Segment Information

3 Months Ended

Mar. 31, 2014

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 marketing expenses directly incurred by the segment.

The Domestic and International streaming segments derive revenues from monthly membership fees for services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment card fees are attributed to the operating segment based on the nature of the underlying membership (streaming or DVD) 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.

The Company's long-lived tangible assets were located as follows:

	As of
	March 31, 2014		December 31, 2013
	(in thousands)
United States	$	126,330	$	126,455
International	7,143		7,150

The following tables represent segment information for the three months ended March 31, 2014 and 2013:

	As of/ Three months ended March 31, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	35,674		12,683			6,652		—
Revenues	$	798,617	$	267,118		$	204,354	$	1,270,089
Cost of revenues	517,094		245,267			106,825		869,186
Marketing	80,258		56,840			—		137,098
Contribution profit (loss)	$	201,265	$	(34,989	)	$	97,529	$	263,805
Other operating expenses								166,210
Operating income								97,595
Other income (expense)								(8,651		)
Provision for income taxes								35,829
Net income								$	53,115

	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	440,334		166,892			129,726		736,952
Marketing	66,965		52,047			74		119,086
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

The following table represents the amortization of the content library:

	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
Three months ended March 31,	(in thousands)
2014	$	386,315	$	214,420	$	16,121	$	616,856
2013	335,748		149,992		18,237		503,977

The following table represents total content library, net:

	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
As of March 31, 2014	$	3,009,260	$	918,979	$	22,645	$	3,950,884
As of December 31, 2013	2,973,023		804,690		19,779		3,797,492

(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. Memberships are assigned to territories based on the geographic location used at time of sign up as determined by the Company's internal systems, which utilize industry standard geo-location technology. 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.