This was a presentation that we did for our MBA program which set forth the evidence in favor of a merger of two companies.

1. project neon materials for discussion pursuant to proposal january 31 st 2009

3. part 1 industry backdrop

4. Industry Timeline project neon

6. part 2 an overview of the firms

9. Industry trends project neon Neon predicts conventional DVD rentals to peak in 2013 . At that time the number of people watching online video content will have grown to 941 million globally.

10. Direct Competitors project neon NB the streaming market is estimated to be worth $1.5 billion

12. Neon partners project neon

13. Neon’s management team & board project neon Name Title Age Total cash comp at Neon Reed Hastings CEO and Chairman of the Board 47 $850,270 USD W Barry McCarthy Jr CFO 54 $706,764 USD Leslie J Kilgore Other Executive Officer 42 $706,930 USD Ted Sarandos Other Executive Officer and DVP 43 $823,430 USD Neil Hunt Other Executive Director 46 $677,020 USD Patty McCord Other Executive Officer 54 Unavailable Name Title Age Affiliation Gregory S Stanger Director 43 Venture Partner at Technology Crossover Ventures Jay C. Hoag Director 49 General Partner at Technology Crossover Ventures Charles H. Giancarlo Director 50 Managing Director at Silver Lake Timothy M. Haley Director 53 Founder and Managing Director at Redpoint Ventures A. George Battle Director 64 Former Chairman & CEO of Ask.com Richard N. Barton Director 40 CEO & Chairman of Zillow Inc.

15. Industry trends (cont’d) project neon “ We named the company “ Neon ” not “DVDs by Mail” because we knew that eventually we would deliver movies directly over the Internet. DVDs will be around a long time, but we're building for the day when they're not .” Neon CEO

16. part 3 preliminary valuation

17. Main assumptions project neon r f 2.30% r d 6.47% r m 7.00% β 1.07 g 4.00% D/V 3.26% E/V 96.74% CAPM 9.79% WACC 9.60%

18. Intrinsic value assumptions project neon *All as a percent of revenue, except for revenue growth Historical Assumptions* Year 2007 2008 2009 2010 2011 2012 2013 Rev Growth 20% 13% 12.00% 11.00% 11.00% 10.00% 10.00% Margin 34% 33% 34.00% 34.00% 34.00% 34.00% 34.00% Total Operating Expense 27% 27% 26.00% 26.00% 25.00% 25.00% 25.00% Other Income & Expense 1.68% 1.68% 1.50% 1.50% 1.50% 1.50% 1.50% Taxes 40% 40% 40.00% 40.00% 40.00% 40.00% 40.00%

19. Intrinsic Value project neon DCF $350,225.40 Continuing Value $1,719,942.46 Total Value $2,070,167.87 Share Price $35.28

21. Comparables project neon Company Revenue Market-Cap P/E EV/EBITDA Blockbuster $5.48 Billion $256.39 Million 4.16 3.781 1-800-FlOWERS $931.61 Million $192.52 Million 6.89 6.362 Comcast $33.51 Billion $44.15 Billion 14.88 5.956 DIRECTV $19.26 Billion $23.38 Billion 12.83 5.488 Argon $18.14 Billion $21.4 Billion 34.72 18.592 Mean $15.46 Billion $17.88 Billion 14.70 8.035 Median $18.14 Billion $21.4 Billion 12.83 5.956 Neon $1.31 Billion $2.16 Billion 20.04 14.464

22. Multiples Valuation project neon Ratio Mean Median Netflix P/E $20.80 $18.16 $28.36 EV/EBITDA $22.79 $16.89 $41.03

23. part 4 synergy valuation

25. Synergy and Growth Assumptions project neon *Percentage of net sales Assumptions* Year 2009 2010 2011 2012 2013 PV of Synergies (thousands) Fulfillment Synergies 1.75% 1.75% 1.75% 1.75% 1.75% $124,486 Growth Synergies -0.50% 0.00% 1.00% 2.00% 3.50% $86,486 Marketing Synergies 0.25% 0.25% 0.25% 0.25% 0.25% $17,784 Technology Synergies 1.00% 1.00% 1.00% 1.00% 1.00% $71,135

27. Neon value with synergies project neon *Premium based on LP Consulting’s calculation of intrinsic share price DCF $490,680.52 Continuing Value $2,641,474.81 Total Value $3,227,009.17 Share Price $55.00 Premium*: 55.88% Actual Share Price $36.14 Premium on Actual 52.19%

30. questions ?

31. visual presentation by LP CONSULTING