NetFlix 2013 Annual Report Download - page 25

In the International streaming segment, we derive revenues from monthly membership fees for services
consisting solely of streaming content offered through a membership plan priced at the equivalent of USD $7 to
$14 per month. We launched our streaming service in Canada in September 2010 and have continuously
expanded our services internationally with launches in Latin America in September 2011, the U.K. and Ireland in
January 2012, Finland, Denmark, Sweden and Norway in October 2012 and most recently the Netherlands in
September 2013. We plan to continue to expand our services internationally and expect a substantial European
expansion in 2014.
The $424.8 million increase in our international revenues was primarily due to the 134% growth in the
average number of paid international memberships. International streaming memberships account for 25% of
total streaming memberships at the end of 2013.
The $299.2 million increase in international cost of revenues was primarily due to a $272.0 million increase
in content licensing expenses. This increase was primarily attributable to continued investments in existing and
new streaming content including content to support the launch of our service in the Nordics (launched in the
fourth quarter of 2012) and the Netherlands (launched in the third quarter of 2013). Other costs increased
$27.2 million due to increases in our content delivery expenses, costs associated with our customer service call
centers and payment processing fees, all driven by our growing member base.
International marketing expenses for the year ended December 31, 2013 increased $10.9 million as
compared to the year ended December 31, 2012 due to our expansion in the Nordics and the Netherlands offset
partially by a decrease in spending in other territories.
International contribution losses improved $114.8 million year over year, as a result of growing
memberships and revenues faster than content and marketing spending. Our International streaming segment
does not benefit from the established member base that exists for the Domestic segments. As a result of having to
build a member base from zero, investments in streaming content and marketing programs for our International
segment are larger initially relative to revenues, in particular as new territories are launched. The contribution
losses for our International segment have been significant due to investments in streaming content and marketing
programs to drive membership growth and viewing in our international markets.
Domestic DVD Segment
As of /Year Ended December 31, Change
2013 2012 2013 vs. 2012
(in thousands, except percentages)
Members:
Net losses .............................. (1,294) (2,941) (56)%
Members at end of period .................. 6,930 8,224 (16)%
Paid members at end of period .............. 6,765 8,049 (16)%
Contribution profit:
Revenues ............................... $910,797 $1,136,872 (20)%
Cost of revenues ......................... 459,349 591,432 (22)%
Marketing .............................. 12,466 7,290 71%
Contribution profit ....................... 438,982 538,150 (18)%
Contribution margin ...................... 48% 47%
In the Domestic DVD segment, we derive revenues from our DVD-by-mail membership services. The price
per plan for DVD-by-mail varies from $4.99 to $43.99 per month according to the plan chosen by the member.
DVD-by-mail plans differ by the number of DVDs that a member may have out at any given point. Members
electing access to high definition Blu-ray discs in addition to standard definition DVDs pay a surcharge ranging
from $2 to $4 per month for our most popular plans.
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