Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented in the same manner that the Company’s chief operating decision maker ("CODM") reviews the operating results in assessing performance and allocating resources. The Company’s CODM 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 Company has aggregated the results of the International operating segments into one reportable segment because these operating segments share similar long-term economic and other qualitative characteristics.

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 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. Content rights increasingly include multiple geographies as the Company aspires to obtain global content rights to support global expansion. The Company allocates this content between the International and Domestic segments based on estimated fair market value. 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, 2015		December 31, 2014
	(in thousands)
United States	$	135,080	$	138,704
International	10,736		11,171

The following table represents segment information for the quarter ended March 31, 2015:

	As of/ Three months ended March 31, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	41,397		20,877			5,564		—
Revenues	$	984,532	$	415,397		$	173,200	$	1,573,129
Cost of revenues	582,529		375,278			88,594		1,046,401
Marketing	89,551		105,126			—		194,677
Contribution profit (loss)	$	312,452	$	(65,007	)	$	84,606	$	332,051
Other operating expenses								234,595
Operating income								97,456
Other income (expense)								(59,030		)
Provision for income taxes								14,730
Net income								$	23,696

The following table represents segment information for the quarter ended March 31, 2014:

	As of/ Three months ended March 31, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships 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

The following table represents the amortization of the content library:

	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
Three months ended March 31,	(in thousands)
2015	$	431,989	$	317,529	$	21,185	$	770,703
2014	386,315		214,420		16,121		616,856

The following table represents total content library, net:

	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
As of March 31, 2015	$	3,966,867	$	1,685,671	$	30,262	$	5,682,800
As of December 31, 2014	3,476,226		1,392,701		30,101		4,899,028

(1) A membership (also referred to as a subscription or member) 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 membership in the above metrics, a method of payment is required to be provided even during the free-trial period. Total memberships therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.