Netflix Company became globally known when it changed its business model many times, and this has been the main reason behind the growth of the company. However, the breakthrough of Netflix was achieved when it acquired licensing requirements to stream video contents.  Netflix experienced market risks as the prices of video content streaming fluctuated despite the fact Netflix Company had already made fixed price deals with premium channels. Netflix incurred more costs in the streaming of videos since the content creators had sold their rights for content distribution to premium television channels.

For Netflix Company to amortize content production, it should base on the historical and estimated viewing patterns. It should amortize the content on the consolidated operations statement on a straight line over the contractual window of estimated time of usage starting with the month of first availability( Zhang, 2016). The amortization period of Netflix Company usually takes an approximate of four years. I agree with the rate of declining rate of amortization in Netflix as it faces unhealthy competition alongside the current rate of price fluctuations.

In the deal done by Netflix and CBS in signing a 2-year content-streaming deal, Netflix made a contract which restricted the validity in length of streaming videos. Content by Netflix should be considered as an asset as the company will earn revenue from the signed contract and amortize the asset at will. In a deal where Netflix signed a contract with Epixto Stream Lionsgate, MGM, Paramount Films. Netflix can access content from Epix bought it did not sign for the purchase of rights. The deal also does not indicate the actual length of rights thus, and amortization is not possible; hence it cannot be listed as an asset.

Reference

Zhang, S. T. (2016). Firm valuation from customer equity: When does it work and when does it fail. International Journal of Research in Marketing, 33(4), 966-970.

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