NetFlix 2012 Annual Report Download - page 66

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Content Liabilities
Content liabilities consisted of the following:
As of December 31,
2012 2011
(in thousands)
Current content liabilities .............................. $1,366,847 $ 935,036
Non-current content liabilities ........................... 1,076,622 739,628
Total content liabilities ................................ $2,443,469 $1,674,664
The Company typically enters into multi-year licenses with various content providers that may result in an
increase in the streaming content library and a corresponding increase in the streaming content liabilities. The
payment terms for these streaming license fees may extend over the term of the license agreement, which
typically ranges from six months to five years.
Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
As of December 31,
2012 2011
(in thousands)
Computer equipment ................... 3years $ 84,193 $ 67,090
Operations and other equipment .......... 5years 100,207 100,306
Software ............................ 3years 39,073 35,356
Furniture and fixtures .................. 3years 18,208 17,310
Building ............................ 30years 40,681 40,681
Leasehold improvements ............... Over life of lease 45,393 44,473
Capital work-in-progress ................................ 8,282 822
Property and equipment, gross ............................ 336,037 306,038
Less: Accumulated depreciation ........................... (204,356) (169,685)
Property and equipment, net .............................. $131,681 $ 136,353
Property and equipment, gross increased $30.0 million or 10% due primarily to increased investments in our
streaming content delivery network (“Open Connect”).
4. Long-term Debt
Senior Convertible Notes
In November 2011, the Company issued $200.0 million aggregate principal amount of zero coupon senior
convertible notes due on December 1, 2018 (the “Convertible Notes”) in a private placement offering to TCV
VII, L.P., TCV VII(A), L.P., and TCV Member Fund, L.P. A general partner of these funds also serves on the
Company’s Board of Directors, and as such, the issuance of the notes is considered a related party transaction.
The net proceeds to the Company were approximately $197.8 million. Debt issuance costs of $2.2 million (of
which $0.3 million was paid in the year ended December 31, 2012) were recorded in “Other non-current assets”
on the Consolidated Balance Sheets and are amortized over the term of the notes as interest expense. The
Convertible Notes are the Company’s general, unsecured obligations and are effectively subordinated to all of the
Company’s existing and future secured debt, to the extent of the assets securing such debt, and are structurally
subordinated to all liabilities of the Company’s subsidiaries, including trade payables. The Convertible Notes do
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