Revenue Recognition

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The Company's primary source of revenues is 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.

The following tables summarize streaming revenue, paid net membership additions, and paid memberships at end of period by region for the three and nine months ended September 30, 2020 and September 30, 2019, respectively:

United States and Canada (UCAN)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)
Revenues	$	2,933,445	$	2,621,250	$	8,475,891	$	7,379,300
Paid net membership additions	177		613		5,419		2,357
Paid memberships at end of period (1)	73,081		67,114		73,081		67,114

Europe, Middle East, and Africa (EMEA)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)
Revenues	$	2,019,083	$	1,428,040	$	5,635,094	$	3,980,506
Paid net membership additions	759		3,126		10,464		9,537
Paid memberships at end of period (1)	62,242		47,355		62,242		47,355

Latin America (LATAM)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)
Revenues	$	789,384	$	741,434	$	2,368,205	$	2,049,042
Paid net membership additions	256		1,490		4,907		3,303
Paid memberships at end of period (1)	36,324		29,380		36,324		29,380

Asia-Pacific (APAC)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)
Revenues	$	634,891	$	382,304	$	1,687,691	$	1,051,400
Paid net membership additions	1,012		1,543		7,271		3,878
Paid memberships at end of period (1)	23,504		14,485		23,504		14,485

(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 cancellations, 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.

Total U.S. revenues, inclusive of DVD revenues not reported in the tables above, were $2.8 billion and $8.0 billion, respectively, for the three and nine months ended September 30, 2020, and $2.5 billion and $7.0 billion, respectively, for the three and nine months ended September 30, 2019. DVD revenues were $59 million and $185 million, respectively, for the three and nine months ended September 30, 2020, and $72 million and $229 million, respectively, for the three and nine months ended September 30, 2019.

Deferred revenue consists of membership fees billed that have not been recognized, as well as gift cards and other prepaid memberships that have not been fully redeemed. As of September 30, 2020, total deferred revenue was $1,040 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 $115 million increase in deferred revenue as compared to the balance of $925 million for the year ended December 31, 2019 is a result of the increase in membership fees billed due to increased memberships.