Netflix is the leading movie streaming company with almost 137 million subscribers worldwide. The more prominent subscribers of the company are from the united states. The company was incorporated in the year 1997 but become a public listed company in the year 2002. In the following year, the company made its profitable quarter which was as the result of an increase of some subscribers. The company continued to make profits and expanding its market share to the point of forcing its competitors Blockbuster Inc. to bankruptcy. In 2013, after the impact of the financial crisis of 2008 the company almost got into bankruptcy. The increase in the price of its product in the year 2011 resulted in a decrease in the number of subscribers and profit. Netflix experienced a reduction in number by 805,000 in a single quarter. In this period the shares plunged from almost $300 as low as $53.8% in 2013. This article is going to outline the Netflix come back. ( Barr,2016).
Netflix Comeback
In the year 2013 Netflix emerged as the best performing stock in the benchmark standard and most deficient in 500 indexes. Many of the investors had high hopes with the company when the company announced that it was planning to separate its streaming and DVD business. The plan was later abandoned which caused the company to share to drop from $300 high to $53.4. During this time Wall Street Journal criticized the company management of being insensitive, but they failed to understand that the company was struggling to squeeze every penny from the loyal customers who are struggling from the repercussion of the 2008 financial crisis ( Friedman,& Mandelbaum,2015) .
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Barr (2016) reported that the company was on the verge of becoming bankrupt, but luckily, the management was able to get the remedy for its economic woes. The management showed patience and learned from its mistakes, which helped to formulate Netflix turn around strategy. The management did not lose hope but concentrated in delivering movies with no explicit consideration of the customer.
Chart 1: Netflix Shares Prices in 2013
Netflix comeback when it recorded 25% increase in share at the second quarter of 2013. At this period Wall Street Journal projected a 19% decrease in the shares. The company was able to sign up two million new domestic streaming subscribers in the last quarter of 2013. On December 2013 the company stock was back on its feet where it recorded a high for the period of $217.94 ( Friedman,& Mandelbaum,2015) .
The management facilitated the growth of the stock by deciding to sell its original content. Netflix released it fist original series Lillyhammer, but it was the debut of the House of Card that made the company turn around strategy successful. The growth of subscriber and profits combined with the early success of its original content help the company stock to triple in price hitting the highest of $389 (“ Netflix is a comeback kid, but can it stay on top”, 2013)
After the management found out that they were in a fiscal crisis, they did a significant financial restructuring. The management decided to rebrand the company regarding their two-line business; the streaming, and the DVD rental departments. The company changed it the strategy from home delivery of discs to producer of the video content. Netflix took advantage of the change in technology to execute significant changes ( Barr,2016) .
The passage from the DVD rental industry to market od digital streaming was very crucial for the stockholders who invested capital on this company with equity increasing at an impressive rate every year. The net income in 2013 summed from $112,403 while stockholders equity summed up to $1,333,561. The company reported an increase in return on equity from 8.43% in 2013 to 14.36% in 2014 ( Friedman,& Mandelbaum,2015).
Reference
Barr, T. (2016). Television’s newcomers: Netflix, Apple, Google and Facebook. Telecommunications Journal of Australia, 61(4).
Friedman, T. L., & Mandelbaum, M. (2015). That used to be us: How America fell behind in the world it invented and how we can come back. Macmillan.
Street, O. W. Netflix is a comeback kid, but can it stay on top? (2013). Knowledge@ Wharton.-
