Because the NetFlix business model focused on the acquisition and retention of individual
subscribers, McCarthy projected future NetFlix financing requirements using a subscriber model.
First, McCarthy modeled the expected cash flows from a newly acquired subscriber, including the
subscription fees paid, the expected number of discs rented, the costs associated with shipping and
disc acquisition, and any other cash flows that varied directly with the acquisition or loss of an
individual subscriber. Second, McCarthy modeled the likelihood that any given subscriber would be
retained over the forecast horizon. And last, McCarthy used the projected number of future new
subscribers together with the number of existing subscribers to forecast the company’s expected
aggregate cash flows.