2010-2012 Netflix Financials Essay

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The Evolution of the Netflix Empire
Netflix has quickly become a household name by saturating the market with a new age way to rent movies. Established in 1998, Netflix geared its business to provide consumers with quick and easy access to their favorite movies without the need to leave their homes. As the business developed and other popular sites, such as YouTube, began to gain popularity Netflix entered the market of streaming online content. During the infancy of their instant service Netflix still relied heavily on mailing DVDs to offer their customers a wider range of movies and TV shows. However, as their steaming library grew the mindset of the company began to shift. As they transitioned away from their mailing movies, key …show more content…
Following such a strong opening, the financials during 2011 show that the company decided to focus on growing the streaming side of the business. Investment in the DVD library dropped by 30% while investment in the streaming library increased by 471%. This counterintuitive shift in focus for the company signaled that there was clearly more in store behind the scenes that would ultimately send shockwaves through the company that would be evident in the financial statements in the latter half of the year.

One Fateful Decision
The second half of 2011 was disastrous for Netflix’s stockholders. Through 2010 and the first half of 2011, Netflix invested nearly ten times more in streaming content than DVD content ($1.2 billion vs. $165 million). This pattern of investment along with comments from the CEO, Reed Hastings, such as "DVD by mail may not last forever, but we want it to last as long as possible” made Netflix’s growth plans clear. On July 12th 2011, Netflix publically confirmed these plans and announced that it would spin off the DVD rental into its own business, called Qwikster. Under the two company proposal, customers who wanted to be able to rent DVDs and have access to streaming video would need to subscribe to each service/company individually, with a related increase in cost. To say that customers were not pleased with this plan would be a significant understatement. The decision was a public relations
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