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Alex Blatt, Vanessa Boys Smith, Drew Fann, Brie Hunt-Augustine, Chris Mullican
Why Netflix?
Integrated Customer Experience
Good Cultural Fit
Increased Market Share
Streaming & Content Synergies
Apple TV – Not your typical TV“I’d like to create an integrated television set that is completely easy to use. It would be seamlessly synced with all of your devices and with iCloud. It will have the simplest user interface you could imagine. I finally cracked it.” – Steve Jobs
Apple TV is Our New iOS Platform
Leveraging our Next Portfolio Product
• integrated with iTunes and App Store = new monetization opportunities through capture of streaming market share
• New User Experience• Fully integrated living room experience• Deeper content relationship• Leveraged synergies with a combined user
base
In House: MacOSxiPhone,
iPad, iPods
Solid State Flash
Storage
Acquisition 2011
TV as PlatformIntegrated
User Experience
*Apple TV*
Streaming Contracts
Acquisition Need Vertical Integration
Outcome
Design Efficiency
Production Cost Savings
Distribution Efficiency
Design Efficiency(Apple TV Integration)
Production Cost Savings (Contracts)
Distribution Efficiency(Streaming & Market Share)
Com
peti
tive E
dg
e
Movie Streaming on Apple TV:
Capturing Market Share
• 23.8 million subscribers• 22 million streaming
70%
30%
The DVD Streaming Market
Other
Netflix
Pricing Model
Basic Membership - $7.99 per month
Premium Membership - $14.99 per month
Conservative Year 1 2 3 4 5
Total 782$ 978$ 1,131$ 1,250$ 1,355$
Total 808$ 1,091$ 1,363$ 1,636$ 1,881$
Expected
Millions
Millions
Comparative Value with sensitivity analysis
DCF Earnings Multiple$17B$16B$15B$14B$13B$12B$11B$10B$9B$8B$7B$6B$5B
Added Value
$17B$16B$15B$14B$13B$12B$11B$10B$9B$8B$7B$6B$5B
Netflix Value Mem. Rev. iTunes Etc. Outside Mem.Total Rev.
Netflix current valueOur OFFER
$ 12.5 Billion
Divested owners Joining 50%cash/ 50% 100% cash in Apple Stock
Current Value Chain
Content & Services• MobileMe• iCloud
Content Aggregation• iTunes• iBooks• App Store
Hardware & Software Platforms• MacOSx• iWorks
Appliances
• Mac• iPhone• iPad• iPod• Apple TV
Retail & Distribution
Value Add: Vertical Integration
Content & Services• MobileMe• iCloud
Content Aggregation
• Netflix Streaming Technology
• iTunes • iBooks• App Store
Hardware & Software Platforms• MacOSx• iWorks
Appliances
• Mac• iPhone• iPad• iPod• Apple TV
Retail & Distribution
Apple’s Innovative Culture
Do Everything Important Internally
Make a Dent in the Universe
Control the MessageGet MarketingLove & Cherish the CreativesValues, not RulesDo What is ImportantFreedom & Flexibility
Think Different
Empower Employees to Make
a Difference
Do Everything Important Internally
Make a Dent in the Universe
Control the MessageGet MarketingLove & Cherish the Creatives
Values, not RulesDo What is ImportantFreedom & Flexibility
Think Different
Empower Employees to Make
a Difference
Apple-Netflix Integration Team
Integration Change Management
COMMUNICATIONCOMMUNICATION ORGANIZATIONORGANIZATION CULTURECULTURE
Head of iTunes
HR, Apple
COO, NFLX
HR NFLX
Responsible for vision, direction and prioritization of all integration efforts
CEO, NFLX R&D Apple TV
Apple CEO
Integration
Team
Integration Initiative Communication Organization Culture
Facilitate integration effectiveness
Align Apple and Netflix to increase efficiencies and realize synergies
Minimize integration risks due to cultural differences
Organize all stakeholders
Establish 2-way feedback
Launch internal communication campaign
External PR Campaign
Maximize stakeholder buy-in and involvement
Set cross-organizational hierarchy
Monitor retention rates
Develop cultural transition strategy
Deploy cultural progress surveys
Put extra emphasis on gathering informal feedback
Goals
Actions
February | March |October | September
Begin integration
due diligenceFeb 1
Integration Team
formedFeb 8
Netflix is acquired
Feb 1
Integration Completed
September 1
Acquisition Timeline
Communication Initiative launched
Feb 8
Set cross organizationa
l hierarchyFeb 8
Monitor retention
ratesMarch 1
Integration Timeline Year One
Maximize stakeholder buy-
in and involvement
March 1
Deploy Cultural
Progress SurveysMarch 1
Gather informal feedback
March - October
Netflix Will Benefit from the Acquisition
Fiscal Incentives Cultural Fit
Competitive Positioning: Streaming Advantage & User Base
Strategic Leveraging: AppleTV as a Platform
Summary• Digital streaming experience unlike any other
• Netflix Digital Library & Subscribers• Seamlessly Synced Apple Platforms & iCloud
Service
• Now:• #1 Digital Video Streaming Market Share
• Future: Streaming Content with Untapped Market Entry