NetFlix 2009 Annual Report Download - page 37

Results of Operations
The following table sets forth, for the periods presented, the line items in our consolidated statements of
operations as a percentage of total revenues. The information contained in the table below should be read in
conjunction with the financial statements and notes thereto included in Item 8, Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.
Year Ended December 31,
2009 2008 2007
Revenues ............................................................. 100.0% 100.0% 100.0%
Costs of revenues:
Subscription ....................................................... 54.4 55.8 55.1
Fulfillment expenses ................................................ 10.2 10.9 10.1
Total cost of revenues ........................................... 64.6 66.7 65.2
Gross profit ........................................................... 35.4 33.3 34.8
Operating expenses:
Technology and development ......................................... 6.9 6.6 5.9
Marketing ......................................................... 14.2 14.6 18.1
General and administrative ........................................... 3.1 3.6 4.3
Gain on disposal of DVDs ............................................ (0.3) (0.4) (0.5)
Gain on legal settlement .............................................. — — (0.6)
Total operating expenses ......................................... 23.9 24.4 27.2
Operating income ....................................................... 11.5 8.9 7.6
Other income (expense):
Interest expense .................................................... (0.4) (0.2) (0.1)
Interest and other income (expense) .................................... 0.4 0.9 1.7
Income before income taxes .............................................. 11.5 9.6 9.2
Provision for income taxes ................................................ 4.6 3.5 3.7
Net income ............................................................ 6.9% 6.1% 5.5%
Revenues
We derive substantially all of our revenues from monthly subscription fees and recognize subscription
revenues ratably over each subscriber’s monthly subscription period. We record refunds to subscribers as a
reduction of revenues. We currently generate all our revenues in the United States, although we plan to launch a
limited international expansion with a streaming subscription service in 2010.
We offer a variety of subscription plans combining streaming movies and TV episodes over the Internet and
sending DVDs by mail. The price per plan varies based on the number of DVDs that a subscriber has out at any
given point and based on whether the service has limited or unlimited usage. All of our unlimited plans allow the
subscriber unlimited streaming to their computer or Netflix Ready Device. The vast majority of our subscriber
base has chosen a 1, 2 or 3-out Unlimited plan. Customers electing access to the high definition Blu-ray discs in
addition to standard definition DVDs pay a surcharge ranging from $1 to $4 for our most popular plans. Pricing
of our plans is as follows:
Price per
month
1-out Limited ........................................................ $ 4.99
1-out Unlimited ...................................................... 8.99
2-out Unlimited ...................................................... 13.99
3-out Unlimited ...................................................... 16.99
All other Unlimited Plans .............................................. 23.99 to 47.99
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