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

Id 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

Acquisition

Need

Vertical Integration

Outcome
Design Efficiency

Competitive Edge

Acquisition 2011

Solid State Flash Storage

In House: MacOSx iPhone, iPad, iPods

Production Cost Savings Distribution Efficiency Design Efficiency (Apple TV Integration)

*Apple TV* Streaming Contracts

TV as Platform Integrated User Experience

Production Cost Savings (Contracts) Distribution Efficiency (Streaming & Market Share)

Movie Streaming on Apple TV:

Capturing Market Share

The DVD Streaming Market

23.8 million subscribers 22 million streaming

Other

30%

Netflix
70%

Pricing Model
Basic Membership - $7.99 per month Premium Membership - $14.99 per month
Conservative
Total

Year
Millions

1
$ 782 $

978 $ 1,131 $ 1,250 $ 1,355

Expected
Total
Millions

808 $ 1,091 $ 1,363 $ 1,636 $ 1,881

Comparative Value with sensitivity analysis

DCF $17B $16B $15B $14B $13B $12B $11B $10B $9B $8B $7B $6B $5B Earnings Multiple

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 value Our OFFER

$ 12.5 Billion

Divested owners 100% cash

Joining 50%cash/ 50% in Apple Stock

Current Value Chain

Content & Services MobileMe iCloud

Content Aggregation

iTunes iBooks App Store

Hardware & Software Platforms

MacOSx iWorks Mac iPhone iPad iPod Apple TV Retail & Distribution Apple Store Telecom Competitor Hardware

Appliances

Value Add: Vertical Integration

Content & Services

MobileMe iCloud
Netflix Streaming Technology iTunes iBooks App Store Hardware & Software Platforms

Content Aggregation

MacOSx iWorks Mac iPhone iPad iPod Apple TV Retail & Distribution Apple Store Telecom

Appliances

Apples Innovative Culture

Values, not Rules Do What is Important Freedom & Flexibility

Control the Message

Love & Cherish the Creatives

Think Different
Get Marketing

Empower Employees to Make a Difference

Do Everything Important Internally

Make a Dent in the Universe

Values, not Rules Do What is Important Freedom & Flexibility

Control the Message

Love & Cherish the Creatives

Get Marketing

Think Different

Empower Employees to Make a Difference

Do Everything Important Internally

Make a Dent in the Universe

Apple-Netflix Integration Team

Apple CEO CEO, NFLX COO, NFLX HR NFLX

R&D Apple TV
Head of iTunes HR, Apple

Responsible for vision, direction and prioritization of all integration efforts

Integration Change Management

COMMUNICATION ORGANIZATION CULTURE

Integration Initiative
Communication Organization Culture

Goals

Facilitate integration effectiveness

Align Apple and Minimize integration Netflix to increase risks due to cultural efficiencies and realize differences synergies

Actions

Organize all stakeholders Establish 2-way feedback Launch internal communication campaign External PR Campaign

Maximize stakeholder buy-in and involvement Set crossorganizational hierarchy Monitor retention rates

Develop cultural transition strategy Deploy cultural progress surveys Put extra emphasis on gathering informal feedback

Acquisition Timeline

Begin integration due diligence Feb 1

Integration Team formed Feb 8

Set cross organizationa l hierarchy Feb 8

Deploy Cultural Progress Surveys March 1

Monitor retention rates March 1

February

| March

|October

| September
Integration Completed September 1

Netflix is acquired Feb 1

Communication Initiative launched Feb 8

Maximize stakeholder buyin and involvement March 1

Gather informal feedback March - October

Netflix Will Benefit from the Acquisition

Strategic Leveraging: Competitive Positioning: Cultural Fit Fiscal Incentives
Streaming Advantage & User Base 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