Running head: Netflix 1
Netflix Case Analysis
Question 1: Using the case data and the CLV formulation provided in Chapter 10,
"Customer Lifetime Value," estimate the lifetime value of a Netflix customer for each
quarter. For further assistance in answering this question, refer to computational
instructions 1a., 1b., and 1c. on page 152 of the text.
For this question, the formula for calculating CLV is provided in the textbook and is
CLV = M*((1+d))/(1+d-r)) where M is gross margin per customer, d is a discount rate (10% in
this case) and r is the retention rate.
M = (total revenue - cost of goods sold)
Please note for M, revenues were given. For the cost of goods sold or cost of revenues, I used the
cost of subscription + fulfillment expenses + technology and development. Although the cost of
m
revenues was provided in the supplementary data, it only included the cost of subscription +
er as
fulfillment expenses. However, at the very ending, we see that three cells are considered as the
co
cost of revenues from financials.
eH w
Retention Rate (r) = ((E-N)/S))*100
o.
E = number of customers at the end of the period
rs e
N = number of customers acquired during the period
ou urc
S = number of customers at the start of the period
The table below provides the CLV for all quarters given in the excel. I have also embedded the
excel to provide the formulas I used.
o
aC s
vi y re
Quarter CLV
Jun-01 2422.5779
Sep–01 -2360.911
Dec–01 6679.2434
ed d
Mar–02 -3548.312
ar stu
Jun-02 20073.403
Sep-02 25456.71
Dec–02 40311.326
is
Mar–03 33689.362
Jun-03 44102.468
Th
Sep-03 52152.214
Dec–03 52702.253
Mar–04 64184.82
sh
Jun-04 113507.83
Sep-04 102562.31
Dec–04 172286.7
Mar–05 100213.78
Jun-05 153903.61
Sep-05 134975.13
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, NETFLIX 2
Dec–05 187856.9
Mar–06 223084.45
Jun-06 307814.02
Sep-06 289697.07
Dec–06 351900.58
Mar–07 388949.26
Jun-07 463252
Sep-07 342897.77
Dec–07 332532.51
Mar–08 336106.74
Jun-08 413379.51
Sep-08 354496.99
Dec–08 349734.1
Mar–09 401642.19
Jun-09 511275.01
m
Sep-09 444246.08
er as
Dec–09 442695.39
co
Mar–10 524929.17
eH w
Jun-10 699261.98
o.
Sep-10 590012.27
Dec–10 rs e 523879.52
ou urc
Mar–11 570823.38
Jun-11 987207.09
Sep-11 875151.5
o
Dec-11 703858.44
aC s
The figure below represents the data from the table above in a visual format.
vi y re
Figure 1: CLV Trends
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000784424693 from CourseHero.com on 06-20-2021 20:48:24 GMT -05:00
https://www.coursehero.com/file/53735679/Individual-Case-3-Netflixdocx/
Netflix Case Analysis
Question 1: Using the case data and the CLV formulation provided in Chapter 10,
"Customer Lifetime Value," estimate the lifetime value of a Netflix customer for each
quarter. For further assistance in answering this question, refer to computational
instructions 1a., 1b., and 1c. on page 152 of the text.
For this question, the formula for calculating CLV is provided in the textbook and is
CLV = M*((1+d))/(1+d-r)) where M is gross margin per customer, d is a discount rate (10% in
this case) and r is the retention rate.
M = (total revenue - cost of goods sold)
Please note for M, revenues were given. For the cost of goods sold or cost of revenues, I used the
cost of subscription + fulfillment expenses + technology and development. Although the cost of
m
revenues was provided in the supplementary data, it only included the cost of subscription +
er as
fulfillment expenses. However, at the very ending, we see that three cells are considered as the
co
cost of revenues from financials.
eH w
Retention Rate (r) = ((E-N)/S))*100
o.
E = number of customers at the end of the period
rs e
N = number of customers acquired during the period
ou urc
S = number of customers at the start of the period
The table below provides the CLV for all quarters given in the excel. I have also embedded the
excel to provide the formulas I used.
o
aC s
vi y re
Quarter CLV
Jun-01 2422.5779
Sep–01 -2360.911
Dec–01 6679.2434
ed d
Mar–02 -3548.312
ar stu
Jun-02 20073.403
Sep-02 25456.71
Dec–02 40311.326
is
Mar–03 33689.362
Jun-03 44102.468
Th
Sep-03 52152.214
Dec–03 52702.253
Mar–04 64184.82
sh
Jun-04 113507.83
Sep-04 102562.31
Dec–04 172286.7
Mar–05 100213.78
Jun-05 153903.61
Sep-05 134975.13
This study source was downloaded by 100000784424693 from CourseHero.com on 06-20-2021 20:48:24 GMT -05:00
https://www.coursehero.com/file/53735679/Individual-Case-3-Netflixdocx/
, NETFLIX 2
Dec–05 187856.9
Mar–06 223084.45
Jun-06 307814.02
Sep-06 289697.07
Dec–06 351900.58
Mar–07 388949.26
Jun-07 463252
Sep-07 342897.77
Dec–07 332532.51
Mar–08 336106.74
Jun-08 413379.51
Sep-08 354496.99
Dec–08 349734.1
Mar–09 401642.19
Jun-09 511275.01
m
Sep-09 444246.08
er as
Dec–09 442695.39
co
Mar–10 524929.17
eH w
Jun-10 699261.98
o.
Sep-10 590012.27
Dec–10 rs e 523879.52
ou urc
Mar–11 570823.38
Jun-11 987207.09
Sep-11 875151.5
o
Dec-11 703858.44
aC s
The figure below represents the data from the table above in a visual format.
vi y re
Figure 1: CLV Trends
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000784424693 from CourseHero.com on 06-20-2021 20:48:24 GMT -05:00
https://www.coursehero.com/file/53735679/Individual-Case-3-Netflixdocx/
