NetFlix 2011 Annual Report Download - page 25

As of / Year Ended December 31,
2011 2010 2009 2008 2007
(in thousands)
Other Data:
Total consolidated unique subscribers at end of
period ................................... 26,253 20,010 12,268 9,390 7,479
Net consolidated unique subscriber additions during
period ................................... 6,243 7,742 2,878 1,911 1,163
For purposes of determining the number of unique subscribers, domestic subscribers who have elected both a
DVD and a streaming subscription plan are considered a single unique subscriber.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are the world’s leading Internet subscription service for enjoying TV shows and movies. Our
subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs,
computers and mobile devices and in the United States, our subscribers can receive standard definition DVDs,
and their high definition successor, Blu-ray discs (collectively referred to as “DVD”), delivered quickly to their
homes.
Our core strategy is to grow our streaming subscription business domestically and globally. We are
continuously improving the customer experience, with a focus on expanding our streaming content, enhancing
our user interface and extending our streaming service to even more Internet-connected devices, while staying
within the parameters of our consolidated net income and operating segment contribution profit targets. In the
past, we have focused on operating margin targets. Going forward, we will be operating within the parameters of
contribution profit targets for each of our operating segments. Contribution profit is defined as revenue less cost
of revenues and marketing expenses.
We are a pioneer in the Internet delivery of TV shows and movies, launching our streaming service in 2007.
Since this launch, we have developed an ecosystem of Internet-connected devices and have licensed increasing
amounts of content that enable consumers to enjoy TV shows and movies directly on their TVs, computers and
mobile devices. As a result of these efforts, we have experienced growing consumer acceptance of and interest in
the delivery of TV shows and movies directly over the Internet. We believe that the DVD portion of our domestic
service will be a fading differentiator to our streaming success.
Prior to July 2011, in the United States, our streaming and DVD-by-mail operations were combined and
subscribers could receive both streaming content and DVDs under a single “hybrid” plan. In July 2011, we
introduced DVD only plans and separated the combined plans, making it necessary for subscribers who wish to
receive both DVDs-by-mail and streaming content to have two separate subscription plans. This resulted in a
price increase for our members who were taking a combination of our unlimited DVDs-by-mail and unlimited
streaming services. We made a subsequent announcement during the third quarter of 2011 concerning the
rebranding of our DVD-by-mail service and the separation of the DVD-by-mail and streaming websites. The
consumer reaction to the price change, and to a lesser degree, the branding announcement, was very negative
leading to significant customer cancellations. We subsequently retracted our plans to rebrand our DVD-by-mail
service and separate the DVD-by-mail and streaming websites.
In September 2010, we began international operations by offering our streaming service in Canada. In
September 2011, we expanded our streaming service to Latin America and the Caribbean. In January 2012, we
launched our streaming service in the UK and Ireland. We anticipate significant contribution losses in the
International streaming segment in 2012. Until we reach our goal of global profitability, we do not intend to
launch additional international markets.
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