European markets, including Germany and France.
• Without debt-boosted cash reserves, investors would worry about running out of cash if
something goes wrong.
• As is, the company can afford to make a few mistakes along the way.
The $2.2 Trillion War For
Your Living Room Begins