Market Analysis of Netflix

Netflix, Inc. is a hugely popular, subscription-based international on-demand internet media streaming and flat rate DVD-by-mail service that was established in 1997 by its creators Marc Randolph and Reed Hastings in Scots Valley, California.  Beginning as a solely DVD-by-mail service in 1997, Netflix quickly grew in popularity in the US. On February 25, 2007, one decade after its founding, Netflix delivered its billionth DVD and quickly began making the transition to a structure that favored on-demand Internet streaming over DVD delivery. Today Netflix is headquartered in Los Gatos, California with more than 60 million subscribers in 50 countries and offices in 40 countries throughout North and South America, Europe, Australia, and Southeast Asia.

        I chose to invest in Netflix because I am a frequent patron to their services. Netflix is a service I believe in, and evidently my belief paid off with a return of more than 35%. I also felt confident in investing in Netflix because its stock prices had been steadily rising for several weeks. Netflix offers a service that is invaluable to many people. With on-demand media streaming, customers can watch whatever they like whenever they like without being at the mercy of the traditional station programming schedules.

        During the period in which I invested, individual stock prices were initially $414.08 per share. At the end of my investment period, prices were $559.06 per share making for a substantial gain; however in the middle of my investment period on April 17th, prices peaked at $571.55 per share.

        During my investment period, Netflix modified its subscription terms of service making the standard rate of $7.99 per month the cheapest rate with viewing capabilities on only two devices at any time. Originally this limit was four devices for all subscribers. Now viewing on four devices requires subscription to the premium rate at $10.99 per month. This change came along with the release of the first 2015 quarterly earnings report. Altering its subscription terms of service may have negatively affected Netflix's stock prices evidenced by a sharp drop in prices per share just days after the change was announced.

        This project has taught me a great deal not only about a service I use almost daily, but also a great deal about how to engage myself in the stock market. I have watched my own investments grow and change with the market over time, I have learned that small changes in terms of service and company policy can mean a great deal to the people subscribing as well as the people investing in a service, I have experienced financial gain and loss firsthand, but most importantly, I have learned to seize an opportunity when it reveals itself. I learned in my research that in 2000 Netflix, Inc. was offered for acquisition to Blockbuster, Inc. for the grand total of $50 million; however, the offer was declined. Fifteen years later, Blockbuster, Inc. is bankrupted and all but forgotten; whereas, Netflix, Inc. is worth more than $9 billion.