Accounting
The trend in Netflix's contribution margin ratio over the past three years is as follows. The costs are the COGS plus 30% of other expenses. The remaining 70% of expenses are assumed to be fixed.
Netflix
Revenue
Costs
Contribution
Contribution Margin
The contribution margin for Netflix is therefore lower than it was a couple of years ago. The long-term trend is tough to determine, but it seems that Netflix saw its contribution margin take a hit in 2012, only to begin the process of building it back in 2013. Or alternately, this new level is basically a "new normal" level for the company, with the higher level from 2011 unlikely to be reached again for the foreseeable future. Either is possible without knowing the reason why the contribution margin declined so much in 2012.
The breakeven point for Netflix given this is as follows:
Breakeven
Variable Costs
Fixed Costs
Breakeven Revenue
What this means is that the company's breakeven revenue point has increased over the past...
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