I have selected this Income Approach for my final project, as it seems to
be the most suited for Netflix. With the Income Approach, the company
is valued by the income it generates. Netflix is able to generate a
tremendous amount of cash through subscriptions. I feel the Market
Approach would be inaccurate if even possible to properly value
Netflix, for the simple fact that there are no other competitors in which
are strictly a streaming service like Netflix. Their biggest competitor
would be Amazon Prime video, which is a small portion of Amazons
overall operations. you would now be looking at higher valued
transactions or publicly traded companies to benchmark it for a
valuation. With the Asset Approach, Netflix has little in the way of
assets, mostly intangible assets in the way of licenses, and quite a bit of
debt to hold those licenses. (Baginski, Bradshaw, & Wahlen, 2018)
Therefore, the Income Approach would most accurately depict the
current value of Netflix.
Reference:
Baginski, S., Bradshaw, M., Wahlen, J. (2018). Financial reporting,
financial statement analysis, and valuation. Boston: Cengage Learning
