Balance Sheet Components

Content Assets

Content assets consisted of the following:



	As of
	March 31, 2019		December 31, 2018
	(in thousands)
Licensed content, net	$	14,297,658	$	14,081,463

Produced content, net
Released, less amortization	2,737,677		2,403,896
In production	3,494,467		3,305,126
In development and pre-production	348,515		311,842
	6,580,659		6,020,864
DVD, net	10,468		9,813
Total	$	20,888,785	$	20,112,140

On average, over 90% of a licensed or produced streaming content asset is expected to be amortized within four years after its month of first availability.

As of March 31, 2019, approximately $5,415 million, $3,691 million, and $2,552 million of the $14,298 million unamortized cost of the licensed content is expected to be amortized in each of the next three years.

As of March 31, 2019, approximately $935 million, $756 million, and $559 million of the $2,738 million unamortized cost of the produced content that has been released is expected to be amortized in each of the next three years.

As of March 31, 2019, the amount of accrued participations and residuals was not material.

The following table represents the amortization of streaming content assets:



	Three Months Ended
	March 31, 2019		March 31, 2018
	(in thousands)
Licensed content	$	1,774,289	$	1,557,424
Produced content	350,397		191,420
Total streaming content	$	2,124,686	$	1,748,844

Property and Equipment, Net

Property and equipment and accumulated depreciation consisted of the following:



	As of
	March 31, 2019			December 31, 2018			Estimated Useful Lives
	(in thousands)
Leasehold improvements	294,358			282,028			Over life of lease
Information technology	229,168			224,296			3 years
Furniture and fixtures	70,125			63,667			3-15 years
Buildings	32,787			73,468			30 years
Corporate aircraft	99,009			62,560			8 years
DVD operations equipment	53,416			53,416			5 years
Machinery and equipment	2,117			1,692			3 years
Land	6,125			6,125
Capital work-in-progress	18,290			19,548
Property and equipment, gross	805,395			786,800
Less: Accumulated depreciation	(371,023		)	(368,519		)
Property and equipment, net	$	434,372		$	418,281

Leases

The Company has entered into operating leases primarily for real estate. These leases have terms which range from 1 year to 15 years, and often include one or more options to renew. These renewal terms can extend the lease term from 1 to 10 years, and are included in the lease term when it is reasonably certain that the Company will exercise the option. These operating leases are included in "Other non-current assets" on the Company's March 31, 2019 Consolidated Balance Sheet, and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are included in "Accrued expenses and other liabilities" and "Other non-current liabilities" on the Company's March 31, 2019 Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets of approximately $743 million and lease liabilities for operating leases of approximately $813 million on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $812 million and $888 million, respectively. The Company has entered into various short-term operating leases, primarily for marketing billboards, with an initial term of twelve months or less. These leases are not recorded on the Company's balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term. In the three months ended March 31, 2019, the Company recognized approximately $104 million in total lease costs, which was comprised of $43 million in operating lease costs for right-of-use assets and $61 million in short-term lease costs related to short-term operating leases.

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has certain contracts for real estate and marketing which may contain lease and non-lease components which it has elected to treat as a single lease component.

Information related to the Company's right-of-use assets and related lease liabilities were as follows:



	Three Months Ended
	March 31, 2019
	(in thousands)
Cash paid for operating lease liabilities	$	37,653
Right-of-use assets obtained in exchange for new operating lease obligations ⁽¹⁾	842,395
Weighted-average remaining lease term	8.5 years
Weighted-average discount rate	5.7		%

(1) Includes $743 million for operating leases existing on January 1, 2019 and $99 million for operating leases that commenced in the first quarter of 2019.

Maturities of lease liabilities as of March 31, 2019 were as follows (in thousands):



Due in 12 month period ended March 31,
2020	167,238
2021	142,248
2022	133,824
2023	113,437
2024	109,572
Thereafter	477,116
	1,143,435
Less imputed interest	(255,913	)
Total lease liabilities	887,522

Current operating lease liabilities	122,498
Non-current operating lease liabilities	765,024
Total lease liabilities	887,522

The Company has additional operating leases for real estate of $815 million which have not commenced as of March 31, 2019, and as such, have not been recognized on the Company's Consolidated Balance Sheet. These operating leases are expected to commence between 2019 and 2020 with lease terms between 5 years and 15 years.

Deferred Revenue

The Company’s primary source of revenues are from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. The Company is the principal in all its relationships where partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet service providers (“ISPs”), provide access to the service as the Company retains control over service delivery to its members. Typically, payments made to the partners, such as for marketing, are expensed, but in the case where the price that the member pays is established by the partners and there is no standalone price for the Netflix service (for instance, in a bundle), these payments are recognized as a reduction of revenues.

Deferred revenue consists of membership fees billed that have not been recognized, as well as gift and other prepaid memberships that have not been fully redeemed. As of March 31, 2019, total deferred revenue was $809 million, the vast majority of which was related to membership fees billed that are expected to be recognized as revenue within the next month. The remaining deferred revenue balance, which is related to gift cards and other prepaid memberships, will be recognized as revenue over the period of service after redemption, which is expected to occur over the next 12 months. The $48 million increase in deferred revenue as compared to the year ended December 31, 2018 is a result of the increase in membership fees billed due to increased members and average monthly revenue per paying member.

Other Current Assets

Other current assets consisted of the following:



	As of
	March 31, 2019		December 31, 2018
	(in thousands)
Trade receivables	$	432,955	$	362,712
Prepaid expenses	177,460		178,833
Other	209,935		206,921
Total other current assets	$	820,350	$	748,466