Financial of Netflix Inc.

Netflix Inc. is an American internet entertainment company operating both locally and at the national level. The company was founded in 1997 and is headquartered in California. According to Yahoo Finance (2019), Netflix operates in one hundred and ninety countries at the global level. Netflix targets a population of one hundred and thirty-nine million. This paper analyzes the financial performance of Netflix Inc. and compares to HBO Company, a private internet entertainment firm operating in the United States.

Netflix Inc. has had a robust financial performance in the recent past. According to Yahoo Finance (2019), Netflix generated total revenue of $15, 794,341 in the closing year of 2018. The company’s cost of revenue was $9, 697, 538, translating to a gross profit of $5, 826,803. In 2018, Netflix’s operating income was $1,211,242. The company’s revenue is generated from the global level, but Yahoo Finance (2019) reports that more than forty million Americans have subscribed to Netflix’s internet entertainment. Additionally, the company’s number of subscribers has been increasing annually. Yahoo Finance reports that by the beginning of the first quarter of 2019, Netflix had reached a total of more than one hundred and sixty million subscribers globally. Sixty millions of this demographic figure comprised of Americans.

Comparison with HBO Network

            The global success of Netflix Inc. in the internet entertainment has attracted other competitors at the regional and international level. HBO paid television and internet entertainment network is among Netflix’s primary competitors. I selected HBO for analysis and comparison to the United States because the two companies target the same target market. Additionally, both companies have a geographical presence in the United States. I wanted to compare HBO’s financial performance to that of Netflix, considering that Netflix is a publicly traded company while HBO is a private company owned by Warner Brothers.

Even though both Netflix and HBO target the global and local market in the United States, HBO’s revenue collection in the financial year ending 31^st December 2018 was lower compared to that of Netflix’s ($5.4 compared to $15.7). According to Statista (2018), even though HBO operates in four lines such as premium television services, HBO, and Cinemax, HBO charges a monthly subscription fee that is nearly that of Netflix. Netflix’s monthly subscription is $7.99 per month, while HBO charges double the amount ($14.99 per month). Another reason for differences in profit margins is that Netflix targets the global market while HBO is a local company targeting the United States. When the two companies compete for the local market, odds tend to favor Netflix which charges lower subscription fees compared to HBO.

Netflix controls a significant size of market share in the United States compared to HBO. The reason for this difference in market share is in the marketing strategy. Netflix offers a free monthly subscription before introducing charges once the free subscription has expired, while HBO does not have this offer. This implies that Netflix reaches out to a significant number of premium and basic subscribers both at the local and international market compared to the HBO network. HBO operates in two lines, the HBO Go and HBO Now, but the two have not managed to generate significant revenue and market share compared to Netflix.

Netflix generates robust revenue in the United States and the international market. The company is publicly owned and is listed on the New York Stock Exchange. Netflix’s success has attracted competitors in the local and international markets. HBO is Netflix’s direct competitor in the United States. Both firms target the local market by offering internet subscription entertainment and paid TV network services. Netflix, however, has a higher number of subscribers compared to HBO. As a publicly traded company, Netflix has to work extra hard to maximize its value by targeting international subscribers.

References

HBO’s subscription revenue from 2011 to 2017 (in billion U.S. dollars) (2018). Statista. Retrieved from https://www.statista.com/statistics/329295/hbo-subscription-revenue/

Netflix Inc. (2019). Yahoo Finance. Retrieved from https://finance.yahoo.com/quote/NFLX/financials?p=NFLX

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