Using the case data (attached) and the CLV?formulation provided in the textbook and slide decks, estimate the lifetime value of a Netflix customer
- Using the case data (attached) and the CLV formulation provided in the textbook and slide decks, estimate the lifetime value of a Netflix customer for each quarter.
- How do you expect industry changes and technology advances to affect Netflix? Are these expectations validated by the trend in Netflix’s customer acquisition, customer retention, customer revenue, and CLV?
Title Page
| This spreadsheet supports STUDENT analysis of the case “Netflix, Inc.: The Customer Strikes Back” (UVA-M-0834). | |
| This spreadsheet was prepared by Rajkumar Venkatesan, Bank of America Research Associate Professor of Business Administration. Copyright © 2015 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail [email protected] No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. | |
| Dec. 7, 2015 | |
Base Data for CLV
| NETFLIX, INC.: THE CUSTOMER STRIKES BACK | ||||||||||||||||||||||||||||||||||||||||||||
| Data for Calculating Customer Lifetime Value | ||||||||||||||||||||||||||||||||||||||||||||
| All values in thousands except margin per subscriber and subscriber acquisition cost. | ||||||||||||||||||||||||||||||||||||||||||||
| Mar-01 | Jun-01 | Sep-01 | Dec-01 | Mar-02 | Jun-02 | Sep-02 | Dec-02 | Mar-03 | Jun-03 | Sep-03 | Dec-03 | Mar-04 | Jun-04 | Sep-04 | Dec-04 | Mar-05 | Jun-05 | Sep-05 | Dec-05 | Mar-06 | Jun-06 | Sep-06 | Dec-06 | Mar-07 | Jun-07 | Sep-07 | Dec-07 | Mar-08 | Jun-08 | Sep-08 | Dec-08 | Mar-09 | Jun-09 | Sep-09 | Dec-09 | Mar-10 | Jun-10 | Sep-10 | Dec-10 | Mar-11 | Jun-11 | Sep-11 | Dec-11 | |
| Revenues | $ 17,057 | $ 18,359 | $ 18,878 | $ 21,618 | $ 30,527 | $ 36,360 | $ 40,731 | $ 45,188 | $ 55,669 | $ 63,187 | $ 72,202 | $ 81,185 | $ 100,370 | $ 120,321 | $ 141,644 | $ 138,276 | $ 152,446 | $ 164,027 | $ 172,740 | $ 193,000 | $ 224,126 | $ 239,351 | $ 255,950 | $ 277,233 | $ 305,320 | $ 303,693 | $ 293,972 | $ 302,355 | $ 326,183 | $ 337,614 | $ 341,269 | $ 359,595 | $ 394,098 | $ 408,509 | $ 423,120 | $ 444,542 | $ 493,665 | $ 519,819 | $ 553,219 | $ 595,922 | $ 706,274 | $ 769,714 | $ 799,152 Shively, Daniel: Shively, Daniel: total domestic from shareholder letter |
$ 846,587 |
| Cost of subscription | 9,476 | 10,776 | 9,667 | 14,811 | 14,872 | 17,779 | 21,147 | 23,246 | 29,928 | 35,148 | 38,326 | 44,334 | 56,444 | 69,604 | 71,130 | 76,223 | 93,986 | 99,957 | 97,878 | 101,967 | 126,220 | 128,605 | 135,210 | 142,586 | 165,189 | 166,838 | 163,707 | 168,673 | 187,156 | 193,769 | 186,573 | 193,635 | 215,299 | 224,858 | 233,091 | 231,598 | 259,560 | 265,387 | 292,406 | 336,756 | 376,992 | 428,203 | 471,823 Shively, Daniel: Shively, Daniel: total cost of revenue from financials |
512,578 |
| Fulfillment expenses | 2,886 | 3,589 | 3,283 | 3,785 | 4,155 | 4,854 | 4,908 | 5,449 | 6,383 | 7,221 | 8,322 | 9,348 | 10,790 | 14,373 | 8,322 | 23,124 | 16,694 | 17,560 | 15,013 | 21,495 | 22,045 | 21,974 | 23,583 | 26,762 | 29,783 | 29,855 | 30,746 | 31,377 | 35,649 | 36,318 | 37,923 | 39,211 | 43,969 | 44,385 | 42,183 | 43,888 | 47,602 | 49,547 | 52,063 | 54,034 | 61,159 | 61,775 | 64,794 Shively, Daniel: Shively, Daniel: total cost of revenue from financials |
62,577 |
| Technology and development | 3,857 | 4,896 | 4,463 | 4,802 | 3,181 | 3,518 | 3,966 | 3,960 | 4,183 | 4,123 | 4,738 | 4,840 | 5,039 | 5,652 | 4,738 | 7,477 | 7,155 | 7,513 | 6,325 | 9,949 | 11,206 | 12,043 | 8,955 | 16,175 | 15,715 | 18,907 | 18,216 | 18,557 | 20,516 | 22,670 | 23,368 | 24,052 | 24,200 | 27,119 | 30,014 | 33,209 | 37,399 | 37,863 | 42,108 | 45,959 | 50,905 | 57,865 | 69,480 Shively, Daniel: Shively, Daniel: total cost of revenue from financials |
80,783 |
| Paid subscribers: end of period | 708 | 1,416 | 6,676 | 6,609 | 6,845 | 7,326 | 8,102 | 8,235 | 8,490 | 9,164 | 10,116 | 10,375 | 10,835 | 11,892 | 13,622 | 14,577 | 15,863 | 18,268 | 21,405 | 23,263 | 22,843 Shively, Daniel: Shively, Daniel: from quarterly shareholder letter |
24,395 | ||||||||||||||||||||||
| Paid subscribers: end of last period | 633 | 1,242 | 6,154 | 14,577 | 15,863 | 18,268 | 21,405 | 23,263 Shively, Daniel: Shively, Daniel: from quarterly shareholder letter |
22,843 | |||||||||||||||||||||||||||||||||||
| Number of paid subscribers | 303 | 306 | 315 | 456 | 562 | 598 | 671 | 857 | 1,009 | 1,055 | 1,172 | 1,224 | 1,631 | 1,933 | 2,080 | 2,308 | 2,687 | 2,998 | 3,266 | 3,725 | 4,380 | 4,876 | 5,253 | 5,823 | 6,415 | 6,643 | 6,727 | 7,086 | 7,714 | 8,169 | 8,363 | 8,827 | 9,640 | 10,246 | 10,605 | 11,364 | 12,757 | 14,100 | 15,220 | 17,066 | 19,837 | 22,334 | 23,053 | 23,619 |
| Gross subscriber additions | 186 | 88 | 107 | 186 | 312 | 236 | 277 | 315 | 417 | 327 | 383 | 444 | 760 | 583 | 590 | 783 | 945 | 707 | 921 | 1,156 | 1,377 | 1,070 | 1,310 | 1,493 | 1,520 | 1,028 | 1,297 | 1,495 | 1,862 | 1,384 | 1,528 | 2,085 | 2,413 | 1,936 | 2,180 | 2,803 | 3,492 | 3,059 | 4,101 | 5,649 | 6,299 | 5,315 | 4,714 Shively, Daniel: Shively, Daniel: from quarterly shareholder letter |
5,216 |
| Cost of revenues | $ 12,362 | $ 14,365 | $ 12,950 | $ 18,596 | $ 19,027 | $ 22,633 | $ 26,055 | $ 28,695 | $ 36,311 | $ 42,369 | $ 46,648 | $ 53,682 | $ 67,234 | $ 83,977 | $ 79,452 | $ 99,347 | $ 110,680 | $ 117,517 | $ 112,891 | $ 123,462 | $ 148,265 | $ 150,579 | $ 158,793 | $ 169,348 | $ 194,972 | $ 196,693 | $ 194,453 | $ 200,050 | $ 222,805 | $ 230,087 | $ 224,496 | $ 232,846 | $ 259,268 | $ 269,243 | $ 275,274 | $ 275,486 | $ 307,162 | $ 314,934 | $ 344,469 | $ 390,790 | $ 438,151 | $ 489,978 | $ 536,617 | $ 575,155 |
| Subscriber acquisition cost (domestic after March 2011) | $ 25.15 | $ 46.48 | $ 32.19 | $ 33.24 | $ 25.44 | $ 34.13 | $ 33.57 | $ 33.31 | $ 31.67 | $ 30.45 | $ 31.81 | $ 32.89 | $ 35.12 | $ 35.12 | $ 38.18 | $ 49.39 | $ 37.89 | $ 37.25 | $ 35.69 | $ 49.59 | $ 38.47 | $ 43.95 | $ 45.32 | $ 61.66 | $ 47.46 | $ 44.02 | $ 37.91 | $ 34.60 | $ 29.50 | $ 28.95 | $ 32.21 | $ 26.67 | $ 25.79 | $ 23.88 | $ 26.86 | $ 25.23 | $ 21.54 | $ 24.37 | $ 19.81 | $ 11.13 | $ 14.38 | $ 15.09 | $ 15.25 Shively, Daniel: Shively, Daniel: from quarterly shareholder letter |
$ 15.62 |
| Market capitalization | $ 302,016 | $ 214,069 | $ 247,130 | $ 467,582 | $ 612,152 | $ 813,092 | $ 1,354,507 | $ 1,758,750 | $ 1,876,356 | $ 806,512 | $ 650,186 | $ 574,670 | $ 876,721 | $ 1,402,472 | $ 1,481,697 | $ 1,609,235 | $ 1,848,566 | $ 1,552,548 | $ 1,774,306 | $ 1,594,591 | $ 1,311,501 | $ 1,727,984 | $ 1,727,984 | $ 2,132,708 | $ 1,614,020 | $ 1,825,626 | $ 1,759,385 | $ 2,510,605 | $ 2,373,577 | $ 2,522,867 | $ 2,944,010 | $ 3,853,800 | $ 5,688,697 | $ 8,473,995 | $ 9,273,797 | $ 12,487,968 | $ 13,800,682 | $ 5,947,128 | $ 3,838,597 | |||||
| Share price | 13.99 | 9.70 | 11.01 | 20.35 | 25.55 | 33.56 | 54.69 | 34.12 | 36.00 | 15.42 | 12.33 | 10.85 | 16.41 | 25.99 | 27.06 | 28.99 | 27.21 | 22.78 | 25.86 | 23.19 | 19.39 | 26.62 | 26.62 | 34.65 | 26.07 | 30.88 | 29.89 | 42.92 | 41.34 | 46.17 | 55.09 | 73.74 | 108.65 | 162.16 | 175.7 | 237.78 | 262.69 | 113.27 | 69.29 | |||||
| Outstanding shares | 21,588 | 22,069 | 22,446 | 22,977 | 23,959 | 24,228 | 24,767 | 51,546 | 52,121 | 52,303 | 52,732 | 52,965 | 53,426 | 53,962 | 54,756 | 55,510 | 67,937 | 68,154 | 68,612 | 68,762 | 67,638 | 64,913 | 64,913.00 | 61550.00 | 61,911 | 59,120 | 58,862 | 58,495 | 57,416 | 54,643 | 53,440 | 52,262 | 52,358 | 52,257 | 52,782 | 52,519 | 52,536 | 52,504 | 55,399 | |||||
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