《《Netflix.com Inc.》.pdf

9-201-037 R E V : O C T O B E R 1 7 , 2 0 0 6 E . S C O T T M A Y F I E L D NetF, Inc. In July 2000, Reed Hastings, chairman and CEO of NetF, Inc., faced a critical decision. Three months earlier, following one of the worst episodes on record for the NASDAQ market, NetFlix had submitted its S-1 filing for its initial public offering (IPO).1 As a result of the market downturn, many Internet companies had been forced to withdraw their IPOs. Investment bankers indicated to Hastings that NetFlix would need to show positive cash flows within a twelve-month horizon in order to have a successful offering. Hastings knew that NetFlix was at a crucial stage. With revenues doubling every six months, NetFlix was enjoying tremendous success. But continued success depended on the company’s ability to sustain triple-digit growth for the foreseeable future. Soon, Hastings would have to decide whether or not to proceed with the company’s anticipated IPO. Hastings asked Barry McCarthy, the chief financial officer, to re-evaluate the cash flow requirements of the company’s current business plan, to suggest modifications that would improve the company’s projected cash flows, and to make a recommendation on whether the company should go forward with its planned offering. As McCarthy reviewed the existing NetFlix business model, he considered possible changes that might allow the company to proceed with its planned IPO and yet sustain the type of future growth that wou