Segment Information

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company has three operating segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented along the same lines that the Company’s chief operating decision maker reviews the operating results in assessing performance and allocating resources. The Company’s chief operating decision maker reviews revenues and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and direct marketing expenses.

The Domestic and International streaming segments derive revenues from monthly membership services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly membership services consisting solely of DVD-by-mail. Revenues and the related credit card fees are attributed to the operating segment based on the nature of the underlying membership (DVD or streaming) and the geographic region from which the membership originates. There are no internal revenue transactions between the Company’s reporting segments.

Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by the segment to obtain content and deliver it to the specific region. Marketing expenses are primarily comprised of advertising expenses which are generally included in the segment in which the expenditures are directly incurred.

As of March 31, 2013, the Company had $4.1 million in long-lived tangible assets located internationally and $125.2 million in long-lived tangible assets located in the United States. As of December 31, 2012 the Company had $4.0 million in long-lived tangible assets located internationally and $127.7 million in long-lived tangible assets located in the United States.

The following tables represent segment information for the quarter ended March 31, 2013:

	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	29,174		7,142			7,983		—
Revenues	$	638,649	$	142,019		$	243,293	$	1,023,961
Cost of revenues	436,506		165,024			125,333		726,863
Marketing	70,793		53,915			4,467		129,175
Contribution profit (loss)	$	131,350	$	(76,920	)	$	113,493	$	167,923
Other operating expenses								136,101
Operating income								31,822
Other income (expense)								(30,892		)
Benefit for income taxes								(1,759		)
Net income								$	2,689

	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,332,402	$	606,362	$	29,415	$	2,968,179
Amortization of content library	335,748		149,992		18,237		503,977

The following tables represent the Company’s segment information for the quarter ended March 31, 2012:

	As of/ Three months ended March 31, 2012
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	23,410		3,065			10,089		—
Revenues	$	506,665	$	43,425		$	319,701	$	869,791
Cost of revenues	360,776		91,411			171,746		623,933
Marketing	73,405		54,697			1,826		129,928
Contribution profit (loss)	$	72,484	$	(102,683	)	$	146,129	$	115,930
Other operating expenses								117,865
Operating loss								(1,935		)
Other income (expense)								(5,090		)
Benefit for income taxes								(2,441		)
Net loss								$	(4,584	)

	Three months ended March 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content library	$	254,525	$	85,211	$	20,046	$	359,782

The following tables represent the Company’s segment information as of December 31, 2012:

	As of December 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,317,070	$	527,235	$	29,865	$	2,874,170

(1) A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with these services, the Company offers free-trial memberships to new and certain rejoining members.  For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership would be canceled and cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.