NETFLIX INC, 10-K filed on 1/29/2018
Annual Report
v3.8.0.1
Document And Entity Information - USD ($)
12 Months Ended
Dec. 31, 2017
Jan. 25, 2018
Jun. 30, 2017
Document And Entity Information [Abstract]      
Entity Registrant Name NETFLIX INC    
Entity Central Index Key 0001065280    
Current Fiscal Year End Date --12-31    
Entity Filer Category Large Accelerated Filer    
Document Type 10-K    
Document Period End Date Dec. 31, 2017    
Document Fiscal Year Focus 2017    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   433,948,461  
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Public Float     $ 54,917,149,461
v3.8.0.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]      
Revenues $ 11,692,713 $ 8,830,669 $ 6,779,511
Cost of revenues 7,659,666 6,029,901 4,591,476
Marketing 1,278,022 991,078 824,092
Technology and development 1,052,778 852,098 650,788
General and administrative 863,568 577,799 407,329
Operating income 838,679 379,793 305,826
Other income (expense):      
Interest expense (238,204) (150,114) (132,716)
Interest and other income (expense) (115,154) 30,828 (31,225)
Income before income taxes 485,321 260,507 141,885
Provision for (benefit from) income taxes (73,608) 73,829 19,244
Net income $ 558,929 $ 186,678 $ 122,641
Earnings per share:      
Basic (in USD per share) $ 1.29 $ 0.44 $ 0.29
Diluted (in USD per share) $ 1.25 $ 0.43 $ 0.28
Weighted-average common shares outstanding:      
Basic (in shares) 431,885 428,822 425,889
Diluted (in shares) 446,814 438,652 436,456
v3.8.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Comprehensive Income [Abstract]      
Net income $ 558,929 $ 186,678 $ 122,641
Other comprehensive income (loss):      
Foreign currency translation adjustments 27,409 (5,464) (37,887)
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $378, $126, and $(598), respectively 599 207 (975)
Total other comprehensive income (loss) 28,008 (5,257) (38,862)
Comprehensive income $ 586,937 $ 181,421 $ 83,779
v3.8.0.1
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Comprehensive Income [Abstract]      
Change in unrealized gains (losses) on available for sale securities, tax $ 378 $ 126 $ (598)
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities:      
Net income $ 558,929 $ 186,678 $ 122,641
Adjustments to reconcile net income to net cash used in operating activities:      
Additions to streaming content assets (9,805,763) (8,653,286) (5,771,652)
Change in streaming content liabilities 900,006 1,772,650 1,162,413
Amortization of streaming content assets 6,197,817 4,788,498 3,405,382
Amortization of DVD content assets 60,657 78,952 79,380
Depreciation and amortization of property, equipment and intangibles 71,911 57,528 62,283
Stock-based compensation expense 182,209 173,675 124,725
Excess tax benefits from stock-based compensation 0 (65,121) (80,471)
Other non-cash items 57,207 40,909 31,628
Foreign currency remeasurement loss on long-term debt 140,790 0 0
Deferred taxes (208,688) (46,847) (58,655)
Changes in operating assets and liabilities:      
Other current assets (234,090) 46,970 18,693
Accounts payable 74,559 32,247 51,615
Accrued expenses 114,337 68,706 48,810
Deferred revenue 177,974 96,751 72,135
Other non-current assets and liabilities (73,803) (52,294) (18,366)
Net cash used in operating activities (1,785,948) (1,473,984) (749,439)
Cash flows from investing activities:      
Acquisitions of DVD content assets (53,720) (77,177) (77,958)
Purchases of property and equipment (173,302) (107,653) (91,248)
Other assets (6,689) (941) (1,912)
Purchases of short-term investments (74,819) (187,193) (371,915)
Proceeds from sale of short-term investments 320,154 282,484 259,079
Proceeds from maturities of short-term investments 22,705 140,245 104,762
Net cash provided by (used in) investing activities 34,329 49,765 (179,192)
Cash flows from financing activities:      
Proceeds from issuance of debt 3,020,510 1,000,000 1,500,000
Issuance costs (32,153) (10,700) (17,629)
Proceeds from issuance of common stock 88,378 36,979 77,980
Excess tax benefits from stock-based compensation 0 65,121 80,471
Other financing activities 255 230 (545)
Net cash provided by financing activities 3,076,990 1,091,630 1,640,277
Effect of exchange rate changes on cash and cash equivalents 29,848 (9,165) (15,924)
Net increase (decrease) in cash and cash equivalents 1,355,219 (341,754) 695,722
Cash and cash equivalents, beginning of year 1,467,576 1,809,330 1,113,608
Cash and cash equivalents, end of year 2,822,795 1,467,576 1,809,330
Supplemental disclosure:      
Income taxes paid 113,591 26,806 27,658
Interest paid 213,313 138,566 111,761
Increase (decrease) in investing activities included in liabilities $ (32,643) $ 27,504 $ (4,978)
v3.8.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 2,822,795 $ 1,467,576
Short-term investments 0 266,206
Current content assets, net 4,310,934 3,726,307
Other current assets 536,245 260,202
Total current assets 7,669,974 5,720,291
Non-current content assets, net 10,371,055 7,274,501
Property and equipment, net 319,404 250,395
Other non-current assets 652,309 341,423
Total assets 19,012,742 13,586,610
Current liabilities:    
Current content liabilities 4,173,041 3,632,711
Accounts payable 359,555 312,842
Accrued expenses 315,094 197,632
Deferred revenue 618,622 443,472
Total current liabilities 5,466,312 4,586,657
Non-current content liabilities 3,329,796 2,894,654
Long-term debt 6,499,432 3,364,311
Other non-current liabilities 135,246 61,188
Total liabilities 15,430,786 10,906,810
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2017 and 2016; no shares issued and outstanding at December 31, 2017 and 2016 0 0
Common stock, $0.001 par value; 4,990,000,000 shares authorized at December 31, 2017 and December 31, 2016, respectively; 433,392,686 and 430,054,212 issued and outstanding at December 31, 2017 and December 31, 2016, respectively 1,871,396 1,599,762
Accumulated other comprehensive loss (20,557) (48,565)
Retained earnings 1,731,117 1,128,603
Total stockholders’ equity 3,581,956 2,679,800
Total liabilities and stockholders’ equity $ 19,012,742 $ 13,586,610
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Preferred stock, par value (in USD per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (in USD per share) $ 0.001 $ 0.001
Common stock, shares authorized 4,990,000,000 4,990,000,000
Common stock, shares issued 433,392,686 430,054,212
Common stock, shares outstanding 433,392,686 430,054,212
v3.8.0.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock and Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings [Member]
Beginning Balance (in shares) at Dec. 31, 2014   422,910,887    
Beginning Balance at Dec. 31, 2014 $ 1,857,708 $ 1,042,870 $ (4,446) $ 819,284
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 122,641     122,641
Other comprehensive income (loss) $ (38,862)   (38,862)  
Issuance of common stock upon exercise of options (in shares) 5,029,553 5,029,553    
Issuance of common stock upon exercise of options $ 77,334 $ 77,334    
Stock-based compensation expense 124,725 124,725    
Excess stock option income tax benefits 79,880 $ 79,880    
Ending Balance (in shares) at Dec. 31, 2015   427,940,440    
Ending Balance at Dec. 31, 2015 2,223,426 $ 1,324,809 (43,308) 941,925
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 186,678     186,678
Other comprehensive income (loss) $ (5,257)   (5,257)  
Issuance of common stock upon exercise of options (in shares) 2,113,772 2,113,772    
Issuance of common stock upon exercise of options $ 36,979 $ 36,979    
Stock-based compensation expense 173,675 173,675    
Excess stock option income tax benefits 64,299 $ 64,299    
Ending Balance (in shares) at Dec. 31, 2016   430,054,212    
Ending Balance at Dec. 31, 2016 2,679,800 $ 1,599,762 (48,565) 1,128,603
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 558,929     558,929
Other comprehensive income (loss) $ 28,008   28,008  
Issuance of common stock upon exercise of options (in shares) 3,338,474 3,338,474    
Issuance of common stock upon exercise of options $ 89,425 $ 89,425    
Stock-based compensation expense 182,209 $ 182,209    
Ending Balance (in shares) at Dec. 31, 2017   433,392,686    
Ending Balance at Dec. 31, 2017 3,581,956 $ 1,871,396 $ (20,557) 1,731,117
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Cumulative effect of new accounting principle in period of adoption | Accounting Standards Update 2016-09 [Member] $ 43,585     $ 43,585
v3.8.0.1
Organization and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
Description of Business
Netflix, Inc. (the “Company”) was incorporated on August 29, 1997 and began operations on April 14, 1998. The Company is the world’s leading internet television network with over 117 million streaming memberships in over 190 countries enjoying more than 140 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments. Additionally, in the United States ("U.S."), members can receive DVDs.
The Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD, all of which derive revenue from monthly membership fees. See Note 11 to the consolidated financial statements for further detail on the Company's segments.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the streaming content asset amortization policy and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.
Recently adopted accounting pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification ("ASC") Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits on the Statement of Cash Flows as an operating activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted ASU 2016-09 in fiscal year 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted. See Note 9 to the consolidated financial statements for information regarding the impact on the Company’s financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The standard provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. ASU 2017-01 is effective for fiscal periods beginning after December 15, 2017 (including interim periods within those periods) with early adoption permitted. The Company early adopted the standard in the third quarter of 2017 on a prospective basis and the impact on its consolidated financial statements was not material.
Recently issued accounting pronouncements not yet adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the modified retrospective approach. Because the Company's primary source of revenues is from monthly membership fees which are recognized ratably over each monthly membership period, the Company does not expect the impact on its consolidated financial statements to be material.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019. Although the Company is in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, the Company currently believes the most significant changes will be related to the recognition of new right-of-use assets and lease liabilities on the Company's balance sheet for real estate operating leases.
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-08 is effective for fiscal years beginning after December 15, 2017 (including interim periods within those periods) using a retrospective transition method to each period presented. The Company will adopt ASU 2016-18 in the first quarter of 2018 and does not expect the impact on its consolidated financial statements to be material.
In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Cuts and Jobs Act (the "Act"). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, the Company will elect to treat any potential GILTI inclusions as a period cost as we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any inclusion would be immaterial.
Cash Equivalents and Short-term Investments
The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. The Company also classifies amounts in transit from payment processors for customer credit card and debit card transactions as cash equivalents.
In July 2017, the Company sold all short-term investments. The Company classified short-term investments, which consisted of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments were reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” within Stockholders’ equity in the Consolidated Balance Sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in “Interest and other income (expense)” in the Consolidated Statements of Operations. The Company used the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments.
Short-term investments were reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviewed factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, the Company’s intent to sell, or whether it would be more likely than not that the Company would be required to sell the investments before the recovery of their amortized cost basis.

Streaming Content
The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV shows and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash used in operating activities" on the Consolidated Statements of Cash Flows.
For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets.
For productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs.
Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or 10 years, beginning with the month of first availability. The amortization is on an accelerated basis, as the Company typically expects more upfront viewing, for instance due to additional merchandising and marketing efforts. The Company reviews factors impacting the amortization of the content assets on an ongoing basis. The Company's estimates related to these factors require considerable management judgment. 
The Company's business model is subscription based as opposed to a model generating revenues at a specific title level. Therefore, content assets, both licensed and produced, are reviewed in aggregate at the operating segment level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the net realizable value or fair value may be less than amortized cost. To date, the Company has not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost, net realizable value or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the respective assets, generally up to 30 years, or the lease term for leasehold improvements, if applicable. Leased buildings are capitalized and included in property and equipment when the Company was involved in the construction funding and did not meet the “sale-leaseback” criteria.
Revenue Recognition
The Company's primary source of revenues are from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. Deferred revenue consists of membership fees billed that have not been recognized and gift and other prepaid memberships that have not been redeemed.
Marketing
Marketing expenses consist primarily of advertising expenses and certain payments made to the Company’s partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet service providers (“ISPs”). Advertising expenses include promotional activities such as digital and television advertising. Advertising costs are expensed as incurred. Advertising expenses were $1,091.1 million, $842.4 million and $714.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Research and Development
Research and development expenses are included within "Technology and Development" on the Company's Consolidated Statements of Operations and primarily consist of payroll and related costs incurred in making improvements to our service offerings. Research and development expenses were $981.3 million, $768.3 million and $570.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Income Taxes
The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.
The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. See Note 9 to the consolidated financial statements for further information regarding income taxes.
Foreign Currency
The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive loss" in Stockholders’ equity on the Consolidated Balance Sheets.
Prior to January 1, 2015, the functional currency of certain of the Company's European entities was the British pound. The Company changed the functional currency of these entities to the euro effective January 1, 2015 following the redomiciliation of the European headquarters and the launch of the Netflix service in several significant European countries. The change in functional currency was applied prospectively from January 1, 2015. Monetary assets and liabilities have been remeasured to the euro at current exchange rates. Non-monetary assets and liabilities have been remeasured to the euro using the exchange rate effective for the period in which the balance arose. As a result of this change of functional currency, the Company recorded a $21.8 million cumulative translation adjustment included in other comprehensive loss for year ended December 31, 2015.
The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense). Foreign currency transactions resulted in a loss of $127.9 million for the year ended December 31, 2017 and a gain of $22.8 million and a loss of $37.3 million for the years ended December 31, 2016 and 2015 respectively.
Earnings Per Share
In June 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015 ("Stock Split"). Outstanding share and per-share amounts disclosed for all periods provided have been retroactively adjusted to reflect the effects of the Stock Split. 
Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:
 
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
558,929

 
$
186,678

 
$
122,641

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
431,885

 
428,822

 
425,889

Basic earnings per share
$
1.29

 
$
0.44

 
$
0.29

Diluted earnings per share:
 
 
 
 
 
Net income
$
558,929

 
$
186,678

 
$
122,641

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
431,885

 
428,822

 
425,889

Employee stock options
14,929

 
9,830

 
10,567

Weighted-average number of shares
446,814

 
438,652

 
436,456

Diluted earnings per share
$
1.25

 
$
0.43

 
$
0.28


Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table summarizes the potential common shares excluded from the diluted calculation:
 
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Employee stock options
189

 
1,545

 
517


Stock-Based Compensation
The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures. See Note 7 to the consolidated financial statements for further information regarding stock-based compensation.
v3.8.0.1
Short-term Investments
12 Months Ended
Dec. 31, 2017
Short-term Investments [Abstract]  
Short-term Investments
Short-term Investments

In July 2017, the Company sold all short-term investments. As of December 31, 2017$449.7 million and $1.3 million of money market funds, classified as Level 1 securities, were included in Cash and cash equivalents and Non-current assets, respectively, on the Company's Consolidated Balance Sheet. Foreign time deposits of $300.8 million, classified as Level 2 securities, were included in Cash and cash equivalents on the Company's Consolidated Balance Sheet. Additionally, $4.4 million of restricted cash is included in Non-current assets on the Company's Consolidated Balance Sheet. Amounts included in Non-current assets are primarily related to workers compensation deposits and letter of credit agreements.

The following table summarizes, by major security type, the Company’s assets that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy and where they are classified on the Consolidated Balance Sheets as of December 31, 2016.
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,267,523

 
$

 
$

 
$
1,267,523

 
$
1,264,126

 
$

 
$
3,397

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
204,967

 

 

 
204,967

 
203,450

 

 
1,517

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
199,843

 
110

 
(731
)
 
199,222

 

 
199,222

 

Government securities
35,944

 

 
(128
)
 
35,816

 

 
35,816

 

Certificate of deposit
9,833

 

 

 
9,833

 

 
9,833

 

Agency securities
21,563

 

 
(228
)
 
21,335

 

 
21,335

 

Total
$
1,739,673

 
$
110

 
$
(1,087
)
 
$
1,738,696

 
$
1,467,576

 
$
266,206

 
$
4,914


(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.
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 notes.
There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the years ended December 31, 2017, 2016 or 2015.
There were no material gross realized gains or losses from the sale of available-for-sale investments in the years ended December 31, 2017, 2016 and 2015. Realized gains and losses and interest income are included in "Interest and other income (expense)" on the Consolidated Statements of Operations.
v3.8.0.1
Balance Sheet Components
12 Months Ended
Dec. 31, 2017
Balance Sheet Components Disclosure [Abstract]  
Balance Sheet Components
Balance Sheet Components
Content Assets
Content assets consisted of the following:
 
As of December 31,
 
2017
 
2016
 
(in thousands)
 
 
 
 
Licensed content, net
$
11,771,778

 
$
9,595,315

Produced content, net
 
 
 
Released, less amortization
1,427,256

 
335,400

In production
1,311,137

 
1,010,463

In development and pre-production
158,517

 
34,215

 
2,896,910

 
1,380,078

DVD, net
13,301

 
25,415

Total
$
14,681,989

 
$
11,000,808

 
 
 
 
Current content assets, net
$
4,310,934

 
$
3,726,307

Non-current content assets, net
$
10,371,055

 
$
7,274,501


On average, over 90% of a licensed or produced streaming content asset is expected to be amortized within four years after its month of first availability.
As of December 31, 2017, over 30% of the $14.7 billion unamortized cost is expected to be amortized within one year and 29%, 78% and over 80% of the $1.4 billion unamortized cost of the produced content that has been released is expected to be amortized within one year, three years and four years, respectively.
As of December 31, 2017, the amount of accrued participations and residuals was not material.

 Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
 
 
As of December 31,
 
Estimated Useful Lives (in Years)
 
 
2017
 
2016
 
 
 
(in thousands)
 
 
Information technology assets
 
$
223,850

 
$
185,345

 
3 years
Furniture and fixtures
 
49,217

 
32,185

 
3 years
Buildings
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
229,848

 
107,945

 
Over life of lease
DVD operations equipment
 
59,316

 
70,152

 
5 years
Corporate aircraft
 
30,039

 

 
8 years
Capital work-in-progress
 
8,267

 
108,296

 
 
Property and equipment, gross
 
641,218

 
544,604

 
 
Less: Accumulated depreciation
 
(321,814
)
 
(294,209
)
 
 
Property and equipment, net
 
$
319,404

 
$
250,395

 
 

    
The decrease in capital work-in-progress from December 31, 2016 is primarily due to leasehold improvements for the Company's expanded Los Gatos, California headquarters and the Company's new Los Angeles, California facility, both of which were placed into operation in the first quarter of 2017.
v3.8.0.1
Long-term Debt
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Long-term Debt
Long-term Debt

As of December 31, 2017, the Company had aggregate outstanding long-term notes of $6,499.4 million, net of $61.9 million of issuance costs, with varying maturities (the "Notes"). Each of the Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at fixed rates.

The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2017 and December 31, 2016:

 
 
 
 
 
 
 
 
 
Level 2 Fair Value as of
 
Principal Amount at Par
 
Issuance Date
 
Maturity
 
Interest Due Dates
 
December 31,
2017
 
December 31,
2016
 
(in millions)
 
 
 
 
 
 
 
(in millions)
4.875% Senior Notes
$
1,600

 
October 2017
 
April 2028
 
April 15 and October 15
 
$
1,571

 
$

3.625% Senior Notes (1)
1,561

 
May 2017
 
May 2027
 
May 15 and November 15
 
1,575

 

4.375% Senior Notes
1,000

 
October 2016
 
November 2026
 
May 15 and November 15
 
983

 
975

5.50% Senior Notes
700

 
February 2015
 
February 2022
 
April 15 and October 15
 
739

 
758

5.875% Senior Notes
800

 
February 2015
 
February 2025
 
April 15 and October 15
 
856

 
868

5.750% Senior Notes
400

 
February 2014
 
March 2024
 
March 1 and September 1
 
427

 
431

5.375% Senior Notes
500

 
February 2013
 
February 2021
 
February 1 and August 1
 
530

 
539



(1) Debt is denominated in euro with a €1,300 million aggregate principal amount and is remeasured into U.S. dollars at each balance sheet date. Total proceeds were $1,420.5 million and remeasurement loss on long-term debt was $140.8 million for the year ended December 31, 2017.
Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of December 31, 2017 and December 31, 2016, the Company was in compliance with all related covenants.

Revolving Credit Facility

In July 2017, the Company entered into a $500.0 million unsecured revolving credit facility (“Revolving Credit Agreement”), with an uncommitted incremental facility to increase the amount of the revolving credit facility by up to an additional $250.0 million, subject to certain terms and conditions. Revolving loans may be borrowed, repaid and reborrowed until July 27, 2022, at which time all amounts borrowed must be repaid. The Company may use the proceeds of future borrowings under the Revolving Credit Agreement for working capital and general corporate purposes. As of December 31, 2017, no amounts have been borrowed under the Revolving Credit Agreement.

The borrowings under the Revolving Credit Agreement bear interest, at the Company’s option, of either a floating rate equal to a base rate (the “Alternate Base Rate”) or (ii) a rate equal to an adjusted London interbank offered rate (the “Adjusted LIBO Rate”), plus a margin of 0.75%. The Alternate Base Rate is defined as the greatest of (A) the rate of interest published by the Wall Street Journal, from time to time, as the prime rate, (B) the federal funds rate, plus 0.500% and (C) the Adjusted LIBO Rate for a one-month interest period, plus 1.00%. The Adjusted LIBO Rate is defined as the London interbank offered rate for deposits in U.S. dollars, for the relevant interest period, adjusted for statutory reserve requirements, but in no event shall the Adjusted LIBO Rate be less than 0.00% per annum.

The Company is also obligated to pay a commitment fee on the undrawn amounts of the Revolving Credit Agreement at a rate of 0.10%. The Revolving Credit Agreement requires the Company to comply with certain covenants, including covenants that limit or restrict the ability of the Company’s subsidiaries to incur debt and limit or restrict the ability of the Company and its subsidiaries to grant liens and enter into sale and leaseback transactions; and, in the case of the Company or a guarantor, merge, consolidate, liquidate, dissolve or sell, transfer, lease or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole. As of December 31, 2017, the Company was in compliance with all related covenants.
v3.8.0.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Streaming Content
At December 31, 2017, the Company had $17.7 billion of obligations comprised of $4.2 billion included in "Current content liabilities" and $3.3 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $10.2 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition.
At December 31, 2016, the Company had $14.5 billion of obligations comprised of $3.6 billion included in "Current content liabilities" and $2.9 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $8.0 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition.
The expected timing of payments for these streaming content obligations is as follows:
 
As of December 31,
 
2017
 
2016
 
(in thousands)
Less than one year
$
7,446,947

 
$
6,200,611

Due after one year and through 3 years
8,210,159

 
6,731,336

Due after 3 years and through 5 years
1,894,001

 
1,386,934

Due after 5 years
143,535

 
160,606

Total streaming content obligations
$
17,694,642

 
$
14,479,487


    
Streaming content obligations include amounts related to the acquisition, licensing and production of streaming content. Obligations that are in non-U.S. dollar currencies are translated to U.S. dollar at period end rates. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements. An obligation for the acquisition and licensing of content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. Traditional film output deals, or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of such license agreements. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. However, the unknown obligations are expected to be significant.
Lease obligations
The Company leases facilities under non-cancelable operating leases with various expiration dates through 2027. Several lease agreements contain rent escalation clauses or rent holidays. For purposes of recognizing minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation for intended use. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the Consolidated Statements of Operations. The Company has the option to extend or renew most of its leases which may increase the future minimum lease commitments.
Because the terms of the Company’s facilities lease agreements for its original Los Gatos, California headquarters site required the Company’s involvement in the construction funding of the buildings, the Company is the “deemed owner” (for accounting purposes only) of these buildings. Accordingly, the Company recorded an asset of $40.7 million, representing the total costs of the buildings and improvements, including the costs paid by the lessor (the legal owner of the buildings), with corresponding liabilities. Upon completion of construction of each building, the Company did not meet the sale-leaseback criteria for de-recognition of the building assets and liabilities. Therefore the leases are accounted for as financing obligations. At December 31, 2017, the lease financing obligation balance was $29.5 million, the majority of which is recorded in “Other non-current liabilities,” on the Consolidated Balance Sheets. The remaining future minimum payments under the lease financing obligation are $15.6 million. The lease financing obligation balance at the end of the lease term will be approximately $21.8 million which approximates the net book value of the buildings to be relinquished to the lessor.
In addition to the lease financing obligation, future minimum lease payments include $508.3 million as of December 31, 2017 related to non-cancelable operating leases for the expanded headquarters in Los Gatos, California and the new office space in Los Angeles, California.
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2017 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2018
$
101,987

2019
97,560

2020
96,255

2021
85,188

2022
77,418

Thereafter
278,970

Total minimum payments
$
737,378


Rent expense associated with the operating leases was $75.3 million, $53.1 million and $34.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Legal Proceedings
From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims, including claims relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company's view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations or its financial position, liquidity or results of operations.

The Company is involved in litigation matters not listed herein but does not consider the matters to be material either individually or in the aggregate at this time. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold.
v3.8.0.1
Guarantees—Indemnification Obligations
12 Months Ended
Dec. 31, 2017
Guarantees [Abstract]  
Guarantees—Indemnification Obligations
Guarantees—Indemnification Obligations
In the ordinary course of business, the Company has entered into contractual arrangements under which it has agreed to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements and out of intellectual property infringement claims made by third parties. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract.
The Company’s obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations vary.
It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. No amount has been accrued in the accompanying financial statements with respect to these indemnification guarantees.
v3.8.0.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2017
Stockholders' Equity Note [Abstract]  
Stockholders' Equity
Stockholders’ Equity
Stock Split
In March 2015, the Company's Board of Directors adopted an amendment to the Company's Certificate of Incorporation, to increase the number of shares of capital stock the Company is authorized to issue from 170,000,000 (160,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001 to 5,000,000,000 (4,990,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001. This amendment to the Company's certificate of incorporation was approved by the Company's stockholders at the 2015 Annual Meeting held on June 9, 2015.
On June 23, 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015. Outstanding share and per-share amounts disclosed for all periods presented have been retroactively adjusted to reflect the effects of the Stock Split. 
Preferred Stock
The Company has authorized 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. None of the preferred shares were issued and outstanding at December 31, 2017 and 2016.
Voting Rights
The holders of each share of common stock shall be entitled to one vote per share on all matters to be voted upon by the Company’s stockholders.
Stock Option Plans
In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of December 31, 2017, 10.7 million shares were reserved for future grants under the 2011 Stock Plan.
A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:
 
 
Shares Available
for Grant
 
Options Outstanding
 
Weighted- Average Remaining Contractual Term (in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
 
Number of
Shares
 
Weighted- Average Exercise Price
(per Share)
 
Balances as of December 31, 2014
20,025,208

 
22,845,417

 
$
21.65

 
 
 
 
Granted
(3,179,892
)
 
3,179,892

 
82.67

 
 
 
 
Exercised

 
(5,029,553
)
 
15.38

 
 
 
 
Balances as of December 31, 2015
16,845,316

 
20,995,756

 
$
32.39

 
 
 
 
Granted
(3,555,363
)
 
3,555,363

 
102.03

 
 
 
 
Exercised

 
(2,113,772
)
 
17.48

 
 
 
 
Balances as of December 31, 2016
13,289,953

 
22,437,347

 
$
44.83

 
 
 
 
Granted
(2,550,038
)
 
2,550,038

 
159.56

 
 
 
 
Exercised

 
(3,338,474
)
 
26.79

 
 
 
 
Expired

 
(1,561
)
 
3.25

 
 
 
 
Balances as of December 31, 2017
10,739,915

 
21,647,350

 
$
61.13

 
5.97
 
$
2,833,198

Vested and exercisable at
December 31, 2017
 
 
21,647,350

 
$
61.13

 
5.97
 
$
2,833,198


The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of 2017. This amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised for the years ended December 31, 2017, 2016 and 2015 was $464.0 million, $189.2 million and $368.4 million, respectively.
Cash received from option exercises for the years ended December 31, 2017, 2016 and 2015 was $88.4 million, $37.0 million and $78.0 million, respectively.
Stock-Based Compensation
Stock options granted are exercisable for the full ten year contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
 
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Dividend yield
 
%
 
%
 
%
Expected volatility
 
34% - 37%

 
40% - 50%

 
36% - 53%

Risk-free interest rate
 
2.24% - 2.45%

 
1.57% - 2.04%

 
2.03% - 2.29%

Suboptimal exercise factor
 
2.48 - 2.63

 
2.48

 
2.47 - 2.48

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
71.45

 
$
48.85

 
$
39.22

Total stock-based compensation expense (in thousands)
 
182,209

 
173,675

 
124,725

Total income tax impact on provision (in thousands)
 
61,842

 
65,173

 
47,125



The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior.

The Company calculates expected volatility based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.
In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.
v3.8.0.1
Accumulated Other Comprehensive Loss
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax:
 
Foreign currency
 
Change in unrealized gains on available-for-sale securities
 
Total
 
(in thousands)
Balances as of December 31, 2015
$
(42,502
)
 
$
(806
)
 
$
(43,308
)
Other comprehensive income (loss) before reclassifications
(5,464
)
 
310

 
(5,154
)
Amounts reclassified from accumulated other comprehensive (loss) income

 
(103
)
 
(103
)
Net (increase) decrease in other comprehensive loss
(5,464
)
 
207

 
(5,257
)
Balances as of December 31, 2016
$
(47,966
)
 
$
(599
)
 
$
(48,565
)
Other comprehensive income before reclassifications
27,409

 
728

 
28,137

Amounts reclassified from accumulated other comprehensive (loss) income

 
(129
)
 
(129
)
Net decrease in other comprehensive loss
27,409

 
599

 
28,008

Balances as of December 31, 2017
$
(20,557
)
 
$

 
$
(20,557
)


The amounts reclassified from accumulated other comprehensive loss were immaterial for the years ended December 31, 2017 and 2016.
v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
United States
$
144,100

 
$
188,078

 
$
95,644

Foreign
341,221

 
72,429

 
46,241

Income before income taxes
$
485,321

 
$
260,507

 
$
141,885


The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
54,245

 
$
54,315

 
$
52,557

State
(7,601
)
 
5,790

 
(1,576
)
Foreign
88,436

 
60,571

 
26,918

Total current
135,080

 
120,676

 
77,899

Deferred tax provision:
 
 
 
 
 
Federal
(153,963
)
 
(24,383
)
 
(37,669
)
State
(52,695
)
 
(14,080
)
 
(17,635
)
Foreign
(2,030
)
 
(8,384
)
 
(3,351
)
Total deferred
(208,688
)
 
(46,847
)
 
(58,655
)
Provision for income taxes
$
(73,608
)
 
$
73,829

 
$
19,244



At the beginning of 2017, the Company underwent a corporate restructuring that better aligns its corporate structure with how its business operates. As a result of this restructuring and the Company's increasing international income, there is now significantly more income being taxed at rates lower than the U.S. tax rate.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the Act in its year end income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result has recorded $79.1 million as an additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $46.9 million. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was $32.2 million based on cumulative foreign earnings of $484.9 million.
On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the $46.9 million of the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities and the $32.2 million of current tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount and a reasonable estimate at December 31, 2017. Additional work is necessary to do a more detailed analysis of historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.
The Company recorded a $66.5 million benefit related to foreign taxes expensed in prior years that may now be claimed as a Foreign Tax Credit. The Company has determined there is sufficient foreign source income projected to utilize these credits.
Due to the adoption of ASU 2016-09 in 2017, all excess tax benefits and deficiencies are recognized as income tax expense in the Company’s Consolidated Statement of Operations. This will result in increased volatility in the Company’s effective tax rate.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory Federal income tax rate to income before income taxes is as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Expected tax expense at U.S. Federal statutory rate of 35%
$
169,860

 
$
91,179

 
$
49,658

State income taxes, net of Federal income tax effect
6,404

 
7,261

 
4,783

Foreign earnings at other than U.S. rates
(87,514
)
 
14,639

 
5,310

Federal and California R&D tax credits
(79,868
)
 
(41,144
)
 
(29,363
)
Excess tax benefits on stock-based compensation
(157,888
)
 

 

Tax Cuts and Jobs Act of 2017
79,077

 

 

Release of tax reserves on previously unrecognized tax benefits

 

 
(13,438
)
Other
(3,679
)
 
1,894

 
2,294

Provision for income taxes
$
(73,608
)
 
$
73,829

 
$
19,244

Effective Tax Rate
(15
)%
 
28
%
 
14
%


The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2017
 
2016
 
(in thousands)
Deferred tax assets:
 
 
 
Stock-based compensation
$
149,367

 
$
188,458

Accruals and reserves
34,170

 
29,231

Depreciation and amortization
(70,382
)
 
(93,760
)
Federal and California tax R&D credits
260,686

 
107,283

Federal foreign tax credits
102,242

 

Other
51,614

 
(2,363
)
Gross deferred tax assets
527,697

 
228,849

Valuation allowance
(49,431
)
 
(1,601
)
Net deferred tax assets
$
478,266

 
$
227,248


All deferred tax assets are classified as “Other non-current assets” on the Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016. In evaluating its ability to realize the net deferred tax assets, the Company considered all available positive and negative evidence, including its past operating results and the forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. As of December 31, 2017, the valuation allowance of $49.4 million related to certain foreign tax credits that are not likely to be realized. The Company remeasured these non-current assets and liabilities at the applicable tax rate of 21% in accordance with the Tax Cuts and Jobs Act of 2017. The remeasurement resulted in a total decrease in these assets of $46.9 million.
As of December 31, 2017, the Company's Federal R&D tax credit and state tax credit carryforwards for tax return purposes were $133.4 million, and $119.2 million, respectively. The Federal R&D tax credit carryforwards expire through 2037. State tax credit carryforwards can be carried forward indefinitely.
As of December 31, 2017, the Company's Federal foreign tax credit carryforwards for tax return purposes were $102.2 million. The Federal foreign tax credit carryovers expire through 2026.
As of December 31, 2017, the Company’s net operating loss carryforwards for state tax return purposes was $80.9 million which expire in 2035. As a result of the adoption of ASU 2016-09 in fiscal 2017, the Company recorded a cumulative effect adjustment to increase retained earnings by $43.6 million with a corresponding increase to deferred tax assets from stock-based compensation which had not been previously recognized.
The unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year are classified as “Other non-current liabilities” and a reduction of deferred tax assets which is classified as "Other non-current assets" in the Consolidated Balance Sheets. As of December 31, 2017, the total amount of gross unrecognized tax benefits was $42.9 million, of which $37.9 million, if recognized, would favorably impact the Company’s effective tax rate. As of December 31, 2016, the total amount of gross unrecognized tax benefits was $19.7 million, of which $17.0 million, if recognized, would favorably impact the Company’s effective tax rate. The aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
 
Balances as of December 31, 2015
$
17,117

Increases related to tax positions taken during prior periods
1,047

Decreases related to tax positions taken during prior periods
(7,105
)
Increases related to tax positions taken during the current period
8,713

Decreases related to settlements with taxing authorities
(33
)
Balances as of December 31, 2016
19,739

 Increases related to tax positions taken during prior periods

 Decreases related to tax positions taken during prior periods
(3,226
)
 Increases related to tax positions taken during the current period
26,389

 Decreases related to expiration of statute of limitations

Balances as of December 31, 2017
$
42,902


The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes and in “Other non-current liabilities” in the Consolidated Balance Sheets. Interest and penalties included in the Company's provision for income taxes were not material in all the periods presented.
The Company files U.S. Federal, state and foreign tax returns. The Company is currently under examination by the IRS and the state of California for the years 2014 and 2015. The 2016 Federal tax return remains subject to examination by the IRS. The years 2010 through 2013 and 2016 remain subject to examination by the state of California. The Company has no significant foreign jurisdiction audits underway. The years 2012 through 2016 remain subject to examination by foreign jurisdictions.
Given the potential outcome of the current examinations as well as the impact of the current examinations on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible adjustments cannot be made.
v3.8.0.1
Employee Benefit Plan
12 Months Ended
Dec. 31, 2017
Retirement Benefits [Abstract]  
Employee Benefit Plan
Employee Benefit Plan
The Company maintains a 401(k) savings plan covering substantially all of its employees. Eligible employees may contribute up to 60% of their annual salary through payroll deductions, but not more than the statutory limits set by the Internal Revenue Service. The Company matches employee contributions at the discretion of the Board. During 2017, 2016 and 2015, the Company’s matching contributions totaled $20.2 million, $15.7 million and $11.2 million, respectively.
v3.8.0.1
Segment Information
12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Segment Information
Segment Information
The Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented in the same manner that the Company’s chief operating decision maker (“CODM”) reviews the operating results in assessing performance and allocating resources. The Company’s CODM reviews revenue and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses incurred by the segment. The Company has aggregated the results of the International operating segments into one reportable segment because these operating segments share similar long-term economic and other qualitative characteristics.
The Domestic streaming segment derives revenues from monthly membership fees for services consisting solely of streaming content to the members in the United States. The International streaming segment derives revenues from monthly membership fees for services consisting solely of streaming content to members outside of the United States. 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 (streaming or DVD) and the geographic region from which the membership originates. There are no internal revenue transactions between the Company’s segments.
Amortization of streaming content assets makes up the vast majority of cost of revenues. The Company obtains multi-territory or global rights for its streaming content and allocates these rights between Domestic and International streaming segments based on estimated fair market value. Amortization of content assets and other expenses associated with the acquisition, licensing, and production of streaming content for each streaming segment thus includes both expenses directly incurred by the segment as well as an allocation of expenses incurred for global or multi-territory rights. Other costs of revenues such as delivery costs are primarily attributed to the operating segment based on amounts directly incurred by the segment. Marketing expenses consist primarily of advertising expenses and certain payments made to marketing partners, including CE manufacturers, MVPDs, mobile operators and ISPs, 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,
 
2017
 
2016
 
(in thousands)
United States
$
289,875

 
$
236,977

International
29,529

 
13,418


The following tables represent segment information for the year ended December 31, 2017:
 
 
As of/Year ended December 31, 2017
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
54,750

 
62,832

 
3,383

 


Revenues
$
6,153,025

 
$
5,089,191

 
$
450,497

 
$
11,692,713

Cost of revenues
3,319,230

 
4,137,911

 
202,525

 
7,659,666

Marketing
553,331

 
724,691

 

 
1,278,022

Contribution profit
$
2,280,464

 
$
226,589

 
$
247,972

 
2,755,025

Other operating expenses
 
 
 
 
 
 
1,916,346

Operating income
 
 
 
 
 
 
838,679

Other income (expense)
 
 
 
 
 
 
(353,358
)
Benefit from income taxes
 
 
 
 
 
 
(73,608
)
Net income
 
 
 
 
 
 
$
558,929



 
Year ended December 31, 2017
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
2,756,947

 
$
3,440,870

 
$
60,657

 
$
6,258,474


The following tables represent segment information for the year ended December 31, 2016:
 
 
As of/Year ended December 31, 2016
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
49,431

 
44,365

 
4,114

 

Revenues
$
5,077,307

 
$
3,211,095

 
$
542,267

 
$
8,830,669

Cost of revenues
2,855,789

 
2,911,370

 
262,742

 
6,029,901

Marketing
382,832

 
608,246

 

 
991,078

Contribution profit (loss)
$
1,838,686

 
$
(308,521
)
 
$
279,525

 
1,809,690

Other operating expenses
 
 
 
 
 
 
1,429,897

Operating income
 
 
 
 
 
 
379,793

Other income (expense)
 
 
 
 
 
 
(119,286
)
Provision for income taxes
 
 
 
 
 
 
73,829

Net income
 
 
 
 
 
 
$
186,678


 
Year ended December 31, 2016
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
2,337,950

 
$
2,450,548

 
$
78,952

 
$
4,867,450


The following tables represent segment information for the year ended December 31, 2015:
 
As of/Year ended December 31, 2015
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
44,738

 
30,024

 
4,904

 

Revenues
$
4,180,339

 
$
1,953,435

 
$
645,737

 
$
6,779,511

Cost of revenues
2,487,193

 
1,780,375

 
323,908

 
4,591,476

Marketing
317,646

 
506,446

 

 
824,092

Contribution profit (loss)
$
1,375,500

 
$
(333,386
)
 
$
321,829

 
1,363,943

Other operating expenses
 
 
 
 
 
 
1,058,117

Operating income
 
 
 
 
 
 
305,826

Other income (expense)
 
 
 
 
 
 
(163,941
)
Provision for income taxes
 
 
 
 
 
 
19,244

Net income
 
 
 
 
 
 
$
122,641

 
Year ended December 31, 2015
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
1,905,069

 
$
1,500,313

 
$
79,380

 
$
3,484,762

(1)
A membership (also referred to as a subscription) is defined as the right to receive Netflix service following sign-up and a method of payment being provided. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to certain new and rejoining members. Total members include those who are on a free-trial as long as a method of payment has been provided. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.
v3.8.0.1
Selected Quarterly Financial Data (Unaudited)
12 Months Ended
Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data (Unaudited)
Selected Quarterly Financial Data (Unaudited)
 
 
December 31
 
September 30
 
June 30
 
March 31
 
(in thousands, except for per share data)
2017
 
Total revenues
$
3,285,755

 
$
2,984,859

 
$
2,785,464

 
$
2,636,635

Gross profit
1,178,401

 
991,879

 
883,156

 
979,611

Net income
185,517

 
129,590

 
65,600

 
178,222

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.43

 
$
0.30

 
$
0.15

 
$
0.41

Diluted
0.41

 
0.29

 
0.15

 
0.40

2016
 
 
 
 
 
 
 
Total revenues
$
2,477,541

 
$
2,290,188

 
$
2,105,204

 
$
1,957,736

Gross profit
823,122

 
757,344

 
632,106

 
588,196

Net income
66,748

 
51,517

 
40,755

 
27,658

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.12

 
$
0.10

 
$
0.06

Diluted
0.15

 
0.12

 
0.09

 
0.06

v3.8.0.1
Organization and Summary of Significant Accounting Policies (Policy)
12 Months Ended
Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Use of Estimates
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the streaming content asset amortization policy and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates.
Recently adopted accounting pronouncements
Recently adopted accounting pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends Accounting Standards Codification ("ASC") Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits on the Statement of Cash Flows as an operating activity. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted ASU 2016-09 in fiscal year 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted. See Note 9 to the consolidated financial statements for information regarding the impact on the Company’s financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The standard provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. ASU 2017-01 is effective for fiscal periods beginning after December 15, 2017 (including interim periods within those periods) with early adoption permitted. The Company early adopted the standard in the third quarter of 2017 on a prospective basis and the impact on its consolidated financial statements was not material.
Recently issued accounting pronouncements not yet adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the modified retrospective approach. Because the Company's primary source of revenues is from monthly membership fees which are recognized ratably over each monthly membership period, the Company does not expect the impact on its consolidated financial statements to be material.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019. Although the Company is in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, the Company currently believes the most significant changes will be related to the recognition of new right-of-use assets and lease liabilities on the Company's balance sheet for real estate operating leases.
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-08 is effective for fiscal years beginning after December 15, 2017 (including interim periods within those periods) using a retrospective transition method to each period presented. The Company will adopt ASU 2016-18 in the first quarter of 2018 and does not expect the impact on its consolidated financial statements to be material.
In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Cuts and Jobs Act (the "Act"). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, the Company will elect to treat any potential GILTI inclusions as a period cost as we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any i
Cash Equivalents and Short-Term Investments
Cash Equivalents and Short-term Investments
The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. The Company also classifies amounts in transit from payment processors for customer credit card and debit card transactions as cash equivalents.
In July 2017, the Company sold all short-term investments. The Company classified short-term investments, which consisted of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments were reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” within Stockholders’ equity in the Consolidated Balance Sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in “Interest and other income (expense)” in the Consolidated Statements of Operations. The Company used the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments.
Short-term investments were reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviewed factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, the Company’s intent to sell, or whether it would be more likely than not that the Company would be required to sell the investments before the recovery of their amortized cost basis.
Streaming Content
Streaming Content
The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV shows and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash used in operating activities" on the Consolidated Statements of Cash Flows.
For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets.
For productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs.
Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or 10 years, beginning with the month of first availability. The amortization is on an accelerated basis, as the Company typically expects more upfront viewing, for instance due to additional merchandising and marketing efforts. The Company reviews factors impacting the amortization of the content assets on an ongoing basis. The Company's estimates related to these factors require considerable management judgment. 
The Company's business model is subscription based as opposed to a model generating revenues at a specific title level. Therefore, content assets, both licensed and produced, are reviewed in aggregate at the operating segment level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the net realizable value or fair value may be less than amortized cost. To date, the Company has not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost, net realizable value or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off.
Property and Equipment
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the respective assets, generally up to 30 years, or the lease term for leasehold improvements, if applicable. Leased buildings are capitalized and included in property and equipment when the Company was involved in the construction funding and did not meet the “sale-leaseback” criteria.
Revenue Recognition
Revenue Recognition
The Company's primary source of revenues are from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. Deferred revenue consists of membership fees billed that have not been recognized and gift and other prepaid memberships that have not been redeemed.
Marketing
Marketing
Marketing expenses consist primarily of advertising expenses and certain payments made to the Company’s partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet service providers (“ISPs”). Advertising expenses include promotional activities such as digital and television advertising. Advertising costs are expensed as incurred.
Research and Development
Research and Development
Research and development expenses are included within "Technology and Development" on the Company's Consolidated Statements of Operations and primarily consist of payroll and related costs incurred in making improvements to our service offerings.
Income Taxes
Income Taxes
The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.
The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
Foreign Currency
Foreign Currency
The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive loss" in Stockholders’ equity on the Consolidated Balance Sheets.
Prior to January 1, 2015, the functional currency of certain of the Company's European entities was the British pound. The Company changed the functional currency of these entities to the euro effective January 1, 2015 following the redomiciliation of the European headquarters and the launch of the Netflix service in several significant European countries. The change in functional currency was applied prospectively from January 1, 2015. Monetary assets and liabilities have been remeasured to the euro at current exchange rates. Non-monetary assets and liabilities have been remeasured to the euro using the exchange rate effective for the period in which the balance arose. As a result of this change of functional currency, the Company recorded a $21.8 million cumulative translation adjustment included in other comprehensive loss for year ended December 31, 2015.
The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense).
Earnings Per Share
Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options.
Stock-Based Compensation
Stock-Based Compensation
The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures.
v3.8.0.1
Organization and Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Computation of Net Income Per Share
The computation of earnings per share is as follows:
 
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
558,929

 
$
186,678

 
$
122,641

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
431,885

 
428,822

 
425,889

Basic earnings per share
$
1.29

 
$
0.44

 
$
0.29

Diluted earnings per share:
 
 
 
 
 
Net income
$
558,929

 
$
186,678

 
$
122,641

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
431,885

 
428,822

 
425,889

Employee stock options
14,929

 
9,830

 
10,567

Weighted-average number of shares
446,814

 
438,652

 
436,456

Diluted earnings per share
$
1.25

 
$
0.43

 
$
0.28

Summary of Potential Common Shares Excluded from Diluted Calculation
The following table summarizes the potential common shares excluded from the diluted calculation:
 
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Employee stock options
189

 
1,545

 
517

v3.8.0.1
Short-term Investments (Tables)
12 Months Ended
Dec. 31, 2017
Short-term Investments [Abstract]  
Available-For-Sale Securities Reported at Fair Value
The following table summarizes, by major security type, the Company’s assets that were measured at fair value on a recurring basis and were categorized using the fair value hierarchy and where they are classified on the Consolidated Balance Sheets as of December 31, 2016.
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,267,523

 
$

 
$

 
$
1,267,523

 
$
1,264,126

 
$

 
$
3,397

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
204,967

 

 

 
204,967

 
203,450

 

 
1,517

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
199,843

 
110

 
(731
)
 
199,222

 

 
199,222

 

Government securities
35,944

 

 
(128
)
 
35,816

 

 
35,816

 

Certificate of deposit
9,833

 

 

 
9,833

 

 
9,833

 

Agency securities
21,563

 

 
(228
)
 
21,335

 

 
21,335

 

Total
$
1,739,673

 
$
110

 
$
(1,087
)
 
$
1,738,696

 
$
1,467,576

 
$
266,206

 
$
4,914


(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.
v3.8.0.1
Balance Sheet Components (Tables)
12 Months Ended
Dec. 31, 2017
Balance Sheet Components Disclosure [Abstract]  
Components of Content Library
Content assets consisted of the following:
 
As of December 31,
 
2017
 
2016
 
(in thousands)
 
 
 
 
Licensed content, net
$
11,771,778

 
$
9,595,315

Produced content, net
 
 
 
Released, less amortization
1,427,256

 
335,400

In production
1,311,137

 
1,010,463

In development and pre-production
158,517

 
34,215

 
2,896,910

 
1,380,078

DVD, net
13,301

 
25,415

Total
$
14,681,989

 
$
11,000,808

 
 
 
 
Current content assets, net
$
4,310,934

 
$
3,726,307

Non-current content assets, net
$
10,371,055

 
$
7,274,501

Property and Equipment and Accumulated Depreciation
Property and equipment and accumulated depreciation consisted of the following:
 
 
As of December 31,
 
Estimated Useful Lives (in Years)
 
 
2017
 
2016
 
 
 
(in thousands)
 
 
Information technology assets
 
$
223,850

 
$
185,345

 
3 years
Furniture and fixtures
 
49,217

 
32,185

 
3 years
Buildings
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
229,848

 
107,945

 
Over life of lease
DVD operations equipment
 
59,316

 
70,152

 
5 years
Corporate aircraft
 
30,039

 

 
8 years
Capital work-in-progress
 
8,267

 
108,296

 
 
Property and equipment, gross
 
641,218

 
544,604

 
 
Less: Accumulated depreciation
 
(321,814
)
 
(294,209
)
 
 
Property and equipment, net
 
$
319,404

 
$
250,395

 
 
v3.8.0.1
Long-term Debt (Tables)
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Schedule of Long-term Debt Instruments
The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2017 and December 31, 2016:

 
 
 
 
 
 
 
 
 
Level 2 Fair Value as of
 
Principal Amount at Par
 
Issuance Date
 
Maturity
 
Interest Due Dates
 
December 31,
2017
 
December 31,
2016
 
(in millions)
 
 
 
 
 
 
 
(in millions)
4.875% Senior Notes
$
1,600

 
October 2017
 
April 2028
 
April 15 and October 15
 
$
1,571

 
$

3.625% Senior Notes (1)
1,561

 
May 2017
 
May 2027
 
May 15 and November 15
 
1,575

 

4.375% Senior Notes
1,000

 
October 2016
 
November 2026
 
May 15 and November 15
 
983

 
975

5.50% Senior Notes
700

 
February 2015
 
February 2022
 
April 15 and October 15
 
739

 
758

5.875% Senior Notes
800

 
February 2015
 
February 2025
 
April 15 and October 15
 
856

 
868

5.750% Senior Notes
400

 
February 2014
 
March 2024
 
March 1 and September 1
 
427

 
431

5.375% Senior Notes
500

 
February 2013
 
February 2021
 
February 1 and August 1
 
530

 
539



(1) Debt is denominated in euro with a €1,300 million aggregate principal amount and is remeasured into U.S. dollars at each balance sheet date. Total proceeds were $1,420.5 million and remeasurement loss on long-term debt was $140.8 million for the year ended December 31, 2017.
v3.8.0.1
Commitments and Contingencies (Tables)
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Expected timing of payments for streaming content obligations
The expected timing of payments for these streaming content obligations is as follows:
 
As of December 31,
 
2017
 
2016
 
(in thousands)
Less than one year
$
7,446,947

 
$
6,200,611

Due after one year and through 3 years
8,210,159

 
6,731,336

Due after 3 years and through 5 years
1,894,001

 
1,386,934

Due after 5 years
143,535

 
160,606

Total streaming content obligations
$
17,694,642

 
$
14,479,487

Future minimum payments under lease financing obligations and non-cancelable operating leases
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2017 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2018
$
101,987

2019
97,560

2020
96,255

2021
85,188

2022
77,418

Thereafter
278,970

Total minimum payments
$
737,378

Future minimum payments under capital leases
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2017 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2018
$
101,987

2019
97,560

2020
96,255

2021
85,188

2022
77,418

Thereafter
278,970

Total minimum payments
$
737,378

v3.8.0.1
Stockholders' Equity (Tables)
12 Months Ended
Dec. 31, 2017
Stockholders' Equity Note [Abstract]  
Summary of Activity Related to Stock Option Plans
A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:
 
 
Shares Available
for Grant
 
Options Outstanding
 
Weighted- Average Remaining Contractual Term (in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
 
Number of
Shares
 
Weighted- Average Exercise Price
(per Share)
 
Balances as of December 31, 2014
20,025,208

 
22,845,417

 
$
21.65

 
 
 
 
Granted
(3,179,892
)
 
3,179,892

 
82.67

 
 
 
 
Exercised

 
(5,029,553
)
 
15.38

 
 
 
 
Balances as of December 31, 2015
16,845,316

 
20,995,756

 
$
32.39

 
 
 
 
Granted
(3,555,363
)
 
3,555,363

 
102.03

 
 
 
 
Exercised

 
(2,113,772
)
 
17.48

 
 
 
 
Balances as of December 31, 2016
13,289,953

 
22,437,347

 
$
44.83

 
 
 
 
Granted
(2,550,038
)
 
2,550,038

 
159.56

 
 
 
 
Exercised

 
(3,338,474
)
 
26.79

 
 
 
 
Expired

 
(1,561
)
 
3.25

 
 
 
 
Balances as of December 31, 2017
10,739,915

 
21,647,350

 
$
61.13

 
5.97
 
$
2,833,198

Vested and exercisable at
December 31, 2017
 
 
21,647,350

 
$
61.13

 
5.97
 
$
2,833,198

Summary of Assumptions Used to Value Stock Option Grants Using Lattice-Binomial Model
The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
 
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Dividend yield
 
%
 
%
 
%
Expected volatility
 
34% - 37%

 
40% - 50%

 
36% - 53%

Risk-free interest rate
 
2.24% - 2.45%

 
1.57% - 2.04%

 
2.03% - 2.29%

Suboptimal exercise factor
 
2.48 - 2.63

 
2.48

 
2.47 - 2.48

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
71.45

 
$
48.85

 
$
39.22

Total stock-based compensation expense (in thousands)
 
182,209

 
173,675

 
124,725

Total income tax impact on provision (in thousands)
 
61,842

 
65,173

 
47,125

v3.8.0.1
Accumulated Other Comprehensive Loss (Tables)
12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
Schedule of Changes in Accumulated Other Comprehensive Income
The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax:
 
Foreign currency
 
Change in unrealized gains on available-for-sale securities
 
Total
 
(in thousands)
Balances as of December 31, 2015
$
(42,502
)
 
$
(806
)
 
$
(43,308
)
Other comprehensive income (loss) before reclassifications
(5,464
)
 
310

 
(5,154
)
Amounts reclassified from accumulated other comprehensive (loss) income

 
(103
)
 
(103
)
Net (increase) decrease in other comprehensive loss
(5,464
)
 
207

 
(5,257
)
Balances as of December 31, 2016
$
(47,966
)
 
$
(599
)
 
$
(48,565
)
Other comprehensive income before reclassifications
27,409

 
728

 
28,137

Amounts reclassified from accumulated other comprehensive (loss) income

 
(129
)
 
(129
)
Net decrease in other comprehensive loss
27,409

 
599

 
28,008

Balances as of December 31, 2017
$
(20,557
)
 
$

 
$
(20,557
)
v3.8.0.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Schedule of Income before Income Taxes
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
United States
$
144,100

 
$
188,078

 
$
95,644

Foreign
341,221

 
72,429

 
46,241

Income before income taxes
$
485,321

 
$
260,507

 
$
141,885

Components of Provision for Income Taxes
The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
54,245

 
$
54,315

 
$
52,557

State
(7,601
)
 
5,790

 
(1,576
)
Foreign
88,436

 
60,571

 
26,918

Total current
135,080

 
120,676

 
77,899

Deferred tax provision:
 
 
 
 
 
Federal
(153,963
)
 
(24,383
)
 
(37,669
)
State
(52,695
)
 
(14,080
)
 
(17,635
)
Foreign
(2,030
)
 
(8,384
)
 
(3,351
)
Total deferred
(208,688
)
 
(46,847
)
 
(58,655
)
Provision for income taxes
$
(73,608
)
 
$
73,829

 
$
19,244

Reconciliation of Provision for Income Taxes
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory Federal income tax rate to income before income taxes is as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Expected tax expense at U.S. Federal statutory rate of 35%
$
169,860

 
$
91,179

 
$
49,658

State income taxes, net of Federal income tax effect
6,404

 
7,261

 
4,783

Foreign earnings at other than U.S. rates
(87,514
)
 
14,639

 
5,310

Federal and California R&D tax credits
(79,868
)
 
(41,144
)
 
(29,363
)
Excess tax benefits on stock-based compensation
(157,888
)
 

 

Tax Cuts and Jobs Act of 2017
79,077

 

 

Release of tax reserves on previously unrecognized tax benefits

 

 
(13,438
)
Other
(3,679
)
 
1,894

 
2,294

Provision for income taxes
$
(73,608
)
 
$
73,829

 
$
19,244

Effective Tax Rate
(15
)%
 
28
%
 
14
%
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2017
 
2016
 
(in thousands)
Deferred tax assets:
 
 
 
Stock-based compensation
$
149,367

 
$
188,458

Accruals and reserves
34,170

 
29,231

Depreciation and amortization
(70,382
)
 
(93,760
)
Federal and California tax R&D credits
260,686

 
107,283

Federal foreign tax credits
102,242

 

Other
51,614

 
(2,363
)
Gross deferred tax assets
527,697

 
228,849

Valuation allowance
(49,431
)
 
(1,601
)
Net deferred tax assets
$
478,266

 
$
227,248

Summary of Changes in Unrecognized Tax Benefits
The aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
 
Balances as of December 31, 2015
$
17,117

Increases related to tax positions taken during prior periods
1,047

Decreases related to tax positions taken during prior periods
(7,105
)
Increases related to tax positions taken during the current period
8,713

Decreases related to settlements with taxing authorities
(33
)
Balances as of December 31, 2016
19,739

 Increases related to tax positions taken during prior periods

 Decreases related to tax positions taken during prior periods
(3,226
)
 Increases related to tax positions taken during the current period
26,389

 Decreases related to expiration of statute of limitations

Balances as of December 31, 2017
$
42,902

v3.8.0.1
Segment Information (Tables)
12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Long-lived Assets by Geographic Areas
The Company's long-lived tangible assets were located as follows:
 
As of December 31,
 
2017
 
2016
 
(in thousands)
United States
$
289,875

 
$
236,977

International
29,529

 
13,418

Information on Reportable Segments and Reconciliation to Consolidated Net Income
The following tables represent segment information for the year ended December 31, 2017:
 
 
As of/Year ended December 31, 2017
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
54,750

 
62,832

 
3,383

 


Revenues
$
6,153,025

 
$
5,089,191

 
$
450,497

 
$
11,692,713

Cost of revenues
3,319,230

 
4,137,911

 
202,525

 
7,659,666

Marketing
553,331

 
724,691

 

 
1,278,022

Contribution profit
$
2,280,464

 
$
226,589

 
$
247,972

 
2,755,025

Other operating expenses
 
 
 
 
 
 
1,916,346

Operating income
 
 
 
 
 
 
838,679

Other income (expense)
 
 
 
 
 
 
(353,358
)
Benefit from income taxes
 
 
 
 
 
 
(73,608
)
Net income
 
 
 
 
 
 
$
558,929



 
Year ended December 31, 2017
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
2,756,947

 
$
3,440,870

 
$
60,657

 
$
6,258,474


The following tables represent segment information for the year ended December 31, 2016:
 
 
As of/Year ended December 31, 2016
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
49,431

 
44,365

 
4,114

 

Revenues
$
5,077,307

 
$
3,211,095

 
$
542,267

 
$
8,830,669

Cost of revenues
2,855,789

 
2,911,370

 
262,742

 
6,029,901

Marketing
382,832

 
608,246

 

 
991,078

Contribution profit (loss)
$
1,838,686

 
$
(308,521
)
 
$
279,525

 
1,809,690

Other operating expenses
 
 
 
 
 
 
1,429,897

Operating income
 
 
 
 
 
 
379,793

Other income (expense)
 
 
 
 
 
 
(119,286
)
Provision for income taxes
 
 
 
 
 
 
73,829

Net income
 
 
 
 
 
 
$
186,678


 
Year ended December 31, 2016
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
2,337,950

 
$
2,450,548

 
$
78,952

 
$
4,867,450


The following tables represent segment information for the year ended December 31, 2015:
 
As of/Year ended December 31, 2015
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
44,738

 
30,024

 
4,904

 

Revenues
$
4,180,339

 
$
1,953,435

 
$
645,737

 
$
6,779,511

Cost of revenues
2,487,193

 
1,780,375

 
323,908

 
4,591,476

Marketing
317,646

 
506,446

 

 
824,092

Contribution profit (loss)
$
1,375,500

 
$
(333,386
)
 
$
321,829

 
1,363,943

Other operating expenses
 
 
 
 
 
 
1,058,117

Operating income
 
 
 
 
 
 
305,826

Other income (expense)
 
 
 
 
 
 
(163,941
)
Provision for income taxes
 
 
 
 
 
 
19,244

Net income
 
 
 
 
 
 
$
122,641

 
Year ended December 31, 2015
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Amortization of content assets
$
1,905,069

 
$
1,500,313

 
$
79,380

 
$
3,484,762

(1)
A membership (also referred to as a subscription) is defined as the right to receive Netflix service following sign-up and a method of payment being provided. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to certain new and rejoining members. Total members include those who are on a free-trial as long as a method of payment has been provided. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.
v3.8.0.1
Selected Quarterly Financial Data (Tables)
12 Months Ended
Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data
 
December 31
 
September 30
 
June 30
 
March 31
 
(in thousands, except for per share data)
2017
 
Total revenues
$
3,285,755

 
$
2,984,859

 
$
2,785,464

 
$
2,636,635

Gross profit
1,178,401

 
991,879

 
883,156

 
979,611

Net income
185,517

 
129,590

 
65,600

 
178,222

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.43

 
$
0.30

 
$
0.15

 
$
0.41

Diluted
0.41

 
0.29

 
0.15

 
0.40

2016
 
 
 
 
 
 
 
Total revenues
$
2,477,541

 
$
2,290,188

 
$
2,105,204

 
$
1,957,736

Gross profit
823,122

 
757,344

 
632,106

 
588,196

Net income
66,748

 
51,517

 
40,755

 
27,658

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.12

 
$
0.10

 
$
0.06

Diluted
0.15

 
0.12

 
0.09

 
0.06

v3.8.0.1
Organization and Summary of Significant Accounting Policies (Narrative) (Details)
member in Millions, $ in Millions
12 Months Ended
Jul. 14, 2015
Jun. 30, 2015
Dec. 31, 2017
USD ($)
country
segment
member
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Organization And Summary Of Significant Accounting Policies [Line Items]          
Number of streaming members (more than) | member     117    
Number of countries (over) | country     190    
Number of hours (more than)     140000000 hours    
Number of reportable segments | segment     3    
Stock split, conversion ratio 7 7      
Streaming content library, useful life (in years)     1 year    
Advertising expense     $ 1,091.1 $ 842.4 $ 714.3
Technology and development     981.3 768.3 570.0
Foreign currency translation adjustment, other comprehensive loss         21.8
Foreign currency transaction gain (loss)     $ (127.9) $ 22.8 $ (37.3)
Minimum [Member]          
Organization And Summary Of Significant Accounting Policies [Line Items]          
Content assets, useful life (in years)     10 years    
Maximum [Member]          
Organization And Summary Of Significant Accounting Policies [Line Items]          
Property and equipment estimated useful life     30 years    
v3.8.0.1
Organization and Summary of Significant Accounting Policies (Computation of Net Income Per Share) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Basic earnings per share:                      
Net income $ 185,517 $ 129,590 $ 65,600 $ 178,222 $ 66,748 $ 51,517 $ 40,755 $ 27,658 $ 558,929 $ 186,678 $ 122,641
Weighted-average common shares outstanding                 431,885 428,822 425,889
Basic earnings per share (in USD per share) $ 0.43 $ 0.30 $ 0.15 $ 0.41 $ 0.16 $ 0.12 $ 0.10 $ 0.06 $ 1.29 $ 0.44 $ 0.29
Diluted earnings per share:                      
Net income $ 185,517 $ 129,590 $ 65,600 $ 178,222 $ 66,748 $ 51,517 $ 40,755 $ 27,658 $ 558,929 $ 186,678 $ 122,641
Shares used in computation:                      
Weighted-average common shares outstanding                 431,885 428,822 425,889
Employee stock options                 14,929 9,830 10,567
Weighted-average number of shares                 446,814 438,652 436,456
Diluted earnings per share (in USD per share) $ 0.41 $ 0.29 $ 0.15 $ 0.40 $ 0.15 $ 0.12 $ 0.09 $ 0.06 $ 1.25 $ 0.43 $ 0.28
v3.8.0.1
Organization And Summary Of Significant Accounting Policies (Summary of Potential Common Shares Excluded From Diluted Calculation) (Details) - shares
shares in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Equity Option [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Employee stock options 189 1,545 517
v3.8.0.1
Short-term Investments (Available-For-Sale Securities Reported At Fair Value) (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Non-current Assets [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Restricted Cash $ 4,400  
Level 1 Securities [Member] | Cash and Cash Equivalents [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Money Market Funds, at Carrying Value 449,700  
Level 1 Securities [Member] | Non-current Assets [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Money Market Funds, at Carrying Value 1,300  
Level 1 Securities [Member] | Money market funds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash and Money market funds, Amortized Cost   $ 204,967
Cash and Money market funds, Fair Value Disclosure   204,967
Level 2 Securities [Member] | Cash and Cash Equivalents [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Foreign deposits $ 300,800  
Cash [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash and Money market funds, Amortized Cost   1,267,523
Cash and Money market funds, Fair Value Disclosure   1,267,523
Fair Value, Measurements, Recurring [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Gross Unrealized Gains   110
Available-for-sale Securities, Gross Unrealized Losses   (1,087)
Total, Amortized Cost   1,739,673
Total, Estimated Fair Value   1,738,696
Fair Value, Measurements, Recurring [Member] | Cash and Cash Equivalents [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value   1,467,576
Fair Value, Measurements, Recurring [Member] | Short-term Investments [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value   266,206
Fair Value, Measurements, Recurring [Member] | Non-current Assets [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value   4,914
Fair Value, Measurements, Recurring [Member] | Level 1 Securities [Member] | Money market funds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Gains   0
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Losses   0
Cash and Money market funds, Fair Value Disclosure   203,450
Cash and Money market funds, Non-current assets   1,517
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Corporate debt securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost   199,843
Available-for-sale Securities, Gross Unrealized Gains   110
Available-for-sale Securities, Gross Unrealized Losses   (731)
Available-for-sale Securities, Estimated Fair Value   199,222
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | US Government Agencies Debt Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost   35,944
Available-for-sale Securities, Gross Unrealized Gains   0
Available-for-sale Securities, Gross Unrealized Losses   (128)
Available-for-sale Securities, Estimated Fair Value   35,816
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Certificates of Deposit [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost   9,833
Available-for-sale Securities, Estimated Fair Value   9,833
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Agency securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost   21,563
Available-for-sale Securities, Gross Unrealized Gains   0
Available-for-sale Securities, Gross Unrealized Losses   (228)
Available-for-sale Securities, Estimated Fair Value   21,335
Fair Value, Measurements, Recurring [Member] | Cash [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Gains   0
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Losses   0
Cash and Money market funds, Fair Value Disclosure   1,264,126
Cash and Money market funds, Non-current assets   $ 3,397
v3.8.0.1
Balance Sheet Components (Components of Content Library) (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Finite-Lived Intangible Assets [Line Items]    
Total content assets, net $ 14,681,989 $ 11,000,808
Current content assets, net 4,310,934 3,726,307
Non-current content assets, net $ 10,371,055 7,274,501
Average produced content asset amortization percentage (more than) 0.90  
Average produced content asset amortization period (in years) 4 years  
Average unamortized cost percentage (more than) 30.00%  
Average amortization period of unamortized cost at balance sheet date (in years) 1 year  
Produced content, amortization period, tranche one (in years) 1 year  
Produced content, amortization period, tranche two (in years) 3 years  
Produced content, amortization period, tranche three (in years) 4 years  
Licensed Content [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, net $ 11,771,778 9,595,315
Produced Content [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, net 1,427,256 335,400
In production 1,311,137 1,010,463
In development and pre-production 158,517 34,215
Total content assets, net $ 2,896,910 1,380,078
Produced content amortization period tranche one, percent 29.00%  
Produced content amortization period tranche two, percent 78.00%  
Produced content amortization period tranche three, percent 80.00%  
DVD [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, net $ 13,301 $ 25,415
v3.8.0.1
Balance Sheet Components (Property and Equipment and Accumulated Depreciation) (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 641,218 $ 544,604
Less: Accumulated depreciation (321,814) (294,209)
Property and equipment, net 319,404 250,395
Information technology assets Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 223,850 185,345
Estimated Useful Lives 3 years  
Furniture and fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 49,217 32,185
Estimated Useful Lives 3 years  
Buildings [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 40,681 40,681
Estimated Useful Lives 30 years  
Leasehold improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 229,848 107,945
DVD operations equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 59,316 70,152
Estimated Useful Lives 5 years  
Corporate Aircraft [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 30,039 0
Estimated Useful Lives 8 years  
Capital work-in-progress [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 8,267 $ 108,296
v3.8.0.1
Long-term Debt (Narrative) (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Aggregate outstanding principal $ 6,499,432 $ 3,364,311
Debt issuance cost $ 61,900  
Senior Notes [Member]    
Debt Instrument [Line Items]    
Redemption price, percent of outstanding principal 101.00%  
v3.8.0.1
Long-term Debt (Summary of Long-term Debt) (Details)
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Dec. 31, 2017
EUR (€)
Dec. 31, 2017
USD ($)
Debt Instrument [Line Items]          
Foreign currency remeasurement loss on long-term debt $ 140,790,000 $ 0 $ 0    
Senior Notes [Member] | 4.875% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       4.875% 4.875%
Face amount         $ 1,600,000,000
Long-term debt, fair value   0     $ 1,571,000,000
Senior Notes [Member] | 3.625% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       3.625% 3.625%
Face amount       € 1,300,000,000 $ 1,561,300,000.0
Long-term debt, fair value   0     $ 1,575,000,000
Proceeds from convertible debt 1,420,500,000        
Foreign currency remeasurement loss on long-term debt $ 140,800,000        
Senior Notes [Member] | 4.375% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       4.375% 4.375%
Face amount         $ 1,000,000,000
Long-term debt, fair value   975,000,000     $ 983,000,000
Senior Notes [Member] | 5.50% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       5.50% 5.50%
Face amount         $ 700,000,000.0
Long-term debt, fair value   758,000,000     $ 739,000,000
Senior Notes [Member] | 5.875% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       5.875% 5.875%
Face amount         $ 800,000,000
Long-term debt, fair value   868,000,000     $ 856,000,000
Senior Notes [Member] | 5.750% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       5.75% 5.75%
Face amount         $ 400,000,000
Long-term debt, fair value   431,000,000     $ 427,000,000
Senior Notes [Member] | 5.375% Senior Notes [Member]          
Debt Instrument [Line Items]          
Interest rate       5.375% 5.375%
Face amount         $ 500,000,000
Long-term debt, fair value   $ 539,000,000     $ 530,000,000
v3.8.0.1
Long-term Debt (Revolving Credit Facility) (Details) - USD ($)
12 Months Ended
Dec. 31, 2017
Jul. 31, 2017
Revolving Credit Facility [Member]    
Line of Credit Facility [Line Items]    
Line of credit facility, maximum borrowing capacity   $ 500,000,000.0
Line of credit facility, additional maximum borrowing capacity   $ 250,000,000.0
Commitment fee percentage 0.10%  
London Interbank Offered Rate (LIBOR) [Member] | Revolving Credit Facility [Member]    
Line of Credit Facility [Line Items]    
Basis spread on variable rate 0.75%  
Federal Funds Rate [Member] | Revolving Credit Facility [Member]    
Line of Credit Facility [Line Items]    
Basis spread on variable rate 0.50%  
One-Month LIBOR Rate [Member]    
Line of Credit Facility [Line Items]    
Basis spread on variable rate 0.00%  
One-Month LIBOR Rate [Member] | Revolving Credit Facility [Member]    
Line of Credit Facility [Line Items]    
Basis spread on variable rate 1.00%  
v3.8.0.1
Commitments and Contingencies (Streaming Content) (Narrative) (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Contractual Obligation [Line Items]    
Total streaming content obligations $ 17,694,642 $ 14,479,487
Current content liabilities 4,173,041 3,632,711
Non-current content liabilities 3,329,796 2,894,654
Unrecorded streaming obligations 10,200,000 8,000,000
Current Content Liabilities [Member]    
Contractual Obligation [Line Items]    
Current content liabilities 4,200,000 3,600,000
Non-current Content Liabilities [Member]    
Contractual Obligation [Line Items]    
Non-current content liabilities $ 3,300,000 $ 2,900,000
v3.8.0.1
Commitments and Contingencies (Expected Timing of Payments for Commitments) (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]    
Less than one year $ 7,446,947 $ 6,200,611
Due after one year and through 3 years 8,210,159 6,731,336
Due after 3 years and through 5 years 1,894,001 1,386,934
Due after 5 years 143,535 160,606
Total streaming content obligations $ 17,694,642 $ 14,479,487
v3.8.0.1
Commitments and Contingencies (Lease Obligations) (Narrative) (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Capital Leased Assets [Line Items]      
Rent expense $ 75.3 $ 53.1 $ 34.7
Land, Buildings and Improvements [Member] | Los Gatos Buildings [Member]      
Capital Leased Assets [Line Items]      
Total costs of buildings and improvements 40.7    
Capital lease obligations 29.5    
Capital leases, future minimum payments due 15.6    
Capital lease financing obligation under extended lease term 21.8    
Land, Buildings and Improvements [Member] | Los Gatos Buildings Expanded Site and Los Angeles [Member]      
Capital Leased Assets [Line Items]      
Operating leases, future minimum payments due $ 508.3    
v3.8.0.1
Commitments and Contingencies (Future Minimum Payments Under Lease Financing Obligations and Non-Cancelable Operating Leases) (Details)
$ in Thousands
Dec. 31, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2018 $ 101,987
2019 97,560
2020 96,255
2021 85,188
2022 77,418
Thereafter 278,970
Total minimum payments $ 737,378
v3.8.0.1
Stockholders' Equity (Stock Split) (Narrative) (Details)
Jul. 14, 2015
Jun. 30, 2015
Dec. 31, 2017
$ / shares
shares
Dec. 31, 2016
$ / shares
shares
Mar. 31, 2015
$ / shares
shares
Feb. 28, 2015
$ / shares
shares
Stockholders' Equity Note [Abstract]            
Capital units, authorized         5,000,000,000 170,000,000
Common stock, shares authorized     4,990,000,000 4,990,000,000 4,990,000,000 160,000,000
Preferred stock, shares authorized     10,000,000 10,000,000 10,000,000 10,000,000
Common stock, par value (in USD per share) | $ / shares     $ 0.001 $ 0.001 $ 0.001 $ 0.001
Stock split, conversion ratio 7 7        
v3.8.0.1
Stockholders' Equity (Preferred Stock and Voting Rights) (Narrative) (Details)
12 Months Ended
Dec. 31, 2017
vote
$ / shares
shares
Dec. 31, 2016
$ / shares
shares
Mar. 31, 2015
shares
Feb. 28, 2015
shares
Stockholders' Equity Note [Abstract]        
Preferred stock, shares authorized 10,000,000 10,000,000 10,000,000 10,000,000
Preferred stock, par value (in USD per share) | $ / shares $ 0.001 $ 0.001    
Preferred stock, shares issued 0 0    
Preferred stock, shares outstanding 0 0    
Number of voting rights per share | vote 1      
v3.8.0.1
Stockholders' Equity (Stock Option Plans) (Narrative) (Details) - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Total intrinsic value of options exercised $ 464.0 $ 189.2 $ 368.4
Cash received from option exercised $ 88.4 $ 37.0 $ 78.0
2011 Stock Plan [Member] | Employee Stock Option [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Shares available for future issuance 10.7    
v3.8.0.1
Stockholders' Equity (Summary of Activity Related to Stock Option Plans) (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]      
Shares Available for Grant, Beginning Balances 13,289,953 16,845,316 20,025,208
Options Outstanding, Number of Shares, Beginning Balances 22,437,347 20,995,756 22,845,417
Options Outstanding, Number of Shares, Granted (2,550,038) (3,555,363) (3,179,892)
Options Outstanding, Number of Shares, Exercised (3,338,474) (2,113,772) (5,029,553)
Options Outstanding, Number of Shares, Expired (1,561)    
Shares Available for Grant, Ending Balances 10,739,915 13,289,953 16,845,316
Options Outstanding, Number of Shares, Ending Balances 21,647,350 22,437,347 20,995,756
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]      
Options Outstanding, Weighted-Average Exercise Price, Beginning Balances (in USD per share) $ 44.83 $ 32.39 $ 21.65
Options Outstanding, Weighted-Average Exercise Price, Granted (in USD per share) 159.56 102.03 82.67
Options Outstanding, Weighted-Average Exercise Price, Exercised (in USD per share) 26.79 17.48 15.38
Options Outstanding, Weighted-Average Exercise Price, Expired (in USD per share) 3.25    
Options Outstanding, Weighted-Average Exercise Price, Ending Balances (in USD per share) $ 61.13 $ 44.83 $ 32.39
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]      
Options Outstanding, Number of Shares, Vested and exercisable 21,647,350    
Options Outstanding, Weighted-Average Exercise Price, Vested and exercisable (in USD per share) $ 61.13    
Weighted-Average Remaining Contractual Term, Vested and exercisable (in Years) 5 years 11 months 19 days    
Aggregate Intrinsic Value, Vested and exercisable $ 2,833,198    
Expiration period 10 years    
v3.8.0.1
Stockholders' Equity (Summary of Assumptions Used to Value Stock Option Grants) (Details)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
$ / shares
Dec. 31, 2016
USD ($)
$ / shares
Dec. 31, 2015
USD ($)
$ / shares
Stockholders' Equity Note [Abstract]      
Dividend yield 0.00% 0.00% 0.00%
Expected volatility, minimum 34.00% 40.00% 36.00%
Expected volatility, maximum 37.00% 50.00% 53.00%
Risk-free interest rate, minimum 2.24% 1.57% 2.03%
Risk-free interest rate, maximum 2.45% 2.04% 2.29%
Suboptimal exercise factor, minimum 2.48 2.48 2.47
Suboptimal exercise factor, maximum 2.63 2.48 2.48
Valuation data:      
Weighted-average fair value (in USD per share) | $ / shares $ 71.45 $ 48.85 $ 39.22
Total stock-based compensation expense (in thousands) $ 182,209 $ 173,675 $ 124,725
Total income tax impact on provision (in thousands) $ 61,842 $ 65,173 $ 47,125
v3.8.0.1
Accumulated Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning Balance $ 2,679,800 $ 2,223,426
Other comprehensive income before reclassifications 28,137 (5,154)
Amounts reclassified from accumulated other comprehensive (loss) income (129) (103)
Net decrease in other comprehensive loss 28,008 (5,257)
Ending Balance 3,581,956 2,679,800
Foreign currency [Member]    
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning Balance (47,966) (42,502)
Other comprehensive income before reclassifications 27,409 (5,464)
Amounts reclassified from accumulated other comprehensive (loss) income 0 0
Net decrease in other comprehensive loss 27,409 (5,464)
Ending Balance (20,557) (47,966)
Change in unrealized gains on available for sale securities [Member]    
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning Balance (599) (806)
Other comprehensive income before reclassifications 728 310
Amounts reclassified from accumulated other comprehensive (loss) income (129) (103)
Net decrease in other comprehensive loss 599 207
Ending Balance 0 (599)
AOCI Attributable to Parent [Member]    
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning Balance (48,565) (43,308)
Ending Balance $ (20,557) $ (48,565)
v3.8.0.1
Income Taxes (Schedule of Income before Income Taxes) (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]      
United States $ 144,100 $ 188,078 $ 95,644
Foreign 341,221 72,429 46,241
Income before income taxes $ 485,321 $ 260,507 $ 141,885
v3.8.0.1
Income Taxes (Components of Provision for Income Taxes) (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Current tax provision:        
Federal   $ 54,245 $ 54,315 $ 52,557
State   (7,601) 5,790 (1,576)
Foreign   88,436 60,571 26,918
Total current   135,080 120,676 77,899
Deferred tax provision:        
Federal   (153,963) (24,383) (37,669)
State   (52,695) (14,080) (17,635)
Foreign   (2,030) (8,384) (3,351)
Total deferred   (208,688) (46,847) (58,655)
Provision for income taxes $ 79,100 $ (73,608) $ 73,829 $ 19,244
v3.8.0.1
Income Taxes (Narrative) (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Jan. 29, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Operating Loss Carryforwards [Line Items]                        
Federal statutory income tax rate, percent                   35.00% 35.00% 35.00%
Provision for income taxes   $ 79,100               $ (73,608) $ 73,829 $ 19,244
Change in enacted tax rate, amount                   46,900    
Foreign earnings repatriated                   32,200    
Revenues   3,285,755 $ 2,984,859 $ 2,785,464 $ 2,636,635 $ 2,477,541 $ 2,290,188 $ 2,105,204 $ 1,957,736 11,692,713 8,830,669 6,779,511
Foreign income tax expense (benefit)                   66,500    
Valuation allowance   49,431       1,601       49,431 1,601  
Deferred tax assets   46,900               46,900    
Federal foreign tax credits   102,242       0       102,242 0  
Unrecognized tax benefits   42,902       19,739       42,902 19,739 $ 17,117
Reduction in provision for income taxes due to impact of effective tax rate   37,900       $ 17,000       37,900 $ 17,000  
Domestic Tax Authority [Member]                        
Operating Loss Carryforwards [Line Items]                        
Tax credit carryforward, amount   133,400               133,400    
State and Local Jurisdiction [Member]                        
Operating Loss Carryforwards [Line Items]                        
Tax credit carryforward, amount   119,200               119,200    
Internal Revenue Service (IRS) [Member] | Domestic Tax Authority [Member]                        
Operating Loss Carryforwards [Line Items]                        
Operating loss carryforwards   80,900               80,900    
Accounting Standards Update 2016-09 [Member]                        
Operating Loss Carryforwards [Line Items]                        
Deferred income tax assets   43,600               43,600    
Cumulative effect of new accounting principle in period of adoption   43,585               43,585    
Accounting Standards Update 2016-09 [Member] | Retained Earnings [Member]                        
Operating Loss Carryforwards [Line Items]                        
Cumulative effect of new accounting principle in period of adoption   $ 43,585               43,585    
Subsequent Event [Member]                        
Operating Loss Carryforwards [Line Items]                        
Federal statutory income tax rate, percent 21.00%                      
Non-US [Member]                        
Operating Loss Carryforwards [Line Items]                        
Revenues                   $ 484,900    
v3.8.0.1
Income Taxes (Reconciliation of Provision for Income Taxes) (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]        
Federal statutory income tax rate, percent   35.00% 35.00% 35.00%
Expected tax expense at U.S. Federal statutory rate of 35%   $ 169,860 $ 91,179 $ 49,658
State income taxes, net of Federal income tax effect   6,404 7,261 4,783
Foreign earnings at other than U.S. rates   (87,514) 14,639 5,310
Federal and California R&D tax credits   (79,868) (41,144) (29,363)
Excess tax benefits on stock-based compensation   (157,888) 0 0
Tax Cuts and Jobs Act of 2017   79,077 0 0
Release of tax reserves on previously unrecognized tax benefits   0 0 (13,438)
Other   (3,679) 1,894 2,294
Provision for income taxes $ 79,100 $ (73,608) $ 73,829 $ 19,244
Effective Tax Rate   (15.00%) 28.00% 14.00%
v3.8.0.1
Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Deferred tax assets (liabilities):    
Stock-based compensation $ 149,367 $ 188,458
Accruals and reserves 34,170 29,231
Depreciation and amortization (70,382) (93,760)
Federal and California tax R&D credits 260,686 107,283
Federal foreign tax credits 102,242 0
Other   (2,363)
Other 51,614  
Gross deferred tax assets 527,697 228,849
Valuation allowance (49,431) (1,601)
Net deferred tax assets $ 478,266 $ 227,248
v3.8.0.1
Income Taxes (Summary of Changes in Unrecognized Tax Benefits) (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]    
Beginning Balance $ 19,739 $ 17,117
Increases related to tax positions taken during prior periods 0 1,047
Decreases related to tax positions taken during prior periods (3,226) (7,105)
Increases related to tax positions taken during the current period 26,389 8,713
Decreases related to settlements with taxing authorities   (33)
Decreases related to expiration of statute of limitations 0  
Ending Balance $ 42,902 $ 19,739
v3.8.0.1
Employee Benefit Plan (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Retirement Benefits [Abstract]      
Eligible employees maximum contribution percentage 60.00%    
Contributions by employer $ 20.2 $ 15.7 $ 11.2
v3.8.0.1
Segment Information (Narrative) (Details)
12 Months Ended
Dec. 31, 2017
segment
Segment Reporting [Abstract]  
Number of reportable segments 3
v3.8.0.1
Segment Information (Long-lived Assets by Geographic Areas) (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
United States [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 289,875 $ 236,977
International [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 29,529 $ 13,418
v3.8.0.1
Segment Information (Information on Reportable Segments and Reconciliation to Consolidated Net Income) (Details)
subscription in Thousands, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
USD ($)
subscription
Sep. 30, 2017
USD ($)
Jun. 30, 2017
USD ($)
Mar. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
subscription
Sep. 30, 2016
USD ($)
Jun. 30, 2016
USD ($)
Mar. 31, 2016
USD ($)
Dec. 31, 2017
USD ($)
subscription
Dec. 31, 2016
USD ($)
subscription
Dec. 31, 2015
USD ($)
subscription
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription       0       0 0
Revenues $ 3,285,755 $ 2,984,859 $ 2,785,464 $ 2,636,635 $ 2,477,541 $ 2,290,188 $ 2,105,204 $ 1,957,736 $ 11,692,713 $ 8,830,669 $ 6,779,511
Cost of revenues                 7,659,666 6,029,901 4,591,476
Marketing                 1,278,022 991,078 824,092
Contribution profit (loss)                 2,755,025 1,809,690 1,363,943
Other operating expenses                 1,916,346 1,429,897 1,058,117
Operating income                 838,679 379,793 305,826
Other income (expense)                 (353,358) (119,286) (163,941)
Provision for income taxes 79,100               (73,608) 73,829 19,244
Net income $ 185,517 $ 129,590 $ 65,600 $ 178,222 $ 66,748 $ 51,517 $ 40,755 $ 27,658 558,929 186,678 122,641
Amortization of content assets                 $ 6,258,474 $ 4,867,450 $ 3,484,762
Domestic Streaming [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 54,750       49,431       54,750 49,431 44,738
Revenues                 $ 6,153,025 $ 5,077,307 $ 4,180,339
Cost of revenues                 3,319,230 2,855,789 2,487,193
Marketing                 553,331 382,832 317,646
Contribution profit (loss)                 2,280,464 1,838,686 1,375,500
Amortization of content assets                 $ 2,756,947 $ 2,337,950 $ 1,905,069
International Streaming [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 62,832       44,365       62,832 44,365 30,024
Revenues                 $ 5,089,191 $ 3,211,095 $ 1,953,435
Cost of revenues                 4,137,911 2,911,370 1,780,375
Marketing                 724,691 608,246 506,446
Contribution profit (loss)                 226,589 (308,521) (333,386)
Amortization of content assets                 $ 3,440,870 $ 2,450,548 $ 1,500,313
Domestic DVD [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 3,383       4,114       3,383 4,114 4,904
Revenues                 $ 450,497 $ 542,267 $ 645,737
Cost of revenues                 202,525 262,742 323,908
Marketing                 0 0 0
Contribution profit (loss)                 247,972 279,525 321,829
Amortization of content assets                 $ 60,657 $ 78,952 $ 79,380
v3.8.0.1
Selected Quarterly Financial Data (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]                      
Total revenues $ 3,285,755 $ 2,984,859 $ 2,785,464 $ 2,636,635 $ 2,477,541 $ 2,290,188 $ 2,105,204 $ 1,957,736 $ 11,692,713 $ 8,830,669 $ 6,779,511
Gross profit 1,178,401 991,879 883,156 979,611 823,122 757,344 632,106 588,196      
Net income $ 185,517 $ 129,590 $ 65,600 $ 178,222 $ 66,748 $ 51,517 $ 40,755 $ 27,658 $ 558,929 $ 186,678 $ 122,641
Earnings (loss) per share:                      
Basic (in USD per share) $ 0.43 $ 0.30 $ 0.15 $ 0.41 $ 0.16 $ 0.12 $ 0.10 $ 0.06 $ 1.29 $ 0.44 $ 0.29
Diluted (in USD per share) $ 0.41 $ 0.29 $ 0.15 $ 0.40 $ 0.15 $ 0.12 $ 0.09 $ 0.06 $ 1.25 $ 0.43 $ 0.28