NetFlix 2013 Annual Report Download - page 71

Download and view the complete annual report

Please find page 71 of the 2013 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 78

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78

12. Segment Information
Beginning in the fourth quarter of 2011, the Company has three operating segments: Domestic streaming,
International streaming and Domestic DVD. Segment information is presented along the same lines that the
Company’s chief operating decision maker reviews the operating results in assessing performance and allocating
resources. The Company’s chief operating decision maker reviews revenue and contribution profit for each of the
reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing
expenses directly incurred by the segment.
The Domestic and International streaming segments derive revenues from monthly membership fees for
services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly
membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment card fees are
attributed to the operating segment based on the nature of the underlying membership (DVD or streaming) and
the geographic region from which the membership originates. There are no internal revenue transactions between
the Company’s reporting segments.
Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by
the segment to obtain content and deliver it to the specific region. Marketing expenses are primarily comprised of
advertising expenses which are generally included in the segment in which the expenditures are directly incurred.
The Company’s long-lived tangible assets were located as follows:
As of December 31,
2013 2012
(in thousands)
United States ................................................... $126,455 $127,712
International ................................................... 7,150 3,969
Prior to the fourth quarter of 2011 the Company had two operating segments: Domestic and International.
During this time, the Company’s domestic streaming content and DVD-by-mail operations were combined.
Members in the United States were able to receive both streaming content and DVDs under a single hybrid plan.
Accordingly, revenues were generated and marketing expenses were incurred in connection with the membership
offerings as a whole. Therefore, it is impracticable to allocate revenues or marketing expenses or present discrete
segment information for the Domestic streaming and Domestic DVD segments for periods prior to the fourth
quarter of 2011.
In the third quarter of 2011, the Company made certain changes to its domestic pricing and plan structure
which require members who wish to receive both DVDs-by-mail and streaming content to have two separate
membership plans. Following this change, beginning in the fourth quarter of 2011, the Company was able to
generate discrete financial information for its Domestic DVD and Domestic streaming operations and began
reporting this information to the chief operating decision maker for review.
69