GGU MBA Managerial Finance Final Project Term Paper

1. [Type the company name]
A Term Paper Presented to Meet Partial
Requirements for Managerial Finance 300 A
Course Professor: Mr. William Sarsfield
L JANS and Associates, LP: Alicia (Hui Man
Chan), Jenny, Licia, Nina, & Scott
Friday, December 30, 2011

2. Table of Contents
I. Executive Summary ........................................................................................................................................................ 4
Consultant Bio: ................................................................................................................................................................. 4
Client’s Background: ........................................................................................................................................................ 4
Client’s Proposition and Request Objective: ................................................................................................................ 5
Consultant’s Final Analysis Report and Recommendation:....................................................................................... 5
II. Fast Facts: Netflix Corporation and Targeted Companies ....................................................................................... 6
III. Statistical DVD Rental and Streaming Market Data and Information for Consumer and Industry (As of July
2011) ................................................................................................................................................................................. 7
General News Current News Releases for Consumer and Industry: ....................................................................... 7
Netflix: Content and Pricing Model ................................................................................................................................ 8
Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America: Upstream % ....... 9
Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America: Downstream % 10
Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America: % Differential
between Upstream and Downstream ...................................................................................................................... 10
Percentage of Subscriber Website Visitations Graph (From September 22 to September 29) ..................... 11
Per-Subscriber Usage Overlay Graph (From September 22 to September 29) .............................................. 11
Comcast: Content and Pricing Model.......................................................................................................................... 12
Redbox: Content and Pricing Model............................................................................................................................ 12
Blockbuster: Content and Pricing Model .................................................................................................................... 12
Hulu: Content and Pricing Model ................................................................................................................................. 13

3. Amazon: Content and Pricing Model ........................................................................................................................... 13
IV. Du Pont Model Functionality and Utilization Analysis ............................................................................................. 14
V. Balance Sheet Comparative Analysis Charts and Graphs ..................................................................................... 14
Selected Financial Measurements and Corresponding Equation Matrix Sample, Based on Balance Sheet
Data for Year-End 2010 ................................................................................................................................................ 14
Equation Matrix Sample: ............................................................................................................................................... 15
Balance Sheet Synopsis and Overview of a Few Key Performance Statistics: Firm vs. Industry ..................... 16
VI. Financial Performance Ratios and Comparative Analysis Charts and Graphs ................................................... 19
Quick and Current Ratio Performance Comparative Analysis: Netflix vs. Comcast (2006-2010) ..................... 19
NOWC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010) ......... 20
TOC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010).............. 20
NOPAT Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010) ........ 21
FCF Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010) .............. 22
ROIC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010) ............ 22
M/B Ratio Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster (2006-2010)..... 23
VII. Consultant’s Closing Comments and Final Recommendation ............................................................................ 23
Opinions:.......................................................................................................................................................................... 23
Recommendations: ........................................................................................................................................................ 24
VIII. Client’s Q & A Session .............................................................................................................................................. 24
Source Citations, Appendages, and Miscellany ............................................................................................................ 25

4. I. Executive Summary
Consultant Bio:
L JANS & Associates, LLP is an accounting consultancy firm, specializing in corporate evaluation and
due diligence for auditing purposes in areas of mergers and acquisitions, LBOs and liquidations for
Fortune 500 companies worldwide. Established in 2001 by a 25-member team of experienced
accounting professionals and MBA graduates from SMU Cox School of Business, Wharton School of
Business, Stern School of Business, and GGU Edward Ageno School of Business our firm now staffs
over 1,500 CFA and CPA qualified consultants from those prestigious institutions in addition to
several others, specializing in various industries such as engineering, commercial and investment
banking and financial services, insurance, government, hospitality, law, manufacturing, medical and
pharmaceutical, aerospace, commercial real estate, mining and agriculture, televised sports and
entertainment, and news media.
Our unique proprietary brand of products and services allows us to consistently and effectively
execute with the highest degree of integrity and efficiency under full compliance of local, state, and
federal regulations any number of our customers’ various complex and sophisticated financial
evaluation needs, comprehensively and expediently. Since inception, we have managed to maintain
an above-average Return on Capital Investment ratio for our clients’ acquisitions in their particular
industry, a statistical performance record that is factual and irrefutable.
Client’s Background:
Our client, Netflix, Inc., is a $2.2 billion (sales revenue) subscriber-based video tape and disc rental
and Internet video streaming business for the distribution of both TV and movie content and by which
is operated by 2,180 employees. Its services span worldwide and are organized and offered in two

5. segments: U.S. territory and international region. Incorporated in 1997 and headquartered in Los
Gatos, California, the company is currently led by Chief Executive Officer Reed Hastings, a position
held since September 1998 - but yet also serving as Chairman of the Board since the company’s
founding in 1997. The company is publically traded on NASDAQ under the symbol NFLX and is
currently traded on the exchange at around $273 a share.
Client’s Proposition and Request Objective:
On May 16, 2011, L JANS & Associates (lead consultant) was approached by company executives of
the Netflix Corporation (client) to make a formal inquiry and request proposal to provide evaluation
analysis services on Comcast, Inc. (primary targeted competitor) to supplement and facilitate
resource allocation action plans for Netflix management team’s impending investment strategy for the
furtherance of market expansion into their existing online video content streaming business. In
addition to the previous request, Netflix has also made a formal Merger and Acquisition proposal
request to our firm to execute preliminary due diligence and financial analysis on the Redbox
Corporation as a possible acquisition candidate. A third item presented to our firm by Netflix, to be
included in the terms of the pending agreement, is to perform a non-comprehensive M & A prospect
assessment and forecast analysis on the Blockbuster Corporation, pre- and post-Chapter 11 phases,
to examine leverage probability ratios for possible acquisition transaction long-run.
Consultant’s Final Analysis Report and Recommendation:
On this date, August 1, 2011, L JANS & Associates has fully completed all services requested by our
client, Netflix, Inc., in a written proposal submitted to us on May 16, 2011, and have formalized our
results and final conclusions, and, based on our final assessment, offer the following
recommendations in this auditing report.

6. II. Fast Facts: Netflix Corporation and Targeted Companies
Redbox Automated Retail, LLC
Companies (Wholly-owned subsidiary of
Involved in Report Netflix, Inc. Comcast Corp Coinstar, Inc.) Blockbuster, Inc.
100 Winchester Circle One Comcast Center One Tower Lane Suite 1200
Headquarters Los Gatos, CA 95032 Philadelphia, PA 19103-2838 Oakbrook Terrace, IL 60181 1201 Elm Street Dallas, TX
Address: United States USA United States 75270 USA
Date of August 1997 , DE, United December 2001 , PA, United October 1989 , DE, United
Incorporation: States States Founded in 2004 States
Number of
Employees: 4,329 102,000 CoinStar: 2,585 48,000
Coinstar: Paul Davis, CEO:
Chief Executive Reed Hastings, Chairman Redbox: Mr. Mitch Lowe,
Officer: & CEO Brian President Bruce Lewis, SVP & CFO
Gross Revenue: $2.2 billion $38 billion Coinstar: $1.6 billion $3.5 billion
Exchange Listing: NASDAQ NASDAQ Coinstar: NASDAQ Delisted
CMCSA-Class A Common
Stock: CMCSK-Class A
Symbol: NFLX Special Common Stock Coinstar: CSTR Delisted
Number of
Outstanding
Shares (as July 17,
2011): 52,782,000 20,391,697 Coinstar: 31,355,000 219,000,000
Number of
Institutions
Holding Shares: 539 (Up) 217 773 Coinstar: 275 3
Current 52 Week
High/Low: $297.35/$95.33 $27.16/$16.76 Coinstar: $67.56/$37.80 $0.28/$0.03
Coinstar has never paid cash
Most Recent dividend on capital stock.
Dividend Netflix has never paid a Coinstar is restricted to pay any
Distribution cash dividend on capital cash dividends under its current
Amount: stock. July 1, 2011 @ $0.113 credit facility. June 2, 2005 @ $0.02
Executed a 3-for-2 stock split
on February 22, 2007; 2-for-1
split on May 6, 1999: 3-for-2
Historical Stock Executed a 2-for-1 stock on February 3, 1994; 3-for-2
Splits: split on February 12, 2004. split on October 25, 1989. Coinstar: None None
Coinstar purchased 47% of
Redbox in 2005: Later in 2009
Notable M & A purchased the remaining 53%
Historical Events: stake in Redbox.
Publically held as a wholly-owned
subsidiary of Coinstar, Inc.-
Current Status: Public Public Parent Company Chapter 11
Coinstar sold their Entertainment
business in September 2009,
roughly nine months following the
Miscellaneous purchase of the remaining stake
Notes: in Redbox in January 2009.

7. III. Statistical DVD Rental and Streaming Market Data and Information for Consumer
and Industry (As of July 2011)
General News Current News Releases for Consumer and Industry:
 According to Nielson Company, the average viewers spent four hours and thirty-nine minutes
watching Internet video in
January, up 45% from a year
ago. According to Sandvine
Network Analytics chart to the
right, as of Year End 2010, it
shows domestic data usage for
subscribers using various
packages during the year. In
addition, average daily content downloading in North America for the entire year during 2010
over the Internet for fixed access
devices was led by Real-Time
Entertainment traffic at 45.7%,
which includes such companies
like Netflix, Comcast, Redbox, and
Blockbuster, according to the
Sandvine Network Analytics chart
to the left.

8. Internet Publishing and Broadcasting in the U.S.
90 45,000.00
84.8
80 40,000.00
70 71.3 35,000.00
60 30,000.00
50 47.3 25,000.00
Revenue $ million
40 20,000.00
Growth %
30 15,000.00
26.5 24.9
20 20.2 20.1 17.2 10,000.00
18.8
10 12.8 13.1 15.8 5,000.00
0 0 0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
 In 2011, CEO of Netflix, Reed Hastings, has joined Facebook’s board of directors in a new
slot, which is sometimes a precursor to an eventual initial public offering, or IPO.
 Due to SEC regulatory requirement which stipulates that any firm involving 500 or more
investors must disclose their financial statements, Facebook who is expected to surpass that
figure must fully comply and disclose company’s financial statements
 Broadband content provider, NBCU (NBC Universal), a subunit of Comcast Corporation, had
been reported as formulating discussions with Netflix for a new distribution deal in 2011.
 On April 26, 2011, a U.S. Bankruptcy Court judge approved a majority sale of Blockbuster’s
assets to Dish Network for a reported $320 million.
Netflix: Content and Pricing Model
 Netflix maintains the largest library of online content than any other service provider company
of its kind. The following graph on the ensuing page indicates annual revenue sales from 2006
to 2010:

9. Total Annual Revenues
2,500,000,000
2,162,625,000
2,000,000,000
1,670,269,000
1,500,000,000
1,364,661,000
1,205,340,000 Total Annual Revenues
1,000,000,000 996,660,000
500,000,000
0
2006 2007 2008 2009 2010
 According to Sandvine Network Analytics, Netflix ranked in the top ten in both upstream and
downstream Internet traffic in North America’s fixed networks in 2010 (see charts below on the
following page).
Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America:
Upstream %
Upstream Percent of Traffic: Year-End 2010
Upstream Percent of Traffic
34.31%
11.18% 12.36%
2.28% 2.41% 2.46% 2.47% 2.99% 3.28% 4.34%
10. 9. 8. MGCP 7. 6. SSL 5. Skype 4. Netflix 3. Gnutella 2. HTTP 1.
Facebook PPStream YouTube BitTorrent

10. Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America:
Downstream %
Downstream Percent of Traffic: Year-End 2010
2. HTTP 22.70%
4. Netflix 20.61%
7. YouTube 9.85%
1. BitTorrent 8.39%
0. Flash Video 6.14%
0. RTMP 6.13%
0. iTunes 2.58%
10. Facebook 2.44%
3. Gnutella 2.12%
0. Xbox Live 1.61%
Downstream Percent of Traffic
Sandvine Networks Analytics Top-Ten Internet Traffic Analysis Chart for North America:
% Differential between Upstream and Downstream
Netflix: Top-Ten Internet Traffic Performance Analysis: Year-End
2010
Percentage Difference in Ranking (Upstream vs. Downstream) ±
374.88%
298.79%
83.66%
0.00% 0.00% 0.00% 0.00%
-0.81%
-75.55% -81.04%

11.  As of September 22, 2010, the company expanded its enterprise operations to Canada and is
currently experiencing promising results in the early stages of market development and
product and service integration. The following graphs indicate the percentage of subscribers
who visited Netflix.Com and per-subscriber usage comparative analysis between Netflix and
YouTube during a one-week span immediately following full deployment.
Percentage of Subscriber Website Visitations Graph (From September 22 to September
29)
Per-Subscriber Usage Overlay Graph (From September 22 to September 29)

12.  Netflix will hike fees for online video streaming downloads and DVD’s by mail as high as 60%:
Rates are scheduled to take effect on September 1.
 New monthly fee rates will consist of a dual package of online video streaming and one DVD at
$16, and increase from current rate of $10: Monthly online streaming only rate remains @ $8.
 Blockbuster now offers thousands of movie rentals for 99¢ a day: New releases cost $2.99.
 At the end of October 2010, Blockbuster had 1.2 million mail-order subscribers, compared to
23 million for Netflix at the time.
Comcast: Content and Pricing Model
 As a fractional part of their monthly cable subscription plan ($60 for a basic plan), Comcast
new movie release fees run about $5 – usually offered the very same day of its DVD release,
giving Comcast more recent movie streaming content than Netflix ; $2 for older ones.
Redbox: Content and Pricing Model
 Redbox’s kiosk each holds 200 newly-released rentals that are available no fewer than 30
days prior to the movie’s distribution via DVD, a contractual restriction similar to Netflix’s plan.
 With over 27,000 bright-red kiosks stationed at various locations nationally in the U.S., mainly
at grocery stores and drugstores, Redbox rent DVDs and Blu-Ray movies for $1 and $1.50 per
night, respectively.
Blockbuster: Content and Pricing Model
 Blockbuster makes the claim that their movie downloads are available well in advance before
they become available through Netflix.

13.  Currently Blockbuster has 1,700 stores remaining.
 Blockbuster does not offer a monthly plan, for which Netflix does.
 In order to compete favorably with Coinstar’s Redbox, Dish Network’s Blockbuster move to a
per-day pricing model that introduces $3 rates for just-released films, $2 for other newly
released movies, and $1 for each additional day thereafter.
 Blockbuster monthly mail-delivery rentals are pricier than Netflix: The company charges a
monthly rate of $12 for one movie or game at a time and $17 for unlimited two-at-a-time
rentals, compared to Netflix’s DVD-only monthly rental rate of $8 for one or $12 for two.
Hulu: Content and Pricing Model
 The Hulu company, owned by The Disney Company, News Corp, and Comcast, offers
thousands of TV show episodes and movies via Hulu Plus @ $8 per month.
Amazon: Content and Pricing Model
 Amazon’s Instant Video.Com does not offer exclusive online monthly rates. It offers roughly
3,500 online movies and television show rentals at prices ranging from $1 to $5.
 Amazon delivers about 6,000 movies and TV shows over the Internet, compared to 20,000 for
Netflix.

14. IV. Du Pont Model Functionality and Utilization Analysis
Netflix versus Comcast
Probability Performance Comparison Chart (2006-2010)
25 70
20 60
50
15 40
10 30
20
5 10
0 0
Netflix- Netflix- Netflix- Netflix- Netflix-
Comcast Comcast Comcast Comcast Comcast
2010 2009 2008 2007 2006
-2010 -2009 -2008 -2007 -2006
ROE % (Net) 65.75 8.35 42.42 8.75 21.29 6.21 15.85 6.27 15.33 6.22
ROA % (Net) 19.36 3.14 17.86 3.22 13.09 2.24 10.66 2.31 10.08 2.37
Comments and Remarks: Netflix shares are held by 570 institutions - accounting for 87.05%
of all shares held. Among the top 5-10 institutions holding Netflix shares are Vanguard Group,
Inc., American Centuries Companies, Inc., State Street Corp, Blackrock Institutional trust Corp,
& Bank of New York Mellon Corp. In 2010 the company’s stock price increased 219%.
Although the company has stabilized its price point for several, since its inception, the recent
decision to change that pricing model by restructuring the monthly subscription fee package
and increasing its rate slightly roused investors and caused major concern, due to irrational
expectations. However, the slight price increase is still relatively below industry standard.
V. Balance Sheet Comparative Analysis Charts and Graphs
Selected Financial Measurements and Corresponding Equation Matrix Sample, Based on
Balance Sheet Data for Year-End 2010
Performance Measures
Comparison Chart (%, unless Redbox Automated Retail, LLC
noted otherwise), as of Year End (Wholly-owned subsidiary of
2010 Netflix, Inc. Comcast Corp Coinstar, Inc.) Blockbuster, Inc.
NOWC (Net Operating Working
Capital) 116,192,000 1,880,000,000 -125,461,000 198,800,000
TOC (Total Net Operating Capital) 244,762,000 25,395,000,000 319,226,000 448,200,000
NOPAT (Net Operating Profit After
Tax) 170,185,000 4,788,000,000 85,924,200 -213,120,000

15. FCF (Free Cash Flow) 103,767,000 -463,000,000 92,174,200 -115,820,000
ROIC (Return on Investment
Capital) 70% 19% 26.92% -48%
Market/Book (M/B) Ratio 50.20 1.15 9.54 -2.70
Comments and Remarks: The two most notable balance sheet stats, or balance sheet-related
statistical numbers, are seen in the figures regarding return on invested capital (ROIC) and
market/book (M/B) ratios, indicating a decisively clear financial positioning for the company and its
investors. These percentage and ratio figures strongly illustrate the company’s dedication and
commitment to its capital infrastructure and investors. Netflix has long been able to secure
confidence from its investors due to its predication of its original mission and standing to be investor-
oriented and –friendly. Because the industry they service and offer products to is a niche market,
there are few competitors who provide their brand of product and services to match or even exceed
the company’s revenue and profitability performance. The following are a few business activities
which has played a crucial role for the company’s historical growth and current accelerated success:
 Product paradigm shift from DVDs to online movie and TV shows streaming
 Content obtained from studios via fixed-fee licenses, revenue-sharing pacts, & direct
purchases.
 Added 8 million subscribers in 2010, bringing total to 20 million
 In 2010, revenue catapulted up 29%: Net income up 39%
Equation Matrix Sample:
Netflix Liquidity Measures: Year
2010
Net Operating Working Capital Operating Current Assets − Operating Current
(2010) = Liabilities
= 375,505 − 259,313
= 116,192 Conversion 116,192,000
Net Operating Working Capital Operating Current Assets − Operating Current
(2009) = Liabilities
= 171,553 − 124,862
= 46,691 Conversion 46,691,000
Total Net Operating Capital (2010) Net Operating Working Capital + Net Operating Long-Term
= Assets
= 116,192 + 128,570

16. = 244,762 Conversion 244,762,000
Total Net Operating Capital (2009) Net Operating Working Capital + Net Operating Long-Term
= Assets
= 46,691 + 131,653
= 178,344 Conversion 178,344,000
NOPAT = Earnings Before Interest Taxes X (1 - Tax Rate)
= 283,641 X 0.60
= 170,185 Conversion 170,185,000
New Investment in Operating Capital (Current
Free Cash Flow (FCF) = (NOPAT + Depreciation) − Year's Total Net Operating Capital - Previous
= 306,764 − 202,997 Year's Total Net Operating Capital) +
Depreciation
= 103,767 Conversion 103,767,000
Return on Investment Capital NOPAT ÷ Total Net Operating Capital
(2010) =
= 170,185 ÷ 244,762
= 70%
Balance Sheet Synopsis and Overview of a Few Key Performance Statistics: Firm vs. Industry
2010 Financial Ratio Comparison: Company vs. Industry
Profit Margin: Company Profit Margin: Industry
9.58 9.6
7.44
5.7
4.8 4.5
3.55
0
Netflix, Inc. Comcast Corp Redbox Automated Blockbuster, Inc.
Retail, LLC (Wholly-
owned subsidiary of
Coinstar, Inc.)
Comments and Remarks: Our original assessment of the leverage position of our two
targeted acquisition candidates is highly illustrated in the chart above. First, because of the
industry shift from a brick and mortar business model to an e-commerce, Redbox Automated
Retail’s profit margin has been impacted severely and performed well below the industry
standard in 2010. Secondly, the substantial discrepancy reported for Blockbuster, Inc. is, of
course, prefaced by the company’s preliminary status of Chapter 11 bankruptcy. Nonetheless,
in spite of the recent purchase of Blockbuster, Inc. by the Dish Network Corp, to aid

17. Blockbuster’s current restructuring efforts, we, L JANS & Associates, remain optimistic that
Blockbuster, once removed from U.S. Chapter 11 bankruptcy, will still be a viable acquisition
target in the near future. The following few statistical graphs further support our original
acquisition recommendation proposal:
2010 Financial Ratio Comparison: Company vs. Industry
Debt Ratio: Company Debt Ratio: Industry
120.4%
70.5% 63.4% 65.2%
51.9% 53.9% 51.9%
33.4%
Netflix, Inc. Comcast Corp Redbox Automated Blockbuster, Inc.
Retail, LLC (Wholly-
owned subsidiary of
Coinstar, Inc.)
Comments and Remarks: The company’s noticeable above-industry standard debt ratio is
described as modest and reflects the company current migration and transformational activity
of hybrid business model incorporating both legacy operational infrastructure (i.e., brick and
mortar product and services) to a contemporary model strictly involving e-retail and e-
commerce. The legacy operations are currently in phase one of the migration stage and full
and complete e-commerce migration efforts are expected to exceed 90% prominence in
operational activity. Although Redbox has a lower debt ratio spread, the company’s business
model is considered antiquated and stagnant and growth potential is highly restricted and
limited, as previously noted. This fact and future forecast of Redbox future financial leverage
and positioning is a going concern, and we now would suggest a defocus of Redbox
Automated Retail as a primary, secondary, and tertiary acquisition targets and shift full
commitment to Blockbuster as sole candidate.

18. 2010 Financial Ratio Comparison: Company vs. Industry
Current Ratio: Industry Current Ratio: Company
Blockbuster, Inc. 1.4
1.13
Redbox Automated Retail, LLC (Wholly-owned 1.1
subsidiary of Coinstar, Inc.) 0.77
Comcast Corp 1.1
1.08
Netflix, Inc. 1.1
1.65
Comments and Remarks: Ancillary and aligned with previous stated concerns, liquidity ratios
indicated above is strongly suggest that proposal recommendation is viable and on target.
2010 Financial Ratio Comparison: Company vs. Industry
Total Asset Turnover: Company Total Asset Turnover: Industry
2.6
2.21 2.1
1 1.15 1
0.33 0.3
Netflix, Inc. Comcast Corp Redbox Automated Blockbuster, Inc.
Retail, LLC (Wholly-
owned subsidiary of
Coinstar, Inc.)
Comments and Remarks: The company’s 160% spread demonstrates management’s
efficient utility and performance of current assets and cost-effectiveness.

19. 2010 Financial Ratio Comparison: Company vs. Industry
Return on Equity: Industry Return on Equity: Company
26.9
Blockbuster, Inc.
0
Redbox Automated Retail, LLC (Wholly-owned 11.4
subsidiary of Coinstar, Inc.) 11.92
7.2
Comcast Corp
8.35
14.06
Netflix, Inc.
65.75
Comments and Remarks: Re-investitures of company earnings in product and services
expansion exclusively and entirely have exponentially raised share value for investors.
VI. Financial Performance Ratios and Comparative Analysis Charts and Graphs
Quick and Current Ratio Performance Comparative Analysis: Netflix vs. Comcast
(2006-2010)
Netflix versus Comcast
Liquidity Performance Comparison Chart (2006-2010)
2.5 2.5
2 2
1.5 1.5
1 1
0.5 0.5
0 0
Netflix- Netflix- Netflix- Netflix- Netflix-
Comcast- Comcast- Comcast- Comcast- Comcast-
2010 2009 2008 2007 2006
2010 2009 2008 2007 2006
Quick Ratio 0.88 0.96 1.38 0.34 1.34 0.32 1.78 0.34 1.99 0.59
Current Ratio 1.65 1.08 1.82 0.44 1.67 0.42 1.96 0.46 2.21 0.7
Comments and Remarks: Five-year deal reached with Paramount, Liongates, and MGM
worth nearly $1 billion to stream movies during 2010 has marginally contributed to a slight
increase in liabilities, thus reducing both liquidity ratios, indicated above. As a result of the

20. deal, annual expenses related to new deal expected to increase to $200 million from $117
million a year earlier. Acid Test Ratio slid ▼36.2% in 2010 from a year ago, because of the
addition to current liabilities
NOWC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster
(2006-2010)
NOWC (Net Operating Working Capital)
Blockbuster, Inc.
Redbox Automated Retail, LLC (Wholly-owned…
Comcast Corp
Netflix, Inc.
-500,000 0 500,000 1,000,000 1,500,000 2,000,000
Thousands
NOWC (Net Operating Working Capital)
Comments and Remarks: Rapid growth of E-Commerce compared to traditional brick-and-
mortar facilities has impacted companies like Redbox, Inc. because of product design and
limited distribution channel.
TOC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster
(2006-2010)
TOC (Total Net Operating Capital)
TOC (Total Net Operating Capital)
25,395,000
244,762 319,226 448,200
Netflix, Inc. Comcast Corp Redbox Automated Retail, Blockbuster, Inc.
LLC (Wholly-owned
subsidiary of Coinstar, Inc.)

21. Comments and Remarks: Blockbuster offers “Total Access” which enables customers to rent
movies online, reducing accrual cost liabilities associated with enhanced inventory control and
decreased wages
NOPAT Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster
(2006-2010)
NOPAT (Net Operating Profit After Tax)
6,000,000
Thousands
5,000,000 4,788,000
4,000,000
3,000,000
NOPAT (Net
2,000,000 Operating Profit
After Tax)
1,000,000
170,185 85,924
0
Netflix, Inc. Comcast Corp Redbox Blockbuster, Inc.
-1,000,000 Automated
-213,120
Retail, LLC
(Wholly-owned
subsidiary of
Coinstar, Inc.)
Comments and Remarks: Netflix reported positive net operating profit after taxes and free
cash flow for 2010. Although business status is active, Blockbuster incurred negative output
for both NOPAT and FCF (see following chart), as a direct result of preliminary stage of
Chapter 11.

22. FCF Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster
(2006-2010)
200,000,000 103,767,000
100,000,000 92,174,200
0
-100,000,000 Netflix, Inc.
Comcast Corp
-200,000,000 Redbox
Blockbuster,
Automated
-300,000,000 Inc.
-115,820,000
Retail, LLC
-400,000,000 (Wholly-owned
-500,000,000 subsidiary of
-463,000,000
Coinstar, Inc.)
FCF (Free Cash Flow)
Comments and Remarks: Conversely, Comcast saw a significant negative total in FCF;
nearly half was attributed to an aggregate of new acquisitions during 2010.
ROIC Performance Comparative Analysis: Netflix, Comcast, Redbox, and Blockbuster
(2006-2010)
ROIC (Return on Investment Capital)
80%
60% 70%
40%
20% 26.92%
19% ROIC (Return on Investment Capital)
0%
Netflix, Inc. Comcast Corp Redbox Blockbuster,
-20% Automated Inc.
Retail, LLC
-40% (Wholly-owned -48%
subsidiary of
-60% Coinstar, Inc.)
Comments and Remarks: In reiteration, the chart above indicates Netflix’ strongest and
decisive capital structure position compared to both competitor (s) and acquisition targets.

23. M/B Ratio Performance Comparative Analysis: Netflix, Comcast, Redbox, and
Blockbuster (2006-2010)
Market/Book (M/B) Ratio
Market/Book (M/B) Ratio
50.20
9.54
1.15
Netflix, Inc. Comcast Corp Redbox Automated Retail, Blockbuster, Inc.
LLC (Wholly-owned -2.70
subsidiary of Coinstar, Inc.)
Comments and Remarks: The pro-growth capital infrastructure has created very favorable
returns for the organization’s investors, which is indicated by a 5 to 1 ratio from its closest
competitor. This advantageous capital position will help the firm seize future financing
opportunities, when needed, and also leverage marketing efforts for future M & A activity.
VII. Consultant’s Closing Comments and Final Recommendation
Opinions:
 Liquidity and profitability positions are moderately conservative to proactive aggressive and
comfortably aligned with corporate business model.
 Current integration measures for existing by-mail subscription services to VOD long-run is
plausible and should be accelerated.
 Because online subscription service over the Internet is experiencing steady yet substantial
growth well above industry average, existing short- and long-range migration strategic planning
should maintain current course directive for global expansion.

24. Recommendations:
 The company’s new migration directive to boost its online presence, in conjunction with a
waning DVD rental market, is not conducive to the functionality of a brick-and-mortar business
model. Therefore, we recommend that management should not move forward with its
acquisition plan of Redbox Automated Retail, LLC.
 Because substantial increases in online product and marketability leverage is projected long-
run, we highly suggest that all current considerations and long-range plans to acquire
Blockbuster, Inc., upon a successful emergence from Chapter 11, should move beyond the
exploratory phase to tactical, to specifically capitalize on Blockbuster’s elaborate and
expansive distribution network
VIII. Client’s Q & A Session

25. Source Citations, Appendages, and Miscellany
Literary Sources:
Strategy + Business Magazine (Spring 2011, Issue 62- ). The Coming Wave of Social Apponomics.
New York: Booz & Company
Troy, L. Ph.D. (2010 Edition). Almanac of Business and Industry Financial Ratios. Chicago: CCH
Group
Web Sources:
Charlie Rose.com (N/A). Guest Interviews: Reed Hastings, CEO of Netflix. Retrieved June 06, 2011,
from http://www.charlierose.com
Businessweek.com (N/A). Investing. Retrieved June 06, 2011, from http://investing.businessweek.com
Sagepub.com (N/A). Sage Online Search. Retrieved June 06, 2011, from http://0-
online.sagepub.com.library.ggu.edu
ReferenceUSA.com (N/A). Reference USA Search. Retrieved June 06, 2011, from http://0-
www.referenceusa.com.library.ggu.edu