NetFlix 2011 Annual Report Download - page 60

Fair value is a market-based measurement that should be determined based on the assumptions that market
participants would use in pricing an asset or liability. The hierarchy level assigned to each security in the
Company’s available-for-sale portfolio and cash equivalents is based on its assessment of the transparency and
reliability of the inputs used in the valuation of such instrument at the measurement date. The fair value of
available-for-sale securities and cash equivalents included in the Level 1 category is based on quoted prices that
are readily and regularly available in an active market. The fair value of available-for-sale securities included in
the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement
date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly.
These values were obtained from an independent pricing service and were evaluated using pricing models that
vary by asset class and may incorporate available trade, bid and other market information and price quotes from
well-established independent pricing vendors and broker-dealers. The Company’s procedures include controls to
ensure that appropriate fair values are recorded, such as comparing prices obtained from multiple independent
sources. See Note 4 to the consolidated financial statements for further information regarding the fair value of the
Company’s senior convertible notes and senior notes.
Because the Company does not intend to sell the investments that are in an unrealized loss position and it is
not likely that the Company will be required to sell any investments before recovery of their amortized cost basis,
the Company does not consider those investments with an unrealized loss to be other-than-temporarily impaired
at December 31, 2011. There were no material other-than-temporary impairments or credit losses related to
available-for-sale securities in 2011, 2010 or 2009.
The gross realized gains on the sales of available-for-sale securities for the three years ended December 31,
2011, 2010 and 2009 were $0.7 million, $1.0 million and $1.9 million, respectively. There were no material gross
realized losses from the sale of available-for-sale investments for the years ended December 31, 2011, 2010 and
2009. Realized gains and losses and interest income are included in interest and other income.
The estimated fair value of short-term investments by contractual maturity as of December 31, 2011 is as
follows:
(in thousands)
Due within one year .............................................. $108,382
Due after one year and through 5 years ............................... 180,373
Due after 5 years and through 10 years ............................... —
Due after 10 years ............................................... 1,003
Total short-term investments ....................................... $289,758
3. Balance Sheet Components
Content Library
Content library consisted of the following:
As of December 31,
2011 2010
Streaming DVD Total Streaming DVD Total
(in thousands)
Total content library, gross ........... $2,552,284 $ 599,155 $ 3,151,439 $ 441,637 $ 627,392 $1,069,029
Accumulated amortization ........... (632,270) (552,526) (1,184,796) (143,227) (563,823) (707,050)
Total content library, net ............. 1,920,014 46,629 1,966,643 298,410 63,569 361,979
Current content library, net ........... 919,709 — 919,709 181,006 — 181,006
Non-current content library, net . . . $1,000,305 $ 46,629 $ 1,046,934 $ 117,404 $ 63,569 $ 180,973
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