NetFlix.com, Inc.

Harvard Business School Case 201-037

Case Software 201-705
Copyright 2000 by the President and Fellows of Harvard College
This case was prepared as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.

Exhibit 1
Income Statements for NetFlix.com, Inc.
Year Ended December 13,
1998

1999

Revenues

1,339

5,006

Cost of revenue

1,311

4,373

Gross profit
Operating expenses:
Product development
Sales and marketing
General and administrative

28

633

3,857
4,815
1,358

7,413
16,424
2,085

Stock-based compensation

1,151

4,742

11,181

30,664

Operating loss
Other income (expense)
Interest and other income, net

(11,153)

(30,031)

114

924

Interest expense, net

Net loss

(42)
(11,081)

(738)
(29,845)

Total operating expenses

Source:

Company reports.

Exhibit 2
Balance Sheets for NetFlix.com, Inc.
As of December 31,
1998
1999
Assets
Current assets
Cash and cash equivalents
Short-term investments
Prepaids and other current assets
Total current assets
Rental library, net
Property and equipment, net
Deposits and other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Notes payable
Current portion of capital lease obligations
Accounts payable
Accrued liabilities
Deferred revenue
Total current liabilities
Capital lease obligations
Note payable
Total liabilities
Mandatorily redeemable conv. pref stock
Shareholders equity (deficit):
Convertible preferred stock
Common stock
Additional paid-in capital
Deferred stock-based compensation
Accumulated deficit
Total shareholders' equity (deficit)
Total liabilities and shareholders' equity (deficit)
Source:

Company reports.

1,061
635
1,696
2,011
1,062
80
4,849

14,198
6,322
720
21,240
8,695
4,499
339
34,773

1,000
579
3,063
1,640
118
6,400
172
6,572
6,321

625
571
5,334
3,211
471
10,212
811
3,959
14,982
51,819

4
3
8,100
(4,711)
(11,440)
(8,044)
4,849

4
7
16,087
(6,841)
(41,285)
(32,028)
34,773

Exhibit 3
Quarterly Operating Results for NetFlix.com, Inc.

March 31
1999
Revenues
Cost of revenue
Gross profit
Operating expenses
Product development
Sales and marketing
General and administrative
Stock-based compensation
Total operating expenses
Operating loss
Interest and other income, net
Interest expense, net
Net loss
Source:

Company reports.

Quarter Ended
June 30
Sept. 30
1999
1999

Dec. 31
1999

847
663
184

854
670
184

1,170
1,276
(106)

2,135
1,764
371

1,324
1,954
532
787
4,597
(4,413)
74
(165)
(4,504)

1,533
2,930
553
1,203
6,219
(6,035)
112
(129)
(6,052)

2,106
4,994
404
1,500
9,004
(9,110)
351
(149)
(8,908)

2,450
6,546
596
1,252
10,844
(10,473)
387
(295)
(10,381)

Exhibit 4
Historical and projected unit sales, average unit price, and household penetration rates for
videocassette recorders and digital video disc players during the first five years after introduction*

Annual Sales

Millions of Units
6
5

Videocassette
Recorders (VCR)

Digital Video Disc

Players (DVD)

3
2
1
0
0

Years since introduction

Household Penetration Rates and Average Unit Price
Percent of Households
0.16

900

0.14

800
700

0.12

600

0.1

500

0.08
0.06

VCR Penetration

400

DVD Penetration

300

VCR Unit Price

0.04

200

DVD Unit Price

0.02

100
Dollars0

0
0

2
3
Years since introduction

* Unit sales are sales to dealers. Consumer sales are estimated to be about 60% of dealer sales.
For DVD players, years 3, 4, and 5 are forecasted values.

Source:

Consumers Electronics Manufacturer's Association.

900
800
700
600
500
400
300
200
100
Dollars0

Exhibit 5
Rental Library (thousands of dollars)

As of December 31,
1998
1999
Rental library
Less accumulated depreciation
Rental library, net

Source:

Company Reports.

2,186
(175)
2,011

10,882
(2,187)
8,695