NetFlix 2010 Annual Report Download - page 61

Future minimum payments under lease financing obligations and non-cancelable operating leases as of
December 31, 2010 are as follows:
Year Ending December 31,
Future
Minimum
Payments
(in thousands)
2011 .......................................................... $17,877
2012 .......................................................... 16,158
2013 .......................................................... 13,208
2014 .......................................................... 10,169
2015 .......................................................... 8,022
Thereafter ...................................................... 11,177
Total minimum payments ......................................... $76,611
Rent expense associated with the operating leases was $14.9 million, $14.5 million and $13.7 million for the
years ended December 31, 2010, 2009 and 2008, respectively.
Streaming Content
The Company had $1,075.2 million and $114.8 million of commitments at December 31, 2010 and
December 31, 2009, respectively, related to streaming content license agreements that do not meet content library
recognition criteria.
The Company also has entered into certain license agreements that include an unspecified or a maximum
number of titles that the Company may or may not receive in the future and /or that include pricing contingent
upon certain variables, such as domestic theatrical exhibition receipts for the title. As of the reporting date, it is
unknown whether the Company will receive access to these titles or what the ultimate price per title will be.
However such amounts are expected to be significant.
The Company has licenses with certain, and is currently involved in negotiations with other, performing
rights organizations (“PROs”) that hold certain rights to music used in connection with streaming content. For
the latter, the Company accrues for estimated royalties that are due to PROs and adjusts these accruals based on
any changes in estimates. While we anticipate finalizing these negotiations, the outcome of these negotiations is
uncertain. Additionally, pending litigation between certain PROs and other third parties could impact our
negotiations. If the Company is unable to reach mutually acceptable terms with the PROs, the Company could
become involved in similar litigation. The results of any negotiation or litigation may be materially different
from management’s estimates.
Litigation
From time to time, in the normal course of its operations, the Company is a party to litigation matters and
claims, including claims relating to employee relations, business practices and patent infringement. Litigation can
be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings
are difficult to predict and the Company’s view of these matters may change in the future as the litigation and
events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision
for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on
the Company’s operations or its financial position, liquidity or results of operations.
On March 29, 2010, Parallel Networks, LLC filed a complaint for patent infringement against the Company
and others in the United States District Court for the Eastern District of Texas, captioned Parallel Networks, LLC
v. Abercrombie & Fitch Co., et. al, Civil Action No 6:10-cv-00111-LED. The complaint alleges that the
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