Segment Information

The Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. 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. The Company’s CODM reviews revenue 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 consisting solely of streaming content to the members in the United States. The International streaming segment derives revenues from monthly membership fees for services consisting solely of 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 card 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 vast 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 primarily attributed to the operating segment based on amounts directly incurred by the segment. 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 were located as follows:



	As of December 31,
	2017		2016
	(in thousands)
United States	$	289,875	$	236,977
International	29,529		13,418

The following tables represent segment information for the year ended December 31, 2017:



	As of/Year ended December 31, 2017
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	54,750		62,832		3,383
Revenues	$	6,153,025	$	5,089,191	$	450,497	$	11,692,713
Cost of revenues	3,319,230		4,137,911		202,525		7,659,666
Marketing	553,331		724,691		—		1,278,022
Contribution profit	$	2,280,464	$	226,589	$	247,972	2,755,025
Other operating expenses							1,916,346
Operating income							838,679
Other income (expense)							(353,358		)
Benefit from income taxes							(73,608		)
Net income							$	558,929



	Year ended December 31, 2017
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	2,756,947	$	3,440,870	$	60,657	$	6,258,474

The following tables represent segment information for the year ended December 31, 2016:



	As of/Year ended December 31, 2016
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	49,431		44,365			4,114		—
Revenues	$	5,077,307	$	3,211,095		$	542,267	$	8,830,669
Cost of revenues	2,855,789		2,911,370			262,742		6,029,901
Marketing	382,832		608,246			—		991,078
Contribution profit (loss)	$	1,838,686	$	(308,521	)	$	279,525	1,809,690
Other operating expenses								1,429,897
Operating income								379,793
Other income (expense)								(119,286		)
Provision for income taxes								73,829
Net income								$	186,678



	Year ended December 31, 2016
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	2,337,950	$	2,450,548	$	78,952	$	4,867,450

The following tables represent segment information for the year ended December 31, 2015:



	As of/Year ended December 31, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	44,738		30,024			4,904		—
Revenues	$	4,180,339	$	1,953,435		$	645,737	$	6,779,511
Cost of revenues	2,487,193		1,780,375			323,908		4,591,476
Marketing	317,646		506,446			—		824,092
Contribution profit (loss)	$	1,375,500	$	(333,386	)	$	321,829	1,363,943
Other operating expenses								1,058,117
Operating income								305,826
Other income (expense)								(163,941		)
Provision for income taxes								19,244
Net income								$	122,641



	Year ended December 31, 2015
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content assets	$	1,905,069	$	1,500,313	$	79,380	$	3,484,762



(1)	A membership (also referred to as a subscription) is defined as the right to receive Netflix service following sign-up and a method of payment being provided. 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 Company offers free-trial memberships to certain new and rejoining members. Total members include those who are on a free-trial as long as a method of payment has been provided. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.