Revenue Recognition

12 Months Ended

Dec. 31, 2022

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 CE manufacturers, MVPDs, mobile operators and 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. However, if there is no distinct service provided in exchange for the payments made to the partners or if 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 revenues, paid net membership additions, and ending paid memberships by region for the years ended December 31, 2022, 2021 and 2020, respectively:

United States and Canada (UCAN)

	As of/ Year Ended December 31,
	2022		2021		2020
	(in thousands)
Revenues	$	14,084,643	$	12,972,100	$	11,455,396
Paid net membership additions (losses)	(919)		1,279		6,274
Paid memberships at end of period	74,296		75,215		73,936

Europe, Middle East, and Africa (EMEA)

	As of/ Year Ended December 31,
	2022		2021		2020
	(in thousands)
Revenues	$	9,745,015	$	9,699,819	$	7,772,252
Paid net membership additions	2,693		7,338		14,920
Paid memberships at end of period	76,729		74,036		66,698

Latin America (LATAM)

	As of/ Year Ended December 31,
	2022		2021		2020
	(in thousands)
Revenues	$	4,069,973	$	3,576,976	$	3,156,727
Paid net membership additions	1,738		2,424		6,120
Paid memberships at end of period	41,699		39,961		37,537

Asia-Pacific (APAC)

	As of/ Year Ended December 31,
	2022		2021		2020
	(in thousands)
Revenues	$	3,570,221	$	3,266,601	$	2,372,300
Paid net membership additions	5,391		7,140		9,259
Paid memberships at end of period	38,023		32,632		25,492

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 certain other promotions that may be offered by the Company to new or rejoining members. Certain members have the option to add extra member sub accounts. These extra member sub accounts are not included in paid memberships. 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, become 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 $13.0 billion, $12.1 billion and $10.8 billion for the years ended December 31, 2022, 2021 and 2020, respectively. DVD revenues were $0.1 billion, $0.2 billion, and $0.2 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

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 December 31, 2022, total deferred revenue was $1,265 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 $56 million increase in deferred revenue as compared to the balance of $1,209 million for the year ended December 31, 2021, is a result of the increase in membership fees billed due to increased memberships and acquisition-related deferred revenue.