Revenue Recognition

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue RecognitionThe 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. 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 Company also earns revenue from advertisements presented on its streaming service, consumer products and various other sources. Revenues earned from sources other than monthly membership fees were not material for the three and nine months ended September 30, 2023 and September 30, 2022.

The following tables summarize revenues, paid net membership additions (losses), and ending paid memberships by region for the three and nine months ended September 30, 2023 and September 30, 2022, respectively:

United States and Canada (UCAN)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
	(in thousands)
Revenues	$	3,735,133	$	3,601,565	$	10,943,226	$	10,489,852
Paid net membership additions (losses)	1,750		104		3,025		(1,828)
Paid memberships at end of period (1)	77,321		73,387		77,321		73,387

Europe, Middle East, and Africa (EMEA)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
	(in thousands)
Revenues	$	2,693,146	$	2,375,814	$	7,772,957	$	7,394,880
Paid net membership additions (losses)	3,953		568		7,031		(502)
Paid memberships at end of period (1)	83,760		73,534		83,760		73,534

Latin America (LATAM)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
	(in thousands)
Revenues	$	1,142,811	$	1,023,945	$	3,290,438	$	3,053,127
Paid net membership additions (losses)	1,179		312		1,946		(25)
Paid memberships at end of period (1)	43,645		39,936		43,645		39,936

Asia-Pacific (APAC)

	As of/ Three Months Ended				As of/ Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
	(in thousands)
Revenues	$	948,216	$	889,037	$	2,801,012	$	2,713,510
Paid net membership additions (losses)	1,881		1,429		4,404		3,596
Paid memberships at end of period (1)	42,427		36,228		42,427		36,228

(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 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 $3.5 billion and $10.1 billion, respectively, for the three and nine months ended September 30, 2023 and $3.3 billion and $9.7 billion, respectively, for the three and nine months ended September 30, 2022. DVD revenues were $22 million and $83 million, respectively, for the three and nine months ended September 30, 2023 and $35 million and $112 million, respectively, for the three and nine months ended September 30, 2022.

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, 2023, total deferred revenue was $1,306 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 $42 million increase in deferred revenue as compared to the balance of $1,265 million as of December 31, 2022 is a result of the increase in membership fees billed due to increased memberships.