Segment Information

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. 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. As of the first quarter of 2019, the Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. 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 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 streaming segment derives revenues from monthly membership fees for services related to streaming content to 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, as well as the Company's operating lease right-of-use assets recognized on the Consolidated Balance Sheets as of March 31, 2019, were located as follows:



	As of
	March 31, 2019		December 31, 2018
	(in thousands)
United States	$	1,102,154	$	381,947
International	144,012		36,334

The following tables represent segment information for the three months ended March 31, 2019:



	As of/ Three Months Ended March 31, 2019
	Domestic Streaming		International Streaming		Domestic DVD			Consolidated
	(in thousands)
Total paid memberships at end of period (1)	60,229		88,634		2,565
Total paid net membership additions (1)	1,743		7,861		(141		)
Total free trials at end of period	1,563		5,003		22
Revenues	$	2,073,555	$	2,366,749	$	80,688		$	4,520,992
Cost of revenues	1,139,535		1,697,121		33,958			2,870,614
Marketing	221,046		395,532		—			616,578
Contribution profit	$	712,974	$	274,096	$	46,730		$	1,033,800
Other operating expenses								574,716
Operating income								459,084
Other income (expense)								(59,425		)
Provision for income taxes								55,607
Net income								$	344,052

The following tables represent segment information for the three months ended March 31, 2018:



	As of/ Three Months Ended March 31, 2018
	Domestic Streaming		International Streaming		Domestic DVD			Consolidated
	(in thousands)
Total paid memberships at end of period (1)	55,087		63,815		3,138
Total paid net membership additions (1)	2,277		5,981		(192		)
Total free trials at end of period	1,618		4,475		29
Revenues	$	1,820,019	$	1,782,086	$	98,751		$	3,700,856
Cost of revenues	936,480		1,321,706		42,393			2,300,579
Marketing	250,719		286,058		—			536,777
Contribution profit	$	632,820	$	174,322	$	56,358		$	863,500
Other operating expenses								416,922
Operating income								446,578
Other income (expense)								(146,962		)
Provision for income taxes								9,492
Net income								$	290,124

(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.

The following table represents the amortization of content assets:



	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Three months ended March 31,
2019	$	864,311	$	1,260,375	$	8,509	$	2,133,195
2018	730,272		1,018,572		11,134		1,759,978