Business Analysis of Netflix

 Analyze Historical Performance, Strategic Priorities, And Business Improvement Opportunities of Netflix

Business Overview

Netflix, Inc., an Internet television network, engages in the Internet delivery of television (TV) shows and movies on various Internet-connected screens. It operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD. The company offers TV shows and movies, including original series, documentaries, and feature films. It offers members with the ability to receive streaming content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes, and mobile devices. The company also provides DVDs-by-mail membership services. As of April 28, 2017, it had approximately 100 million members in 190 countries. Netflix, Inc. was founded in 1997 and is headquartered in Los Gatos, California.

Netflix

Netflix


R&P Rank: 322
Sector: Technology
Industry:Internet
H.Q Location:California
Website: www.netflix.com
Company Address:
100 WINCHESTER CIRCLE, ., LOS GATOS CA 95032
Ph:408-540-3700

Business Analysis of Netflix

The Technology Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Netflix compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Netflix to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.

Here is the performance snapshot of Netflix with an interactive chart.

  1. Revenue Growth: Netflix reported a revenue growth of 30.3% year-on-year during 2016. Internet Industry grew at 23.3% in the same period
  2. COGS share of Revenues: As a percentage of revenue, Netflix spent 68.3% of its total revenues on COGS. Internet industry average (COGS share of revenue) in the same period was 46.3%
  3. R&D share of Revenues: As a percentage of revenue, Netflix spent 9.6% of its total revenues on R&D. Internet industry average R&D spending in the same period was 12.6%
  4. SG&A share of Revenues: As a percentage of revenue, Netflix spent 17.8% of its total revenues on Sales, Marketing, and General Administration (SG&A). Internet industry average SG&A spending in the same period was 20.2%
  5. Inventory share of Revenues: Netflix Inventory share of Revenues details are not available because either company does not share the data or we do not have it
  6. Accounts Payable share of Revenues: As a percentage of revenue, Netflix invested 44.7% of its total revenues on Accounts Payable (A/P) Internet industry average Accounts Payable investment in the same period was 18.0%
  7. Accounts Receivable share of Revenues: Netflix Accounts Receivable share of Revenues details are not available because either company does not share the data or we do not have it
  8. PP&E share of Revenues: As a percentage of revenue, Netflix invested 2.8% of its total revenues on Property, Plants, and Equipments (PP&E). Internet industry average PPE investment in the same period was 24.0%
  9. Intangibles share of Revenues: As a percentage of revenue, Netflix invested 124.6% of its total revenues on Intangibles. Internet industry average Intangibles investment in the same period was 32.7%
  10. Net Margins: Netflix Net Margins in the year 2016 were 2.1%. Internet industry average Net Margins in the same period were 12.2%

Sector and Industry Association of Netflix

For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.

Netflix is associated with Technology Sector and Internet Industry.

Technology sector is comprised of the following industries: Computers Systems and Peripherals; Software; Semiconductor; IT Consulting and Outsourcing Services; Networking Equipment and Services; Internet; Other. The definitions for each of the industries is as follows:

  • Computers Systems and Peripherals industry includes companies primarily engaged in manufacturing of personal computers, servers, mainframes, workstations, and other computer accessories and peripherals such as storage drives, mice, keyboards and printers. It also includes manufacturers of mobile phones and tablets.
  • Software industry includes businesses providing software products such as operating systems, productivity suites, enterprise software, data and analysis software, advertising and marketing software, engineering and manufacturing software, networking software, and IT management software. It also includes companies providing industry-specific software focused on different sectors such as Financials, Automotive, Telecom, Utilities, Travel, Real Estate, Media, and Publishing.
  • Semiconductor industry includes companies primarily engaged in manufacturing and distribution of semiconductor products such as microprocessors, chipsets, motherboards, flash memory, and wired and wireless connectivity products. It also includes companies that provide semiconductor equipment and services to the semiconductor industry.
  • IT Consulting and Outsourcing Services industry includes companies primarily engaged in providing information technology consulting and outsourcing services to other businesses. The services include IT consulting, systems integration, application development and management, IT infrastructure management, and network operations management.
  • Networking Equipment and Services industry includes companies primarily engaged in manufacturing and distribution of networking and communications equipment for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The key products include routers and switches for local and wide-area networks, cable modems, teleconferencing equipment, and wireless access points.
  • Internet industry includes Internet-based businesses providing products and services such as search engines, social networking, web hosting, email, domain name registration, and eCommerce. It also includes industry information/services portals focused on different sectors such as Financials, Automotive, Travel, Health, Real Estate, Media, and Publishing.
  • Other industry includes companies providing products such as photocopiers, fax machines, point of sale machines, audio/video technologies, and video games. It also includes technology companies that are not part of other six technology industries.

Industry Ranking of Netflix

With $8.8 billion revenues, Netflix ranked number 7 of all the companies in the US Internet industry. There were a total of 74 public companies in the US Internet industry that had revenues greater than $50 million during 2016.

The top-10 companies in the US Internet industry by revenues during 2016 were:

  1. Amazon ($136 billion)
  2. Alphabet ($90.3 billion)
  3. Facebook ($27.6 billion)
  4. PayPal ($10.8 billion)
  5. Priceline Group ($10.7 billion)
  6. eBay ($9 billion)
  7. Netflix ($8.8 billion)
  8. Expedia ($8.8 billion)
  9. Yahoo ($5.2 billion)
  10. Wayfair ($3.4 billion)

Business Model Analysis (BMA) Framework

We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.

Next Steps

  • Conduct a holistic benchmarking; to identify and target additional sources of value
  • Get in touch with us to learn more about Business Model Analysis Framework
  • Get free data, charts, and analysis of Netflixand its peers on select key performance indicators by clicking the reports provided below

Industry Peers and Competitors of netflix

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Priceline Group (PCLN) Business Analysis – Analyze Historical Performance, Strategic Priorities,...

Priceline Group Inc. with $11 billion revenues in the year 2016 was the number 5 Internet company. Read this report to know the top competitors of Priceline Group and identify growth and cost optimization opportunities of Priceline Group

eBay (EBAY) Business Analysis – Analyze Historical Performance, Strategic Priorities, And...

Ebay Inc with $9 billion revenues in the year 2016 was the number 6 Internet company. Read this report to know the top competitors of eBay and identify growth and cost optimization opportunities of eBay

Expedia (EXPE) Business Analysis – Analyze Historical Performance, Strategic Priorities, And...

Expedia, Inc. with $9 billion revenues in the year 2016 was the number 8 Internet company. Read this report to know the top competitors of Expedia and identify growth and cost optimization opportunities of Expedia

Yahoo (YHOO) Business Analysis – Analyze Historical Performance, Strategic Priorities, And...

Yahoo Inc with $5 billion revenues in the year 2016 was the number 9 Internet company. Read this report to know the top competitors of Yahoo and identify growth and cost optimization opportunities of Yahoo

Wayfair (W) Business Analysis – Analyze Historical Performance, Strategic Priorities, And...

Wayfair Inc. with $3 billion revenues in the year 2016 was the number 10 Internet company. Read this report to know the top competitors of Wayfair and identify growth and cost optimization opportunities of Wayfair

Revenues Analysis

Netflix (NFLX) Revenues And Revenue Growth From 2012 To 2016

This report provides the last five years revenues and revenue growth of Netflix Inc (NFLX) from 2012 to 2016. Netflix generated a total of $8.8 billion revenues during 2016. Netflix reported a revenue growth of 30.3% year-over-year during 2016. The revenues and the revenue growth correspond to the fiscal year ending in December.

Netflix (NFLX) Revenues And Revenue Growth From 2002 To 2016

This report provides the last fifteen years revenues and revenue growth of Netflix Inc (NFLX) from 2002 to 2016. Netflix generated a total of $8.8 billion revenues during 2016. Netflix reported a revenue growth of 30.3% year-over-year during 2016. The revenues and the revenue growth correspond to the fiscal year ending in December.

Netflix (NFLX) Revenue Growth Comparison With Industry Growth From 2012 To...

This report provides a comparison of Netflix Inc (NFLX) revenue growth with Internet industry growth during the last five years from 2012 to 2016. Netflix reported a revenue growth of 30.3% year-over-year during 2016. The Internet industry growth was 23.3% year-over-year during 2016. Netflix growth was faster than the industry during 2016.

Profit Analysis

Netflix (NFLX) Net Profit And Net Margin From 2012 To 2016

This report provides the last five years net profit and net margin of Netflix Inc (NFLX) from 2012 to 2016. Netflix reported a total net income of $186.7 million during 2016. Netflix generated a total of $8.8 billion revenues during 2016. Netflix net profit margin was 2.1% during 2016. The net profit and the net profit margin correspond to the fiscal year ending in December.