Replace:

By contrast, Netflix went to the public market, and its IPO brought in $86 million. The total enterprise value calculation suggests that 600,000 customers with a lifetime value of $20 should have been worth about $120 million. However, the market didn't see it that way, perhaps counting Netflix's ever-growing inventory of DVDs to be a cost as well as the key benefit to consumers.

with:

By contrast, Netflix went to the public market, and its IPO brought in $86 million. The total enterprise value calculation suggests that 600,000 customers with a lifetime value of $20 should have been worth about $12 million. The expected value of a Netflix subscriber according to the simplified calculation on page 27 is noted to be about $60/year/per subscriber if 28% of long-termers end up becoming a loyal subscriber for five years. So the market likely took into account for Netflix’s IPO value, the continuing market shift towards DVDs away from DIVX and VHS, the solid subscription-based revenue stream of loyal customers over 5 years time plus the growing inventory value of millions of new release DVDs distributed efficiently without retail & retail costs.