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 revenue and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses 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. As markets within the Company's International streaming segment become profitable, the CODM increasingly focuses on the Company's global operating margin as a measure of profitability.

The Domestic streaming segment derives revenues from monthly membership fees for services related to streaming content to the members in the United States. The International streaming segment derives revenues from monthly membership fees for services related to streaming content to members outside of the United States. The Domestic DVD segment derives revenues from monthly membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment processing 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.

Amortization of streaming content assets makes up the majority of cost of revenues. The Company obtains multi-territory or global rights for its streaming content and allocates these rights between Domestic and International streaming segments based on estimated fair market value. Amortization of content assets and other expenses associated with the acquisition, licensing, and production of streaming content for each streaming segment thus includes both expenses directly incurred by the segment as well as an allocation of expenses incurred for global or multi-territory rights. Other costs of revenues such as delivery costs are either attributed to the operating segment based on amounts directly incurred by the segment or are allocated across segments by management. Marketing expenses consist primarily of advertising expenses and certain payments made to marketing partners, including CE manufacturers, MVPDs, mobile operators and ISPs, 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 December 31,
	2018		2017
	(in thousands)
United States	$	381,947	$	289,875
International	36,334		29,529

The following tables represent segment information for the year ended December 31, 2018:



	As of/Year ended December 31, 2018
	Domestic Streaming		International Streaming		Domestic DVD			Consolidated
	(in thousands)
Total paid memberships at end of period (1)	58,486		80,773		2,706
Total paid net membership additions (1)	5,676		22,939		(624		)
Total free trials at end of period	2,065		7,131		25
Revenues	$	7,646,647	$	7,782,105	$	365,589		$	15,794,341
Cost of revenues	4,038,394		5,776,047		153,097			9,967,538
Marketing	1,025,351		1,344,118		—			2,369,469
Contribution profit	$	2,582,902	$	661,940	$	212,492		3,457,334
Other operating expenses								1,852,108
Operating income								1,605,226
Other income (expense)								(378,768		)
Provision for income taxes								15,216
Net income								$	1,211,242



	Year Ended December 31, 2018
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	3,115,170	$	4,416,918	$	41,212	$	7,573,300

The following tables represent segment information for the year ended December 31, 2017.



	As of/Year ended December 31, 2017
	Domestic Streaming		International Streaming			Domestic DVD			Consolidated
	(in thousands)
Total paid memberships at end of period (1)	52,810		57,834			3,330
Total paid net membership additions (1)	4,905		16,649			(699		)
Total free trials at end of period	1,940		4,998			53
Revenues	$	6,153,025	$	5,089,191		$	450,497		$	11,692,713
Cost of revenues	3,470,859		4,359,616			202,525			8,033,000
Marketing	603,746		832,535			—			1,436,281
Contribution profit (loss)	$	2,078,420	$	(102,960	)	$	247,972		2,223,432
Other operating expenses									1,384,753
Operating income									838,679
Other income (expense)									(353,358		)
Benefit from income taxes									(73,608		)
Net income									$	558,929



	Year Ended December 31, 2017
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	2,756,947	$	3,440,870	$	60,657	$	6,258,474

The following tables represent segment information for the year ended December 31, 2016.



	As of/Year ended December 31, 2016
	Domestic Streaming		International Streaming			Domestic DVD			Consolidated
	(in thousands)
Total paid memberships at end of period (1)	47,905		41,185			4,029
Total paid net membership additions (1)	4,504		13,747			(758		)
Total free trials at end of period	1,526		3,180			85
Revenues	$	5,077,307	$	3,211,095		$	542,267		$	8,830,669
Cost of revenues	2,951,973		3,042,747			262,742			6,257,462
Marketing	412,928		684,591			—			1,097,519
Contribution profit (loss)	$	1,712,406	$	(516,243	)	$	279,525		1,475,688
Other operating expenses									1,095,895
Operating income									379,793
Other income (expense)									(119,286		)
Provision for income taxes									73,829
Net income									$	186,678



	Year Ended December 31, 2016
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	2,337,950	$	2,450,548	$	78,952	$	4,867,450



(1)	A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or other promotional offering by the Company to certain new and rejoining members. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations generally become effective at the end of the prepaid membership period. Involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. 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.