NETFLIX INC, 10-K filed on 1/29/2015
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Jan. 28, 2015
Jun. 30, 2014
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, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
60,498,082 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 25,313,674,160 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Statement [Abstract]
 
 
 
Revenues
$ 5,504,656 
$ 4,374,562 
$ 3,609,282 
Cost of revenues
3,752,760 
3,117,203 
2,652,058 
Marketing
607,186 
469,942 
439,208 
Technology and development
472,321 
378,769 
329,008 
General and administrative
269,741 
180,301 
139,016 
Operating income
402,648 
228,347 
49,992 
Other income (expense):
 
 
 
Interest expense
(50,219)
(29,142)
(19,986)
Interest and other income (expense)
(3,060)
(3,002)
474 
Loss on extinguishment of debt
0 
(25,129)
0 
Income before income taxes
349,369 
171,074 
30,480 
Provision for income taxes
82,570 
58,671 
13,328 
Net income
$ 266,799 
$ 112,403 
$ 17,152 
Earnings per share:
 
 
 
Basic (in dollars per share)
$ 4.44 
$ 1.93 
$ 0.31 
Diluted (in dollars per share)
$ 4.32 
$ 1.85 
$ 0.29 
Weighted-average common shares outstanding:
 
 
 
Basic (in shares)
60,078 
58,198 
55,521 
Diluted (in shares)
61,699 
60,761 
58,904 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 266,799 
$ 112,403 
$ 17,152 
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments
(7,768)
1,772 
1,357 
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $(156), $(697), and $538, respectively
(253)
(1,116)
856 
Total other comprehensive income (loss)
(8,021)
656 
2,213 
Comprehensive income
$ 258,778 
$ 113,059 
$ 19,365 
Consolidated Statement of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax, Portion Attributable to Parent
$ (156)
$ (697)
$ 538 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities:
 
 
 
Net income
$ 266,799 
$ 112,403 
$ 17,152 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Additions to streaming content library
(3,773,459)
(3,049,758)
(2,515,506)
Change in streaming content liabilities
593,125 
673,785 
762,089 
Amortization of streaming content library
2,656,279 
2,121,981 
1,591,218 
Amortization of DVD content library
71,491 
71,325 
65,396 
Depreciation and amortization of property, equipment and intangibles
54,028 
48,374 
45,469 
Stock-based compensation expense
115,239 
73,100 
73,948 
Excess tax benefits from stock-based compensation
(89,341)
(81,663)
(4,543)
Other non-cash items
15,282 
5,332 
(8,392)
Loss on extinguishment of debt
0 
25,129 
0 
Deferred taxes
(30,063)
(22,044)
(30,071)
Changes in operating assets and liabilities:
 
 
 
Other current assets
(8,758)
62,234 
(5,432)
Accounts payable
83,812 
18,374 
(4,943)
Accrued expenses
55,636 
1,941 
9,806 
Deferred revenue
58,819 
46,295 
20,676 
Other non-current assets and liabilities
(52,406)
(8,977)
4,719 
Net cash provided by operating activities
16,483 
97,831 
21,586 
Cash flows from investing activities:
 
 
 
Acquisition of DVD content library
(74,790)
(65,927)
(48,275)
Purchases of property and equipment
(69,726)
(54,143)
(40,278)
Other assets
1,334 
5,939 
8,816 
Purchases of short-term investments
(426,934)
(550,264)
(477,321)
Proceeds from sale of short-term investments
385,300 
347,502 
282,953 
Proceeds from maturities of short-term investments
141,950 
60,925 
29,365 
Net cash used in investing activities
(42,866)
(255,968)
(244,740)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock
60,544 
124,557 
4,124 
Proceeds from public offering of common stock, net of issuance costs
0 
0 
(464)
Proceeds from issuance of debt
400,000 
500,000 
0 
Debt issuance costs
(7,080)
(9,414)
(295)
Redemption of debt
0 
(219,362)
0 
Excess tax benefits from stock-based compensation
89,341 
81,663 
4,543 
Principal payments of lease financing obligations
(1,093)
(1,180)
(2,319)
Net cash provided by financing activities
541,712 
476,264 
5,589 
Effect of exchange rate changes on cash and cash equivalents
(6,686)
(3,453)
(197)
Net increase (decrease) in cash and cash equivalents
508,643 
314,674 
(217,762)
Cash and cash equivalents, beginning of year
604,965 
290,291 
508,053 
Cash and cash equivalents, end of year
1,113,608 
604,965 
290,291 
Supplemental disclosure:
 
 
 
Income taxes paid
50,573 
7,465 
28,853 
Interest paid
$ 41,085 
$ 19,114 
$ 19,009 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 1,113,608 
$ 604,965 
Short-term investments
494,888 
595,440 
Current content library, net
2,125,702 
1,706,421 
Other current assets
206,271 
151,937 
Total current assets
3,940,469 
3,058,763 
Non-current content library, net
2,773,326 
2,091,071 
Property and equipment, net
149,875 
133,605 
Other non-current assets
192,981 
129,124 
Total assets
7,056,651 
5,412,563 
Current liabilities:
 
 
Current content liabilities
2,117,241 
1,775,983 
Accounts payable
201,581 
108,435 
Accrued expenses
69,746 
54,018 
Deferred revenue
274,586 
215,767 
Total current liabilities
2,663,154 
2,154,203 
Non-current content liabilities
1,575,832 
1,345,590 
Long-term debt
900,000 
500,000 
Other non-current liabilities
59,957 
79,209 
Total liabilities
5,198,943 
4,079,002 
Commitments and contingencies (Note 6)
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2014 and 2013; no shares issued and outstanding at December 31, 2014 and 2013
0 
0 
Common stock, $0.001 par value; 160,000,000 shares authorized at December 31, 2014 and 2013; 60,415,841 and 59,607,001 issued and outstanding at December 31, 2014 and 2013, respectively
60 
60 
Additional paid-in capital
1,042,810 
777,441 
Accumulated other comprehensive (loss) income
(4,446)
3,575 
Retained earnings
819,284 
552,485 
Total stockholders’ equity
1,857,708 
1,333,561 
Total liabilities and stockholders’ equity
$ 7,056,651 
$ 5,412,563 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 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
$ 0.001 
$ 0.001 
Common stock, shares authorized
160,000,000 
160,000,000 
Common stock, shares issued
60,415,841 
59,607,001 
Common stock, shares outstanding
60,415,841 
59,607,001 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive (Loss) Income [Member]
Retained Earnings [Member]
Beginning Balance at Dec. 31, 2011
$ 642,810 
$ 55 
$ 219,119 
$ 706 
$ 422,930 
Beginning Balance (in shares) at Dec. 31, 2011
 
55,398,615 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
17,152 
 
 
 
17,152 
Other comprehensive income (loss)
2,213 
 
 
2,213 
 
Issuance of common stock upon exercise of options (in shares)
188,552 
188,552 
 
 
 
Issuance of common stock upon exercise of options
4,124 
1 
4,123 
 
 
Stock-based compensation expense
73,948 
 
73,948 
 
 
Excess stock option income tax benefits
4,426 
 
4,426 
 
 
Ending Balance at Dec. 31, 2012
744,673 
56 
301,616 
2,919 
440,082 
Ending Balance (in shares) at Dec. 31, 2012
 
55,587,167 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
112,403 
 
 
 
112,403 
Other comprehensive income (loss)
656 
 
 
656 
 
Issuance of common stock upon exercise of options (in shares)
1,688,774 
1,688,774 
 
 
 
Issuance of common stock upon exercise of options
124,557 
2 
124,555 
 
 
Stock-based compensation expense
73,100 
 
73,100 
 
 
Excess stock option income tax benefits
79,964 
 
79,964 
 
 
Note conversion (in shares)
 
2,331,060 
 
 
 
Note conversion
198,208 
2 
198,206 
 
 
Ending Balance at Dec. 31, 2013
1,333,561 
60 
777,441 
3,575 
552,485 
Ending Balance (in shares) at Dec. 31, 2013
 
59,607,001 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
Net income
266,799 
 
 
 
266,799 
Other comprehensive income (loss)
(8,021)
 
 
(8,021)
 
Issuance of common stock upon exercise of options (in shares)
808,840 
808,840 
 
 
 
Issuance of common stock upon exercise of options
61,190 
0 
61,190 
 
 
Stock-based compensation expense
115,239 
 
115,239 
 
 
Excess stock option income tax benefits
88,940 
 
88,940 
 
 
Ending Balance at Dec. 31, 2014
$ 1,857,708 
$ 60 
$ 1,042,810 
$ (4,446)
$ 819,284 
Ending Balance (in shares) at Dec. 31, 2014
 
60,415,841 
 
 
 
Organization and Summary of Significant Accounting Policies
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 57 million members in nearly 50 countries enjoying more than two billion hours of TV shows and movies per month, 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. A majority of the Company’s revenues are generated in the United States, and substantially all of the Company’s long-lived tangible assets are held in the United States. The Company’s revenues are derived from monthly membership fees.
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 amortization policy for the streaming content library; the recognition and measurement of income tax assets and liabilities; and the valuation of stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("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 to be received in exchange for those goods or services. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, but does not expect the impact to be material.
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.
The Company classifies short-term investments, which consist of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments are reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive (loss) income” 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 uses the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments.
Short-term investments are reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviews 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 licenses and acquires rights to stream TV shows, movies and original content to members for unlimited viewing. These rights are for a fixed fee and specify windows of availability. Payment terms for certain content agreements require more up-front cash relative to expense.

The Company capitalizes the fee per title and records a corresponding liability at the gross amount of liabilities 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 library, net” and the remaining portion as “Non-current content library, net” on the Consolidated Balance Sheets. The acquisition of streaming content rights and the changes in related liabilities, are classified within cash used in operating activities on the Consolidated Statements of Cash Flows.

The Company amortizes the content library in “Cost of revenues” on a straight line or on an accelerated basis, as appropriate:

•
For content that does not premiere on the Netflix service (representing the vast majority of content), the Company amortizes on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years.

•
For content that premieres on the Netflix service, the Company expects more upfront viewing due to the additional merchandising and marketing efforts for this original content available only on Netflix. Hence, the Company amortizes on an accelerated basis over the amortization period, which is the shorter of four years or the license period, beginning with the month of first availability. If a subsequent season is added, the amortization period is extended by a year.

•
If the cost per title cannot be reasonably estimated, the license fee is not capitalized and costs are expensed on a straight line basis over the license period. This typically occurs when the license agreement does not specify the number of titles, the license fee per title or the windows of availability per title.
The content library is stated at the lower of unamortized cost or net realizable value. Streaming content (whether capitalized or not) is reviewed in aggregate at the geographic region level for impairment when an event or change in circumstances indicates a change in the expected usefulness of the content. The level of geographic aggregation is determined based on the streaming content rights which are generally specific to a geographic region inclusive of several countries (such as Latin America). No material write down from unamortized cost to a lower net realizable value was recorded in any of the periods presented.

DVD Content Library
The Company acquires DVD content for the purpose of renting such content to its members and earning membership rental revenues, and, as such, the Company considers its direct purchase DVD library to be a productive asset. Accordingly, the Company classifies its DVD library in “Non-current content library, net” on the Consolidated Balance Sheets. The acquisition of DVD content library, net of changes in related liabilities, is classified within cash used in investing activities on the Consolidated Statements of Cash Flows because the DVD content library is considered a productive asset. Other companies in the in-home entertainment video industry classify these cash flows as operating activities. The Company amortizes its direct purchase DVDs on an accelerated basis over their estimated useful lives, which range from one year to two years. The Company also obtains DVD content through revenue sharing agreements with studios and other content providers. Revenue sharing obligations are expensed as incurred based on shipments.
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.


Impairment of Long-Lived Assets
Long-lived assets such as DVD content library, property and equipment and intangible assets subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. There were no events or changes in circumstances that would indicate that the carrying amount of an asset group may not be recoverable in any of the years presented.
Revenue Recognition
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 to members 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 also include payments made to the Company’s affiliates and consumer electronics partners. Advertising expenses include promotional activities such as television and online advertising. Advertising costs are expensed as incurred. Advertising expenses were $533.1 million, $404.0 million and $351.0 million for the years ended December 31, 2014, 2013 and 2012, 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. There was no significant valuation allowance as of December 31, 2014 or 2013.
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 10 to the consolidated financial statements for further information regarding income taxes.
Foreign Currency
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) income" in Stockholders’ equity on the Consolidated Balance Sheets.
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 losses of $8.2 million, $8.4 million, and $4.0 million for the years ended December 31, 2014, 2013, and 2012 respectively.
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 shares issuable upon the assumed conversion of the Company’s Convertible Notes (prior to the conversion of such notes in April 2013) and incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:
 
 
Year ended December 31,
 
2014
 
2013
 
2012
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
266,799

 
$
112,403

 
$
17,152

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
60,078

 
58,198

 
55,521

Basic earnings per share
$
4.44

 
$
1.93

 
$
0.31

Diluted earnings per share:
 
 
 
 
 
Net income
$
266,799

 
$
112,403

 
$
17,152

Convertible Notes interest expense, net of tax
—

 
49

 
195

Numerator for diluted earnings per share
266,799

 
112,452

 
17,347

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
60,078

 
58,198

 
55,521

Convertible Notes shares
—

 
715

 
2,331

Employee stock options
1,621

 
1,848

 
1,052

Weighted-average number of shares
61,699

 
60,761

 
58,904

Diluted earnings per share
$
4.32

 
$
1.85

 
$
0.29


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,
 
2014
 
2013
 
2012
 
(in thousands)
Employee stock options
131

 
198

 
1,207


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 8 to the consolidated financial statements for further information regarding stock-based compensation.
Reclassifications
Reclassifications
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation in the consolidated financial statements.
Costs of revenues in the amount of $33.9 million and $26.2 million for the years ended December 31, 2013 and 2012, respectively, related to free-trial periods that were previously allocated to “Marketing” on the Consolidated Statements of Operations have been reallocated to “Cost of revenues”. There was no impact in any period presented to contribution profit or net income or to the Consolidated Balance Sheets or Consolidated Statements of Cash Flows.
Short-Term Investments
Short-Term Investments
Short-term Investments
The Company’s investment policy is consistent with the definition of available-for-sale securities. The Company does not buy and hold securities principally for the purpose of selling them in the near future. The Company’s policy is focused on the preservation of capital, liquidity and return. From time to time, the Company may sell certain securities but the objectives are generally not to generate profits on short-term differences in price. The following tables summarize, by major security type, the Company’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy and where they are classified on the consolidated balance sheets.
 
As of December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
1,007,543

 
$
—

 
$
—

 
$
1,007,543

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
111,759

 
—

 
—

 
111,759

Level 2 securities:
 
 
 
 
 
 
 
Corporate debt securities
295,500

 
432

 
(199
)
 
295,733

Government securities
168,749

 
120

 
(95
)
 
168,774

Asset and mortgage-backed securities
112

 
—

 
—

 
112

Certificate of deposits
3,600

 
—

 
—

 
3,600

Agency securities
26,665

 
5

 
(1
)
 
26,669

Total
$
1,613,928

 
$
557

 
$
(295
)
 
$
1,614,190


 
 
As of December 31, 2013
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
483,959

 
$
—

 
$
—

 
$
483,959

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
126,208

 
—

 
—

 
126,208

Level 2 securities:
 
 
 
 
 
 
 
Corporate debt securities
316,465

 
1,245

 
(654
)
 
317,056

Government securities
143,812

 
287

 
(18
)
 
144,081

Asset and mortgage-backed securities
93,118

 
229

 
(418
)
 
92,929

Certificate of deposits
23,425

 
—

 
—

 
23,425

Agency securities
17,951

 
—

 
(2
)
 
17,949

Total
$
1,204,938

 
$
1,761

 
$
(1,092
)
 
$
1,205,607





 
As of December 31,
 
2014
 
2013
 
(in thousands)
Cash and cash equivalents
$
1,113,608

 
$
604,965

Short-term investments
494,888

 
595,440

Non-current assets (1)
5,694

 
5,202

Total
$
1,614,190

 
$
1,205,607

 
(1) Primarily restricted cash that is related to workers compensation deposits.
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 5 to the consolidated financial statements for further information regarding the fair value of the Company’s senior convertible notes and senior notes.
Because the Company does not intend to sell the investments that are in an unrealized loss position and it is not likely that the Company will be required to sell any investments before recovery of their amortized cost basis, the Company does not consider those investments with an unrealized loss to be other-than-temporarily impaired at December 31, 2014. There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the years ended December 31, 2014, 2013 or 2012.
There were no material gross realized gains or losses from the sale of available-for-sale investments in the years ended December 31, 2014, 2013 and 2012. Realized gains and losses and interest income are included in interest and other income.
The estimated fair value of short-term investments by contractual maturity as of December 31, 2014 is as follows:
 
 
 
(in thousands)
Due within one year
 
$
113,864

Due after one year and through 5 years
 
381,024

Total short-term investments
 
$
494,888

Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
Content Library
Content library consisted of the following:
 
 
As of December 31,
 
2014
 
2013
 
(in thousands)
Total content library, gross
$
8,497,403

 
$
6,474,688

Accumulated amortization
(3,598,375
)
 
(2,677,196
)
Total content library, net
4,899,028

 
3,797,492

Current content library, net
2,125,702

 
1,706,421

Non-current content library, net
$
2,773,326

 
$
2,091,071




 


Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
 
 
 
As of December 31,
 
Estimated Useful Lives (in Years)
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
Information technology assets
 
$
189,274

 
$
139,306

 
3 years
Furniture and fixtures
 
25,758

 
21,011

 
3 years
Building
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
57,339

 
51,194

 
Over life of lease
DVD operations equipment
 
89,144

 
96,361

 
5 years
Capital work-in-progress
 
12,495

 
8,643

 
 
Property and equipment, gross
 
414,691

 
357,196

 
 
Less: Accumulated depreciation
 
(264,816
)
 
(223,591
)
 
 
Property and equipment, net
 
$
149,875

 
$
133,605

 
 

    
As of December 31, 2014 and 2013, the Company had unpaid property and equipment included in accounts payable of $11.8 million and $6.8 million, respectively on the Consolidated Balance Sheets, and consequently such amounts are excluded from purchases of property and equipment on the Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013.
Long-Term Debt
Long-Term Debt
Long-term Debt
Senior Convertible Notes
In November 2011, the Company issued $200.0 million aggregate principal amount of zero coupon senior convertible notes due on December 1, 2018 (the “Convertible Notes”) in a private placement offering to TCV VII, L.P., TCV VII(A), L.P., and TCV Member Fund, L.P. A general partner of these funds also serves on the Company’s Board of Directors, and as such, the issuance of the notes is considered a related party transaction. The net proceeds to the Company were approximately $197.8 million. Debt issuance costs of $2.2 million (of which $0.3 million was paid in the year ended December 31, 2012) were recorded in “Other non-current assets” on the Consolidated Balance Sheets and were amortized over the term of the notes as interest expense. At any time following May 28, 2012, the Company could have elected to cause the conversion of the Convertible Notes into shares of the Company’s common stock when specified conditions were satisfied, including that the daily volume weighted average price of the Company’s common stock was equal to or greater than $111.54 for at least 50 trading days during a 65 trading day period prior to the conversion date.
The Company determined that the embedded conversion option in the Convertible Notes did not require separate accounting treatment as a derivative instrument because it was both indexed to the Company's own stock and would be classified in stockholders' equity if freestanding. Additionally, the Convertible Notes did not require or permit any portion of the obligation to be settled in cash and accordingly the liability and equity (conversion option) components were not required to be accounted for separately.
In April 2013, after all specified conditions were satisfied, the Company elected to cause the conversion of all outstanding Convertible Notes with an aggregate principal amount of $200.0 million in accordance with the terms of the Indenture governing such notes. Pursuant to this conversion, the Company issued 2.3 million shares of common stock to the holders of the Convertible Notes at a conversion ratio of 11.6553. The fair market value of one share of common stock on the date of conversion was $216.99 per share.
8.50% Senior Notes

In November 2009, the Company issued $200.0 million aggregate principal amount of 8.50% senior notes due November 15, 2017 (the “8.50% Notes”). The net proceeds to the Company were approximately $193.9 million. Debt issuance costs of $6.1 million were recorded in “Other non-current assets” on the Consolidated Balance Sheets and were amortized over the term of the notes as interest expense. The notes were issued at par and were senior unsecured obligations of the Company. Interest was payable semi-annually at a rate of 8.50% per annum on May 15 and November 15 of each year, commencing on May 15, 2010. The 8.50% Notes were 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 could redeem the 8.50% Notes prior to November 15, 2013 in whole or in part at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium.

In the first quarter of 2013, the Company redeemed the outstanding $200.0 million aggregate principal amount of 8.50% Notes and pursuant to the make-whole provision in the Indenture governing the 8.50% Notes, paid a $19.4 million premium and $5.1 million of accrued and unpaid interest. The Company recognized a loss on extinguishment of debt of $25.1 million related to redemption of the 8.50% Notes which included the write off of unamortized debt issuance costs of $4.2 million.

5.375% Senior Notes

In February 2013, the Company issued $500.0 million aggregate principal amount of 5.375% senior notes due 2021 (the “5.375% Notes”). The 5.375% Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at a rate of 5.375% per annum on February 1 and August 1 of each year, commencing on August 1, 2013. The 5.375% 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 5.375% Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest plus a make-whole payment equivalent to the present value of the remaining interest payments through maturity.

The 5.375% 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 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. At December 31, 2014 the Company was in compliance with these covenants.

In the first quarter of 2013, the Company used $224.5 million of the net proceeds of the 5.375% Notes to redeem the outstanding $200.0 million aggregate principal amount of 8.50% Notes.

Based on quoted market prices in less active markets (a Level 2 input for this financial instrument), the fair value of the 5.375% Notes was $520.0 million and  $506.3 million as of December 31, 2014 and 2013 respectively.

5.750% Senior Notes

In February 2014, the Company issued $400.0 million aggregate principal amount of 5.750% Senior Notes due 2024 (the "5.750% Notes"). The 5.750% Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at a rate of 5.750% per annum on March 1 and September 1 of each year, commencing on September 1, 2014. The 5.750% 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 5.750% Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest plus a make-whole payment equivalent to the present value of the remaining interest payments through maturity.
The 5.750% 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 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. At December 31, 2014, the Company was in compliance with these covenants.
Based on quoted market prices in less active markets (a Level 2 input for this financial instrument), the fair value of the 5.750% Notes as of December 31, 2014 was $416.0 million.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Streaming Content
At December 31, 2014, the Company had $9.5 billion of obligations comprised of $2.1 billion included in "Current content liabilities" and $1.6 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $5.8 billion of obligations that are not reflected on the Consolidated Balance Sheet.
At December 31, 2013, the Company had $7.3 billion of obligations comprised of $1.8 billion included in "Current content liabilities" and $1.3 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $4.2 billion of obligations that are not reflected on the Consolidated Balance Sheet.
The expected timing of payments for these streaming content obligations is as follows:


 
As of December 31,
 
2014
 
2013
 
(in thousands)
Less than one year
$
3,747,648

 
$
2,972,325

Due after one year and through 3 years
4,495,103

 
3,266,907

Due after 3 years and through 5 years
1,164,308

 
929,645

Due after 5 years
44,053

 
83,284

Total streaming content obligations
$
9,451,112

 
$
7,252,161


    
A streaming content obligation 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. Because the amount is not reasonably estimable, 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 and the expected timing of payments could range from less than one year to more than five years.
The Company has entered into certain licenses with performing rights organizations ("PROs"), and is currently involved in negotiations with other PROs, that hold certain rights to music and other entertainment works "publicly performed" in connection with streaming content into various territories. Accruals for estimated license fees are recorded and then adjusted based on any change in estimates. These amounts are included in the streaming content obligations. The results of these negotiations are uncertain and may be materially different from management's estimates.

Lease obligations
The Company leases facilities under non-cancelable operating leases with various expiration dates through 2019. 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 original facilities lease agreements for its current 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.
In the first quarter of 2010, the Company extended the facilities leases for the current Los Gatos buildings for an additional five year term after the remaining term of the original lease, thus increasing the future minimum payments under lease financing obligations by approximately $14 million. The leases continue to be accounted for as financing obligations and no gain or loss was recorded as a result of the lease financing modification. At December 31, 2014, the lease financing obligation balance was $29.6 million, of which $1.2 million and $28.4 million were recorded in “Accrued expenses” and “Other non-current liabilities,” respectively, on the Consolidated Balance Sheets. The remaining future minimum payments under the lease financing obligation are $9.4 million. The lease financing obligation balance at the end of the extended lease term will be approximately $25.8 million which approximates the net book value of the buildings to be relinquished to the lessor.
In the third quarter of 2013, the Company entered into facilities lease agreements to expand its Los Gatos headquarters. At the time the Company entered into these lease agreements, the prior agreement signed in the fourth quarter of 2012 was simultaneously terminated. The 124 month lease term for each of the new leases will commence after the construction of the buildings is complete. Future minimum lease payments associated with these leases are $122.2 million as of December 31, 2014 and are included below.
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2014 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2015
$
35,501

2016
37,078

2017
27,697

2018
19,804

2019
14,923

Thereafter
76,130

Total minimum payments
$
211,133


Rent expense associated with the operating leases was $26.6 million, $27.9 million and $29.7 million for the years ended December 31, 2014, 2013 and 2012, 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.
On January 13, 2012, the first of three purported shareholder class action lawsuits was filed in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. Two additional purported shareholder class action lawsuits were filed in the same court on January 27, 2012 and February 29, 2012 alleging substantially similar claims.  These lawsuits were consolidated into In re Netflix, Inc., Securities Litigation, Case No. 3:12-cv-00225-SC, and the Court selected lead plaintiffs. On June 26, 2012, lead plaintiffs filed a consolidated complaint which alleged violations of the federal securities laws. The Court dismissed the consolidated complaint with leave to amend on February 13, 2013. Lead plaintiffs filed a first amended consolidated complaint on March 22, 2013. The Court dismissed the first amended consolidated complaint with prejudice on August 20, 2013, and judgment was entered on September 27, 2013. Lead plaintiffs filed a motion to alter or amend the judgment and requested leave to file a second amended complaint on October 25, 2013. On January 17, 2014, the Court denied that motion. On February 18, 2014, lead plaintiffs appealed that decision to the United States Court of Appeals for the Ninth Circuit. Management has determined a potential loss is reasonably possible however, based on its current knowledge, management does not believe that the amount of such possible loss or a range of potential loss is reasonably estimable
On November 23, 2011, the first of six purported shareholder derivative suits was filed in the Superior Court of California, Santa Clara County, against the Company and certain of its officers and directors. Five additional purported shareholder derivative suits were subsequently filed: two in the Superior Court of California, Santa Clara County on February 9, 2012 and May 2, 2012; and three in the United States District Court for the Northern District of California on February 13, 2012, February 24, 2012 and April 2, 2012. The purported shareholder derivative suits filed in the Northern District of California have been voluntarily dismissed. On July 5, 2012, the purported shareholder derivative suits filed in Santa Clara County were consolidated into In re Netflix, Inc. Shareholder Derivative Litigation, Case No. 1-12-cv-218399, and lead counsel was appointed. A consolidated complaint was filed on December 4, 2012, with plaintiffs seeking compensatory damages and other relief. The consolidated complaint alleges, among other things, that certain of the Company's current and former officers and directors breached their fiduciary duties, issued false and misleading statements primarily regarding the Company's streaming business, violated accounting rules concerning segment reporting, violated provisions of the California Corporations Code, and wasted corporate assets. The consolidated complaint further alleges that the defendants caused the Company to buy back stock at artificially inflated prices to the detriment of the Company and its shareholders while contemporaneously selling personally held Company stock. The Company filed a demurrer to the consolidated complaint and a motion to stay the derivative litigation in favor of the related federal securities class action on February 4, 2013. On June 21, 2013, the Court granted the motion to stay the derivative litigation pending resolution of the related federal securities class action. Management has determined a potential loss is reasonably possible however, based on its current knowledge, management does not believe that the amount of such possible loss or a range of potential loss is reasonably estimable.

The Company is involved in other litigation matters not listed above 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.
Guarantees-Indemnification Obligations
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.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity
On November 2, 2012, the Board of Directors (the “Board”) of the Company authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.001 per share (the “Common Shares”), of the Company to stockholders of record at the close of business on November 12, 2012 (the “Record Date”). Each Right entitled the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company at an exercise price of $350 per one one-thousandth of a Preferred Share, subject to adjustment (the “Exercise Price”). The Rights were exercisable in the event any person or group acquires 10% (or 20% in the case of certain institutional investors who report their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board, and until such time are inseparable from and trade with the Company's common stock. The Rights had a de minimus fair value. The Rights Agreement was amended on December 30, 2013 to accelerate the expiration of the Rights from the close of business on November 2, 2015 to the close of business on December 30, 2013, and had the effect of terminating the Rights Agreement on that date. At the time of the termination of the Rights Agreement, all of the Rights distributed to holders of the Company’s common stock pursuant to the Rights Agreement expired.
In April 2013, the Company issued 2.3 million shares of common stock in connection with the conversion of the Convertible Notes. See Note 5 to the consolidated financial statements for further details.
Preferred Stock
In 2012, the Company designated 1,000,000 shares of its preferred stock with par value of $0.001 per share as Series A Participating Preferred Stock. The remaining 9,000,000 shares of preferred stock with par value of $0.001 remained undesignated. In connection with the expiration of the Rights and the termination of the Rights Agreement on December 30, 2013, the shares that were designated to such series were returned to the status of authorized but unissued shares of preferred stock of the Company, and the Company therefore now has 10,000,000 shares of preferred stock with a par value of $0.001 that are undesignated.
None of the preferred shares were issued and outstanding at December 31, 2014 and 2013.
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, 2014, 2.9 million shares were reserved for future grants under the 2011 Stock Plan.
In February 2002, the Company adopted the 2002 Stock Plan, which was amended and restated in May 2006. The 2002 Stock Plan provided for the grant of incentive stock options to employees and for the grant of non-statutory stock options and stock purchase rights to employees, directors and consultants. In the first quarter of 2012, 1.2 million shares reserved for future grants under the 2002 Stock Plan expired.
A summary of the activities related to the Company’s stock option plans 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
 
Balances as of December 31, 2011
7,013,508

 
2,957,754

 
$
66.59

 
 
 
 
Granted
(1,803,798
)
 
1,803,798

 
73.94

 
 
 
 
Exercised
—

 
(188,552
)
 
21.85

 
 
 
 
Canceled
48

 
(48
)
 
35.95

 
 
 
 
Expired
(1,160,721
)
 
—

 


 
 
 
 
Balances as of December 31, 2012
4,049,037

 
4,572,952

 
$
71.33

 
 
 
 
Granted
(642,720
)
 
642,720

 
208.94

 
 
 
 
Exercised
—

 
(1,688,774
)
 
73.75

 
 
 
 
Balances as of December 31, 2013
3,406,317

 
3,526,898

 
$
95.25

 
 
 
 
Granted
(545,573
)
 
545,573

 
402.85

 
 
 
 
Exercised
—

 
(808,840
)
 
75.65

 
 
 
 
Balances as of December 31, 2014
2,860,744

 
3,263,631

 
$
151.53

 
6.14
 
$
654,673

Vested and exercisable at
December 31, 2014
 
 
3,263,631

 
$
151.53

 
6.14
 
$
654,673


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 2014 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 2014. 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, 2014, 2013 and 2012 was $265.1 million, $274.2 million and $14.7 million, respectively.
Cash received from option exercises for the years ended December 31, 2014, 2013 and 2012 was $60.5 million, $124.6 million and $4.1 million, respectively.
Employee Stock Purchase Plan
In February 2002, the Company adopted the 2002 ESPP under which employees purchased common stock of the Company through accumulated payroll deductions. The purchase price of the common stock acquired by the employees participating in the ESPP is 85% of the closing price on either the first day of the offering period or the last day of the purchase period, whichever was lower. Under the ESPP, the offering and purchase periods took place concurrently in consecutive six month increments. Therefore, the look-back for determining the purchase price was six months. Employees could invest up to 15% of their gross compensation through payroll deductions. In no event was an employee permitted to purchase more than 8,334 shares of common stock during any six-month purchase period.
As of December 31, 2014, there were 2,785,721 shares available for future issuance under the 2002 Employee Stock Purchase Plan. The Company’s ESPP was suspended in 2011 and there were no offerings subsequent to 2011.

Stock-Based Compensation
Vested stock options granted after June 30, 2004 and before January 1, 2007 can be exercised up to one year following termination of employment. Vested stock options granted after January 2007 will remain 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,
 
 
2014
 
2013
 
2012
Dividend yield
 
—
%
 
—
%
 
—
%
Expected volatility
 
41% - 48%

 
51% - 54%

 
55% - 65%

Risk-free interest rate
 
2.39% - 2.83%

 
1.87% - 2.71%

 
1.61% - 2.01%

Suboptimal exercise factor
 
2.66 - 5.44

 
2.33 - 3.92

 
2.26 - 3.65

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
211.22

 
$
113.74

 
$
41.00

Total stock-based compensation expense (in thousands)
 
115,239

 
73,100

 
73,948

Total income tax benefit related to stock options (in thousands)
 
43,999

 
28,096

 
28,537



The Company considers several factors in determining the suboptimal exercise factor including the historical and estimated option exercise behavior and the employee groupings.
 
The Company estimates expected volatility based on a blend of historical volatility of the Company’s common stock and implied volatility of tradable forward call options to purchase shares of its common stock. The Company believes that implied volatility of publicly traded options in its common stock is expected to be more reflective of market conditions and, therefore, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock. Low trade volume of the Company's tradable forward call options prior to 2011 precluded sole reliance on implied volatility, and as such the Company includes historical volatility in the computation of expected volatility.
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.
Stock Repurchase Program
Under the stock repurchase plan announced on June 11, 2010, the Company was authorized to repurchase up to $300 million of its common stock through the end of 2012. As of December 31, 2012, the Company has repurchased $259.0 million of its common stock under this plan. As of December 31, 2012, the plan has expired and the remaining $41.0 million was unused. There were no stock repurchases in 2012, 2013 or 2014.
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive (Loss) Income

The following table summarizes the changes in accumulated balances of other comprehensive (loss) income, net of tax:

 
Foreign currency
 
Change in unrealized gains on available-for-sale securities
 
Total
 
(in thousands)
Balance as of December 31, 2012
$
1,381

 
$
1,538

 
$
2,919

Other comprehensive income before reclassifications
1,772

 
(1,597
)
 
175

Amounts reclassified from accumulated other comprehensive income
—

 
481

 
481

Net increase (decrease) in other comprehensive income
1,772

 
(1,116
)
 
656

Balance as of December 31, 2013
$
3,153

 
$
422

 
$
3,575

Other comprehensive (loss) income before reclassifications
(7,768
)
 
337

 
(7,431
)
Amounts reclassified from accumulated other comprehensive (loss)income
—

 
(590
)
 
(590
)
Net decrease in other comprehensive (loss) income
(7,768
)
 
(253
)
 
(8,021
)
Balance as of December 31, 2014
$
(4,615
)
 
$
169

 
$
(4,446
)



All amounts reclassified from accumulated other comprehensive (loss) income were related to realized gains (losses) on available-for-sale securities. These reclassifications impacted "Interest and other income (expense)" on the Consolidated Statements of Operations.
Income Taxes
Income Taxes
Income Taxes
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
United States
$
325,081

 
$
159,126

 
$
27,885

Foreign
24,288

 
11,948

 
2,595

Income before income taxes
$
349,369

 
$
171,074

 
$
30,480


The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
86,623

 
$
58,558

 
$
34,387

State
9,866

 
15,154

 
7,850

Foreign
16,144

 
7,003

 
1,162

Total current
112,633

 
80,715

 
43,399

Deferred tax provision:
 
 
 
 
 
Federal
(10,994
)
 
(18,930
)
 
(26,903
)
State
(17,794
)
 
(2,751
)
 
(3,168
)
Foreign
(1,275
)
 
(363
)
 
—

Total deferred
(30,063
)
 
(22,044
)
 
(30,071
)
Provision for income taxes
$
82,570

 
$
58,671

 
$
13,328



U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on a cumulative total of $29.2 million of undistributed earnings for certain foreign subsidiaries as of December 31, 2014. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, the Company would be subject to additional U.S. income taxes net of available foreign tax credits associated with these earnings. The amount of unrecognized deferred income tax liability related to these earnings is approximately $10.2 million.
Income tax benefits attributable to the exercise of employee stock options of $88.9 million, $80.0 million and $4.4 million for the years ended December 31, 2014, 2013 and 2012, respectively, were recorded directly to additional paid-in-capital.
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,
 
2014
 
2013
 
2012
 
(in thousands)
Expected tax expense at U.S. federal statutory rate of 35%
$
122,279

 
$
59,878

 
$
10,667

State income taxes, net of Federal income tax effect
13,274

 
8,053

 
2,914

R&D tax credit
(18,655
)
 
(13,841
)
 
(1,803
)
Release of tax reserves on previously unrecognized tax benefits
(38,612
)
 
—

 
—

Other
4,284

 
4,581

 
1,550

Provision for income taxes
$
82,570

 
$
58,671

 
$
13,328



The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2014
 
2013
 
(in thousands)
Deferred tax assets (liabilities):
 
 
 
Stock-based compensation
$
100,397

 
$
69,201

Accruals and reserves
13,415

 
13,022

Depreciation and amortization
(11,708
)
 
(11,159
)
R&D credits
21,014

 
19,196

Other
(2,778
)
 
824

Total deferred tax assets
120,340

 
91,084

Valuation allowance
—

 
(481
)
Net deferred tax assets
$
120,340

 
$
90,603


Deferred tax assets include $13.4 million and $21.5 million classified as “Other current assets” and $106.9 million and $69.1 million classified as “Other non-current assets” in the Consolidated Balance Sheets as of December 31, 2014 and 2013, respectively. 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, 2014 and 2013, it was considered more likely than not that substantially all deferred tax assets would be realized, and no significant valuation allowance was recorded.

As of December 31, 2014, the Company's state tax credit carryforwards for tax return purposes were $41.9 million, of which $41.1 million can be carried forward indefinitely and $0.8 million expire in 2024.
On December 19, 2014, the Tax Increase Prevention Act of 2014 (H.R.5771) was signed into law which retroactively extends the Federal research and development credit from January 1, 2014 through December 31, 2014. As a result, the Company recognized the retroactive benefit of the Federal research and development credit of approximately $10.7 million as a discrete item in the fourth quarter of 2014, the period in which the legislation was enacted.

The Company classifies unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as “Other non-current liabilities” in the Consolidated Balance Sheets. As of December 31, 2014, the total amount of gross unrecognized tax benefits was $34.8 million, of which $29.2 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):
 
Balance as of December 31, 2012
$
43,337

Increases related to tax positions taken during prior periods
4

Decreases related to tax positions taken during prior periods
(25
)
Increases related to tax positions taken during the current period
24,915

Balance as of December 31, 2013
$
68,231

Decreases related to tax positions taken during prior periods
(39,015
)
Increases related to tax positions taken during the current period
11,174

Decreases related to settlements with taxing authorities
(5,578
)
Balance as of December 31, 2014
$
34,812


The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of December 31, 2014 and December 31, 2013, the total amount of gross interest and penalties accrued was $0.4 million and $3.9 million, respectively, which is classified as “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 for the years 2010 through 2013. The IRS had previously completed its Field Exam of the 2008 and 2009 federal tax returns and issued a Revenue Agents Report with a proposed assessment primarily related to the Company's R&D Credits claimed in those years. The Company filed a protest against the proposed assessment and settlement was reached with the IRS Appeals Division in December 2014. As a result, the Company reassessed the tax reserves for all open years and released $38.6 million of tax reserves in the fourth quarter of 2014. The IRS Field Exam of the 2010 through 2013 federal tax returns is in progress.
The Company is also currently under examination by the state of California for the years 2006 and 2007. California has completed its Field Exam of the 2006 and 2007 California tax returns and has issued a Notice of Proposed Assessment primarily related to the Company's R&D Credits claimed in those years. The Company has filed a protest against the proposed assessment and is currently awaiting the commencement of the Protest process with the Franchise Tax Board. The years 1997 through 2005, as well as 2008 through 2013, remain subject to examination by the state of California.
The Company is currently not under examination in any foreign jurisdiction. The years 2011 through 2013 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, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.
Employee Benefit Plan
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 2014, 2013 and 2012, the Company’s matching contributions totaled $8.3 million, $6.5 million and $5.2 million, respectively.
Segment Information
Segment Information
Segment Information
Beginning in the fourth quarter of 2011, the Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented along the same lines that the Company’s chief operating decision maker reviews the operating results in assessing performance and allocating resources. The Company’s chief operating decision maker reviews revenue and contribution profit for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses directly incurred by the segment. The 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 and International streaming segments derive revenues from monthly membership fees for services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment card fees are attributed to the operating segment based on the nature of the underlying membership (streaming or DVD) and the geographic region from which the membership originates. There are no internal revenue transactions between the Company’s segments.
Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by the segment to obtain content and deliver it to the specific region. Marketing expenses are primarily comprised of advertising expenses which are generally included in the segment in which the expenditures are directly incurred.
The Company's long-lived tangible assets were located as follows:
 
As of December 31,
 
2014
 
2013
 
(in thousands)
United States
$
138,704

 
$
126,455

International
11,171

 
7,150



The following tables represent segment information for the year ended December 31, 2014:
 
 
As of/Year ended December 31, 2014
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
39,114

 
18,277

 
5,767

 
—

Revenues
$
3,431,434

 
$
1,308,061

 
$
765,161

 
$
5,504,656

Cost of revenues
2,201,761

 
1,154,117

 
396,882

 
3,752,760

Marketing
293,453

 
313,733

 
—

 
607,186

Contribution profit (loss)
$
936,220

 
$
(159,789
)
 
$
368,279

 
$
1,144,710

Other operating expenses
 
 
 
 
 
 
742,062

Operating income
 
 
 
 
 
 
402,648

Other income (expense)
 
 
 
 
 
 
(53,279
)
Provision for income taxes
 
 
 
 
 
 
82,570

Net income
 
 
 
 
 
 
$
266,799



 
As of/Year ended December 31, 2014
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
3,476,226

 
$
1,392,701

 
$
30,101

 
$
4,899,028

Amortization of content library
1,657,673

 
998,606

 
71,491

 
2,727,770


The following tables represent segment information for the year ended December 31, 2013:
 
 
As of/Year ended December 31, 2013
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
33,420

 
10,930

 
6,930

 
—

Revenues
$
2,751,375

 
$
712,390

 
$
910,797

 
$
4,374,562

Cost of revenues
1,863,376

 
782,304

 
471,523

 
3,117,203

Marketing
265,232

 
204,418

 
292

 
469,942

Contribution profit (loss)
$
622,767

 
$
(274,332
)
 
$
438,982

 
$
787,417

Other operating expenses
 
 
 
 
 
 
559,070

Operating income
 
 
 
 
 
 
228,347

Other income (expense)
 
 
 
 
 
 
(57,273
)
Provision for income taxes
 
 
 
 
 
 
58,671

Net income
 
 
 
 
 
 
$
112,403


 
As of/Year ended December 31, 2013
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
2,973,023

 
$
804,690

 
$
19,779

 
$
3,797,492

Amortization of content library
1,420,076

 
701,905

 
71,325

 
2,193,306


The following tables represent segment information for the year ended December 31, 2012:
 
As of/Year ended December 31, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
27,146

 
6,121

 
8,224

 
—

Revenues
$
2,184,868

 
$
287,542

 
$
1,136,872

 
$
3,609,282

Cost of revenues
1,570,600

 
483,295

 
598,163

 
2,652,058

Marketing
245,259

 
193,390

 
559

 
439,208

Contribution profit (loss)
$
369,009

 
$
(389,143
)
 
$
538,150

 
$
518,016

Other operating expenses
 
 
 
 
 
 
468,024

Operating income
 
 
 
 
 
 
49,992

Other income (expense)
 
 
 
 
 
 
(19,512
)
Provision for income taxes
 
 
 
 
 
 
13,328

Net income
 
 
 
 
 
 
$
17,152


 
As of/Year ended December 31, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
2,317,070

 
$
527,235

 
$
29,865

 
$
2,874,170

Amortization of content library
1,152,446

 
438,772

 
65,396

 
1,656,614



(1)
A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. 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 new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. 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.
Selected Quarterly Financial Data (Unaudited)
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)
2014
 
Total revenues
$
1,484,728

 
$
1,409,432

 
$
1,340,407

 
$
1,270,089

Gross profit
470,396

 
455,038

 
425,559

 
400,903

Net income
83,371

 
59,295

 
71,018

 
53,115

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.38

 
$
0.99

 
$
1.18

 
$
0.89

Diluted
1.35

 
0.96

 
1.15

 
0.86

2013
 
 
 
 
 
 
 
Total revenues
$
1,175,230

 
$
1,105,999

 
$
1,069,372

 
$
1,023,961

Gross profit
354,553

 
307,099

 
308,698

 
287,009

Net income (loss)
48,421

 
31,822

 
29,471

 
2,689

Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.81

 
$
0.54

 
$
0.51

 
$
0.05

Diluted
0.79

 
0.52

 
0.49

 
0.05

Organization and Summary of Significant Accounting Policies (Policy)
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 amortization policy for the streaming content library; the recognition and measurement of income tax assets and liabilities; and the valuation of stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.
New Accounting Pronouncements 
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("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 to be received in exchange for those goods or services. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, but does not expect the impact to be material.
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.
The Company classifies short-term investments, which consist of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments are reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive (loss) income” 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 uses the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments.
Short-term investments are reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviews 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 licenses and acquires rights to stream TV shows, movies and original content to members for unlimited viewing. These rights are for a fixed fee and specify windows of availability. Payment terms for certain content agreements require more up-front cash relative to expense.

The Company capitalizes the fee per title and records a corresponding liability at the gross amount of liabilities 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 library, net” and the remaining portion as “Non-current content library, net” on the Consolidated Balance Sheets. The acquisition of streaming content rights and the changes in related liabilities, are classified within cash used in operating activities on the Consolidated Statements of Cash Flows.

The Company amortizes the content library in “Cost of revenues” on a straight line or on an accelerated basis, as appropriate:

•
For content that does not premiere on the Netflix service (representing the vast majority of content), the Company amortizes on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years.

•
For content that premieres on the Netflix service, the Company expects more upfront viewing due to the additional merchandising and marketing efforts for this original content available only on Netflix. Hence, the Company amortizes on an accelerated basis over the amortization period, which is the shorter of four years or the license period, beginning with the month of first availability. If a subsequent season is added, the amortization period is extended by a year.

•
If the cost per title cannot be reasonably estimated, the license fee is not capitalized and costs are expensed on a straight line basis over the license period. This typically occurs when the license agreement does not specify the number of titles, the license fee per title or the windows of availability per title.
The content library is stated at the lower of unamortized cost or net realizable value. Streaming content (whether capitalized or not) is reviewed in aggregate at the geographic region level for impairment when an event or change in circumstances indicates a change in the expected usefulness of the content. The level of geographic aggregation is determined based on the streaming content rights which are generally specific to a geographic region inclusive of several countries (such as Latin America). No material write down from unamortized cost to a lower net realizable value was recorded in any of the periods presented.

DVD Content Library 
DVD Content Library
The Company acquires DVD content for the purpose of renting such content to its members and earning membership rental revenues, and, as such, the Company considers its direct purchase DVD library to be a productive asset. Accordingly, the Company classifies its DVD library in “Non-current content library, net” on the Consolidated Balance Sheets. The acquisition of DVD content library, net of changes in related liabilities, is classified within cash used in investing activities on the Consolidated Statements of Cash Flows because the DVD content library is considered a productive asset. Other companies in the in-home entertainment video industry classify these cash flows as operating activities. The Company amortizes its direct purchase DVDs on an accelerated basis over their estimated useful lives, which range from one year to two years. The Company also obtains DVD content through revenue sharing agreements with studios and other content providers. Revenue sharing obligations are expensed as incurred based on shipments.
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.

Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets
Long-lived assets such as DVD content library, property and equipment and intangible assets subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. There were no events or changes in circumstances that would indicate that the carrying amount of an asset group may not be recoverable in any of the years presented.
Revenue Recognition 
Revenue Recognition
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 to members 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 also include payments made to the Company’s affiliates and consumer electronics partners. Advertising expenses include promotional activities such as television and online advertising. Advertising costs are expensed as incurred.
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. There was no significant valuation allowance as of December 31, 2014 or 2013.
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 10 to the consolidated financial statements for further information regarding income taxes.
Foreign Currency 
Foreign Currency
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) income" in Stockholders’ equity on the Consolidated Balance Sheets.
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 
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 shares issuable upon the assumed conversion of the Company’s Convertible Notes (prior to the conversion of such notes in April 2013) and 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. See Note 8 to the consolidated financial statements for further information regarding stock-based compensation.
Organization and Summary of Significant Accounting Policies (Tables)
Computation of Net Income Per Share 
The computation of earnings per share is as follows:
 
 
Year ended December 31,
 
2014
 
2013
 
2012
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
266,799

 
$
112,403

 
$
17,152

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
60,078

 
58,198

 
55,521

Basic earnings per share
$
4.44

 
$
1.93

 
$
0.31

Diluted earnings per share:
 
 
 
 
 
Net income
$
266,799

 
$
112,403

 
$
17,152

Convertible Notes interest expense, net of tax
—

 
49

 
195

Numerator for diluted earnings per share
266,799

 
112,452

 
17,347

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
60,078

 
58,198

 
55,521

Convertible Notes shares
—

 
715

 
2,331

Employee stock options
1,621

 
1,848

 
1,052

Weighted-average number of shares
61,699

 
60,761

 
58,904

Diluted earnings per share
$
4.32

 
$
1.85

 
$
0.29

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,
 
2014
 
2013
 
2012
 
(in thousands)
Employee stock options
131

 
198

 
1,207

Short-Term Investments (Tables)
Available-For-Sale Securities Reported at Fair Value 
The following tables summarize, by major security type, the Company’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy and where they are classified on the consolidated balance sheets.
 
As of December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
1,007,543

 
$
—

 
$
—

 
$
1,007,543

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
111,759

 
—

 
—

 
111,759

Level 2 securities:
 
 
 
 
 
 
 
Corporate debt securities
295,500

 
432

 
(199
)
 
295,733

Government securities
168,749

 
120

 
(95
)
 
168,774

Asset and mortgage-backed securities
112

 
—

 
—

 
112

Certificate of deposits
3,600

 
—

 
—

 
3,600

Agency securities
26,665

 
5

 
(1
)
 
26,669

Total
$
1,613,928

 
$
557

 
$
(295
)
 
$
1,614,190


 
 
As of December 31, 2013
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
483,959

 
$
—

 
$
—

 
$
483,959

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
126,208

 
—

 
—

 
126,208

Level 2 securities:
 
 
 
 
 
 
 
Corporate debt securities
316,465

 
1,245

 
(654
)
 
317,056

Government securities
143,812

 
287

 
(18
)
 
144,081

Asset and mortgage-backed securities
93,118

 
229

 
(418
)
 
92,929

Certificate of deposits
23,425

 
—

 
—

 
23,425

Agency securities
17,951

 
—

 
(2
)
 
17,949

Total
$
1,204,938

 
$
1,761

 
$
(1,092
)
 
$
1,205,607





 
As of December 31,
 
2014
 
2013
 
(in thousands)
Cash and cash equivalents
$
1,113,608

 
$
604,965

Short-term investments
494,888

 
595,440

Non-current assets (1)
5,694

 
5,202

Total
$
1,614,190

 
$
1,205,607

 
(1) Primarily restricted cash that is related to workers compensation deposits.
Estimated Fair Value Of Short-Term Investments By Contractual Maturity 
The estimated fair value of short-term investments by contractual maturity as of December 31, 2014 is as follows:
 
 
 
(in thousands)
Due within one year
 
$
113,864

Due after one year and through 5 years
 
381,024

Total short-term investments
 
$
494,888

Balance Sheet Components (Tables)
Components Of Content Library 
Content library consisted of the following:
 
 
As of December 31,
 
2014
 
2013
 
(in thousands)
Total content library, gross
$
8,497,403

 
$
6,474,688

Accumulated amortization
(3,598,375
)
 
(2,677,196
)
Total content library, net
4,899,028

 
3,797,492

Current content library, net
2,125,702

 
1,706,421

Non-current content library, net
$
2,773,326

 
$
2,091,071

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)
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
Information technology assets
 
$
189,274

 
$
139,306

 
3 years
Furniture and fixtures
 
25,758

 
21,011

 
3 years
Building
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
57,339

 
51,194

 
Over life of lease
DVD operations equipment
 
89,144

 
96,361

 
5 years
Capital work-in-progress
 
12,495

 
8,643

 
 
Property and equipment, gross
 
414,691

 
357,196

 
 
Less: Accumulated depreciation
 
(264,816
)
 
(223,591
)
 
 
Property and equipment, net
 
$
149,875

 
$
133,605

 
 

    
As of December 31, 2014 and 2013, the Company had unpaid property and equipment included in accounts payable of $11.8 million and $6.8 million, respectively on the Consolidated Balance Sheets, and consequently such amounts are excluded from purchases of property and equipment on the Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013.
Commitments and Contingencies (Tables)
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,
 
2014
 
2013
 
(in thousands)
Less than one year
$
3,747,648

 
$
2,972,325

Due after one year and through 3 years
4,495,103

 
3,266,907

Due after 3 years and through 5 years
1,164,308

 
929,645

Due after 5 years
44,053

 
83,284

Total streaming content obligations
$
9,451,112

 
$
7,252,161

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, 2014 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2015
$
35,501

2016
37,078

2017
27,697

2018
19,804

2019
14,923

Thereafter
76,130

Total minimum payments
$
211,133

Stockholders' Equity (Tables)
Summary Of Activity Related To Stock Option Plans 
A summary of the activities related to the Company’s stock option plans 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
 
Balances as of December 31, 2011
7,013,508

 
2,957,754

 
$
66.59

 
 
 
 
Granted
(1,803,798
)
 
1,803,798

 
73.94

 
 
 
 
Exercised
—

 
(188,552
)
 
21.85

 
 
 
 
Canceled
48

 
(48
)
 
35.95

 
 
 
 
Expired
(1,160,721
)
 
—

 


 
 
 
 
Balances as of December 31, 2012
4,049,037

 
4,572,952

 
$
71.33

 
 
 
 
Granted
(642,720
)
 
642,720

 
208.94

 
 
 
 
Exercised
—

 
(1,688,774
)
 
73.75

 
 
 
 
Balances as of December 31, 2013
3,406,317

 
3,526,898

 
$
95.25

 
 
 
 
Granted
(545,573
)
 
545,573

 
402.85

 
 
 
 
Exercised
—

 
(808,840
)
 
75.65

 
 
 
 
Balances as of December 31, 2014
2,860,744

 
3,263,631

 
$
151.53

 
6.14
 
$
654,673

Vested and exercisable at
December 31, 2014
 
 
3,263,631

 
$
151.53

 
6.14
 
$
654,673

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,
 
 
2014
 
2013
 
2012
Dividend yield
 
—
%
 
—
%
 
—
%
Expected volatility
 
41% - 48%

 
51% - 54%

 
55% - 65%

Risk-free interest rate
 
2.39% - 2.83%

 
1.87% - 2.71%

 
1.61% - 2.01%

Suboptimal exercise factor
 
2.66 - 5.44

 
2.33 - 3.92

 
2.26 - 3.65

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
211.22

 
$
113.74

 
$
41.00

Total stock-based compensation expense (in thousands)
 
115,239

 
73,100

 
73,948

Total income tax benefit related to stock options (in thousands)
 
43,999

 
28,096

 
28,537

Accumulated Other Comprehensive (Loss) Income (Tables)
Schedule of Changes in Accumulated Other Comprehensive Income
The following table summarizes the changes in accumulated balances of other comprehensive (loss) income, net of tax:

 
Foreign currency
 
Change in unrealized gains on available-for-sale securities
 
Total
 
(in thousands)
Balance as of December 31, 2012
$
1,381

 
$
1,538

 
$
2,919

Other comprehensive income before reclassifications
1,772

 
(1,597
)
 
175

Amounts reclassified from accumulated other comprehensive income
—

 
481

 
481

Net increase (decrease) in other comprehensive income
1,772

 
(1,116
)
 
656

Balance as of December 31, 2013
$
3,153

 
$
422

 
$
3,575

Other comprehensive (loss) income before reclassifications
(7,768
)
 
337

 
(7,431
)
Amounts reclassified from accumulated other comprehensive (loss)income
—

 
(590
)
 
(590
)
Net decrease in other comprehensive (loss) income
(7,768
)
 
(253
)
 
(8,021
)
Balance as of December 31, 2014
$
(4,615
)
 
$
169

 
$
(4,446
)
Income Taxes (Tables)
Schedule of Income before Income Taxes 
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
United States
$
325,081

 
$
159,126

 
$
27,885

Foreign
24,288

 
11,948

 
2,595

Income before income taxes
$
349,369

 
$
171,074

 
$
30,480

Components of Provision for Income Taxes 
The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
86,623

 
$
58,558

 
$
34,387

State
9,866

 
15,154

 
7,850

Foreign
16,144

 
7,003

 
1,162

Total current
112,633

 
80,715

 
43,399

Deferred tax provision:
 
 
 
 
 
Federal
(10,994
)
 
(18,930
)
 
(26,903
)
State
(17,794
)
 
(2,751
)
 
(3,168
)
Foreign
(1,275
)
 
(363
)
 
—

Total deferred
(30,063
)
 
(22,044
)
 
(30,071
)
Provision for income taxes
$
82,570

 
$
58,671

 
$
13,328

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,
 
2014
 
2013
 
2012
 
(in thousands)
Expected tax expense at U.S. federal statutory rate of 35%
$
122,279

 
$
59,878

 
$
10,667

State income taxes, net of Federal income tax effect
13,274

 
8,053

 
2,914

R&D tax credit
(18,655
)
 
(13,841
)
 
(1,803
)
Release of tax reserves on previously unrecognized tax benefits
(38,612
)
 
—

 
—

Other
4,284

 
4,581

 
1,550

Provision for income taxes
$
82,570

 
$
58,671

 
$
13,328

Deferred Tax Assets and Liabilities 
The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2014
 
2013
 
(in thousands)
Deferred tax assets (liabilities):
 
 
 
Stock-based compensation
$
100,397

 
$
69,201

Accruals and reserves
13,415

 
13,022

Depreciation and amortization
(11,708
)
 
(11,159
)
R&D credits
21,014

 
19,196

Other
(2,778
)
 
824

Total deferred tax assets
120,340

 
91,084

Valuation allowance
—

 
(481
)
Net deferred tax assets
$
120,340

 
$
90,603

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):
 
Balance as of December 31, 2012
$
43,337

Increases related to tax positions taken during prior periods
4

Decreases related to tax positions taken during prior periods
(25
)
Increases related to tax positions taken during the current period
24,915

Balance as of December 31, 2013
$
68,231

Decreases related to tax positions taken during prior periods
(39,015
)
Increases related to tax positions taken during the current period
11,174

Decreases related to settlements with taxing authorities
(5,578
)
Balance as of December 31, 2014
$
34,812

Segment Information (Tables)
Long-lived Assets by Geographic Areas 
The Company's long-lived tangible assets were located as follows:
 
As of December 31,
 
2014
 
2013
 
(in thousands)
United States
$
138,704

 
$
126,455

International
11,171

 
7,150

Information On Reportable Segments And Reconciliation To Consolidated Net Income 
The following tables represent segment information for the year ended December 31, 2014:
 
 
As of/Year ended December 31, 2014
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
39,114

 
18,277

 
5,767

 
—

Revenues
$
3,431,434

 
$
1,308,061

 
$
765,161

 
$
5,504,656

Cost of revenues
2,201,761

 
1,154,117

 
396,882

 
3,752,760

Marketing
293,453

 
313,733

 
—

 
607,186

Contribution profit (loss)
$
936,220

 
$
(159,789
)
 
$
368,279

 
$
1,144,710

Other operating expenses
 
 
 
 
 
 
742,062

Operating income
 
 
 
 
 
 
402,648

Other income (expense)
 
 
 
 
 
 
(53,279
)
Provision for income taxes
 
 
 
 
 
 
82,570

Net income
 
 
 
 
 
 
$
266,799



 
As of/Year ended December 31, 2014
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
3,476,226

 
$
1,392,701

 
$
30,101

 
$
4,899,028

Amortization of content library
1,657,673

 
998,606

 
71,491

 
2,727,770


The following tables represent segment information for the year ended December 31, 2013:
 
 
As of/Year ended December 31, 2013
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
33,420

 
10,930

 
6,930

 
—

Revenues
$
2,751,375

 
$
712,390

 
$
910,797

 
$
4,374,562

Cost of revenues
1,863,376

 
782,304

 
471,523

 
3,117,203

Marketing
265,232

 
204,418

 
292

 
469,942

Contribution profit (loss)
$
622,767

 
$
(274,332
)
 
$
438,982

 
$
787,417

Other operating expenses
 
 
 
 
 
 
559,070

Operating income
 
 
 
 
 
 
228,347

Other income (expense)
 
 
 
 
 
 
(57,273
)
Provision for income taxes
 
 
 
 
 
 
58,671

Net income
 
 
 
 
 
 
$
112,403


 
As of/Year ended December 31, 2013
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
2,973,023

 
$
804,690

 
$
19,779

 
$
3,797,492

Amortization of content library
1,420,076

 
701,905

 
71,325

 
2,193,306


The following tables represent segment information for the year ended December 31, 2012:
 
As of/Year ended December 31, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total members at end of period (1)
27,146

 
6,121

 
8,224

 
—

Revenues
$
2,184,868

 
$
287,542

 
$
1,136,872

 
$
3,609,282

Cost of revenues
1,570,600

 
483,295

 
598,163

 
2,652,058

Marketing
245,259

 
193,390

 
559

 
439,208

Contribution profit (loss)
$
369,009

 
$
(389,143
)
 
$
538,150

 
$
518,016

Other operating expenses
 
 
 
 
 
 
468,024

Operating income
 
 
 
 
 
 
49,992

Other income (expense)
 
 
 
 
 
 
(19,512
)
Provision for income taxes
 
 
 
 
 
 
13,328

Net income
 
 
 
 
 
 
$
17,152


 
As of/Year ended December 31, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total content library, net
$
2,317,070

 
$
527,235

 
$
29,865

 
$
2,874,170

Amortization of content library
1,152,446

 
438,772

 
65,396

 
1,656,614



(1)
A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. 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 new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. 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.
Selected Quarterly Financial Data (Tables)
Selected Quarterly Financial Data
 
December 31
 
September 30
 
June 30
 
March 31
 
(in thousands, except for per share data)
2014
 
Total revenues
$
1,484,728

 
$
1,409,432

 
$
1,340,407

 
$
1,270,089

Gross profit
470,396

 
455,038

 
425,559

 
400,903

Net income
83,371

 
59,295

 
71,018

 
53,115

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.38

 
$
0.99

 
$
1.18

 
$
0.89

Diluted
1.35

 
0.96

 
1.15

 
0.86

2013
 
 
 
 
 
 
 
Total revenues
$
1,175,230

 
$
1,105,999

 
$
1,069,372

 
$
1,023,961

Gross profit
354,553

 
307,099

 
308,698

 
287,009

Net income (loss)
48,421

 
31,822

 
29,471

 
2,689

Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.81

 
$
0.54

 
$
0.51

 
$
0.05

Diluted
0.79

 
0.52

 
0.49

 
0.05

Organization and Summary of Significant Accounting Policies (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
segment
country
member
Dec. 31, 2013
Dec. 31, 2012
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Number of streaming members (more than)
57,000,000 
 
 
Number of Countries (nearly)
50 
 
 
Number of Hours (more than)
2000000000 hours 
 
 
Number of reportable segments
3 
 
 
Original content useful life
4 years 
 
 
Advertising expense
$ 533.1 
$ 404.0 
$ 351.0 
Foreign currency transaction loss
$ 8.2 
$ 8.4 
$ 4.0 
Minimum [Member]
 
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Streaming content library useful life
6 months 
 
 
DVD content library useful life
1 year 
 
 
Maximum [Member]
 
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Streaming content library useful life
5 years 
 
 
DVD content library useful life
2 years 
 
 
Estimated useful life
30 years 
 
 
Content Library, Current [Member]
 
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
 
Streaming content library useful life
1 year 
 
 
Organization and Summary of Significant Accounting Policies (Computation of Net Income Per Share) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Basic earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Net income
$ 83,371 
$ 59,295 
$ 71,018 
$ 53,115 
$ 48,421 
$ 31,822 
$ 29,471 
$ 2,689 
$ 266,799 
$ 112,403 
$ 17,152 
Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
60,078 
58,198 
55,521 
Basic earnings per share (in dollars per share)
$ 1.38 
$ 0.99 
$ 1.18 
$ 0.89 
$ 0.81 
$ 0.54 
$ 0.51 
$ 0.05 
$ 4.44 
$ 1.93 
$ 0.31 
Diluted earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Net income
83,371 
59,295 
71,018 
53,115 
48,421 
31,822 
29,471 
2,689 
266,799 
112,403 
17,152 
Convertible Notes interest expense, net of tax
 
 
 
 
 
 
 
 
0 
49 
195 
Numerator for diluted earnings per share
 
 
 
 
 
 
 
 
$ 266,799 
$ 112,452 
$ 17,347 
Shares used in computation:
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
60,078 
58,198 
55,521 
Convertible Notes shares
 
 
 
 
 
 
 
 
0 
715 
2,331 
Employee stock options
 
 
 
 
 
 
 
 
1,621 
1,848 
1,052 
Weighted-average number of shares
 
 
 
 
 
 
 
 
61,699 
60,761 
58,904 
Diluted earnings per share (in dollars per share)
$ 1.35 
$ 0.96 
$ 1.15 
$ 0.86 
$ 0.79 
$ 0.52 
$ 0.49 
$ 0.05 
$ 4.32 
$ 1.85 
$ 0.29 
Organization And Summary Of Significant Accounting Policies (Summary of Potential Common Shares Excluded From Diluted Calculation) (Details) (Equity Option [Member])
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Equity Option [Member]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Employee stock options
131 
198 
1,207 
Reclassifications (Details) (Marketing Expenses Reclassified to Costs of Revenues [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Marketing Expenses Reclassified to Costs of Revenues [Member]
 
 
Costs of free trials allocated to marketing reclassified to cost of revenues
$ 33.9 
$ 26.2 
Short-Term Investments (Available-For-Sale Securities Reported At Fair Value) (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Total, Amortized Cost
$ 1,613,928 
$ 1,204,938 
Total, Gross Unrealized Gains
557 
1,761 
Total, Gross Unrealized Losses
(295)
(1,092)
Total, Estimated Fair Value
1,614,190 
1,205,607 
Cash and Cash Equivalents [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Total, Estimated Fair Value
1,113,608 
604,965 
Short-term Investments [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Total, Estimated Fair Value
494,888 
595,440 
Non-current Assets [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Total, Estimated Fair Value
5,694 1
5,202 1
Level 1 Securities [Member] |
Money market funds [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cash and Money market funds, Amortized Cost
111,759 
126,208 
Cash and Money market funds, Gross Unrealized Gains
0 
0 
Cash and Money market funds, Gross Unrealized Losses
0 
0 
Cash and Money market funds, Fair Value Disclosure
111,759 
126,208 
Level 2 Securities [Member] |
Corporate debt securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Securities, Amortized Cost
295,500 
316,465 
Available-for-sale Securities, Gross Unrealized Gains
432 
1,245 
Available-for-sale Securities, Gross Unrealized Losses
(199)
(654)
Available-for-sale Securities, Estimated Fair Value
295,733 
317,056 
Level 2 Securities [Member] |
Government securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Securities, Amortized Cost
168,749 
143,812 
Available-for-sale Securities, Gross Unrealized Gains
120 
287 
Available-for-sale Securities, Gross Unrealized Losses
(95)
(18)
Available-for-sale Securities, Estimated Fair Value
168,774 
144,081 
Level 2 Securities [Member] |
Asset and mortgage-backed securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Securities, Amortized Cost
112 
93,118 
Available-for-sale Securities, Gross Unrealized Gains
0 
229 
Available-for-sale Securities, Gross Unrealized Losses
0 
(418)
Available-for-sale Securities, Estimated Fair Value
112 
92,929 
Level 2 Securities [Member] |
Certificates of deposit [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Securities, Amortized Cost
3,600 
23,425 
Available-for-sale Securities, Gross Unrealized Gains
0 
0 
Available-for-sale Securities, Gross Unrealized Losses
0 
0 
Available-for-sale Securities, Estimated Fair Value
3,600 
23,425 
Level 2 Securities [Member] |
Agency securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Securities, Amortized Cost
26,665 
17,951 
Available-for-sale Securities, Gross Unrealized Gains
5 
0 
Available-for-sale Securities, Gross Unrealized Losses
(1)
(2)
Available-for-sale Securities, Estimated Fair Value
26,669 
17,949 
Cash [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Cash and Money market funds, Amortized Cost
1,007,543 
483,959 
Cash and Money market funds, Gross Unrealized Gains
0 
0 
Cash and Money market funds, Gross Unrealized Losses
0 
0 
Cash and Money market funds, Fair Value Disclosure
$ 1,007,543 
$ 483,959 
Short-Term Investments (Estimated Fair Value Of Short-Term Investments By Contractual Maturity) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Short-Term Investments And Fair Value Measurement [Abstract]
 
Due within one year
$ 113,864 
Due after one year and through 5 years
381,024 
Total short-term investments
$ 494,888 
Balance Sheet Components (Components of Content Library) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Balance Sheet Related Disclosures [Abstract]
 
 
 
Total content library, gross
$ 8,497,403 
$ 6,474,688 
 
Accumulated amortization
(3,598,375)
(2,677,196)
 
Total content library, net
4,899,028 
3,797,492 
2,874,170 
Current content library, net
2,125,702 
1,706,421 
 
Non-current content library, net
$ 2,773,326 
$ 2,091,071 
 
Balance Sheet Components (Property and Equipment and Accumulated Depreciation) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 414,691 
$ 357,196 
Less: Accumulated depreciation
(264,816)
(223,591)
Property and equipment, net
149,875 
133,605 
Information technology assets Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
189,274 
139,306 
Estimated Useful Lives
3 years 
 
Furniture and fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
25,758 
21,011 
Estimated Useful Lives
3 years 
 
Building [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
57,339 
51,194 
DVD operations equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
89,144 
96,361 
Estimated Useful Lives
5 years 
 
Capital work-in-progress [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 12,495 
$ 8,643 
Balance Sheet Components (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Property and equipment included in accounts payable
$ 11.8 
$ 6.8 
Long-Term Debt (Senior Convertible Notes) (Narrative) (Details) (USD $)
1 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended
Apr. 30, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
May 28, 2012
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
Apr. 30, 2013
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
Nov. 30, 2011
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
Dec. 31, 2012
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
May 28, 2012
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
Minimum [Member]
May 28, 2012
Director [Member]
Convertible Debt [Member]
Senior Convertible Notes [Member]
Maximum [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
Long-term debt due to related party
 
 
 
 
 
$ 200,000,000.0 
$ 200,000,000.0 
 
 
 
Proceeds from issuance of debt
 
400,000,000 
500,000,000 
0 
 
 
197,800,000 
 
 
 
Debt issuance costs, net
 
 
 
 
 
 
2,200,000 
 
 
 
Debt issuance costs
 
$ 7,080,000 
$ 9,414,000 
$ 295,000 
 
 
 
$ 300,000 
 
 
Weighted average price of common stock
 
 
 
 
$ 111.54 
 
 
 
 
 
Trading days prior to conversion date required for conversion
 
 
 
 
 
 
 
 
50 days 
65 days 
Common stock, shares issued
2,300,000 
 
 
 
 
2,300,000.0 
 
 
 
 
Common stock conversion ratio
 
 
 
 
 
11.6553 
 
 
 
 
Fair value at conversion
 
 
 
 
 
$ 216.99 
 
 
 
 
Long-Term Debt (8.50% Senior Notes) (Narrative) (Details) (USD $)
12 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Nov. 14, 2013
Senior Notes [Member]
8.50% Senior Notes [Member]
Nov. 30, 2009
Senior Notes [Member]
8.50% Senior Notes [Member]
Mar. 31, 2013
Senior Notes [Member]
8.50% Senior Notes [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
Face amount
 
 
 
 
$ 200,000,000.0 
$ 200,000,000.0 
Interest rate
 
 
 
 
8.50% 
8.50% 
Proceeds from issuance of debt
400,000,000 
500,000,000 
0 
 
193,900,000 
 
Debt issuance costs, net
 
 
 
 
6,100,000 
 
Redemption price, percent of outstanding principal
 
 
 
100.00% 
101.00% 
 
Make-whole premium
 
 
 
 
 
19,400,000 
Interest paid
41,085,000 
19,114,000 
19,009,000 
 
 
5,100,000 
Loss on extinguishment of debt
0 
25,129,000 
0 
 
 
25,100,000 
Write off of unamortized deferred financing costs
 
 
 
 
 
$ 4,200,000 
Long-Term Debt (5.375% Senior Notes) (Narrative) (Details) (USD $)
12 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended 1 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Feb. 28, 2013
Senior Notes [Member]
5.375% Senior Notes [Member]
Mar. 31, 2013
Senior Notes [Member]
5.375% Senior Notes [Member]
Dec. 31, 2014
Senior Notes [Member]
5.375% Senior Notes [Member]
Level 2 Securities [Member]
Dec. 31, 2013
Senior Notes [Member]
5.375% Senior Notes [Member]
Level 2 Securities [Member]
Nov. 14, 2013
Senior Notes [Member]
8.50% Senior Notes [Member]
Nov. 30, 2009
Senior Notes [Member]
8.50% Senior Notes [Member]
Mar. 31, 2013
Senior Notes [Member]
8.50% Senior Notes [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
Face amount
 
 
 
$ 500,000,000 
 
 
 
 
$ 200,000,000.0 
$ 200,000,000.0 
Interest rate
 
 
 
5.375% 
 
 
 
 
8.50% 
8.50% 
Redemption price, percent of outstanding principal
 
 
 
101.00% 
 
 
 
100.00% 
101.00% 
 
Repayments
0 
219,362,000 
0 
 
224,500,000 
 
 
 
 
 
Senior notes, fair value
 
 
 
 
 
$ 520,000,000 
$ 506,300,000 
 
 
 
Long-term Debt (5.750% Senior Notes) (Narrative) (Details) (Senior Notes [Member], 5.750% Senior Notes [Member], USD $)
1 Months Ended
Feb. 28, 2014
Dec. 31, 2014
Level 2 Securities [Member]
Debt Instrument [Line Items]
 
 
Face amount
$ 400,000,000.0 
 
Interest rate
5.75% 
 
Redemption price, percent of outstanding principal
101.00% 
 
Senior notes, fair value
 
$ 416,000,000 
Commitments and Contingencies (Streaming Content) (Narrative) (Details) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Contractual Obligation [Line Items]
 
 
Total streaming content obligations
$ 9,451,112,000 
$ 7,252,161,000 
Unrecorded streaming obligations
5,800,000,000 
4,200,000,000 
Current Content Liabilities [Member]
 
 
Contractual Obligation [Line Items]
 
 
Recorded streaming obligations
2,100,000,000 
1,800,000,000 
Non-current Content Liabilities [Member]
 
 
Contractual Obligation [Line Items]
 
 
Recorded streaming obligations
$ 1,600,000,000 
$ 1,300,000,000 
Commitments and Contingencies (Expected Timing of Payments for Commitments) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
 
 
Less than one year
$ 3,747,648 
$ 2,972,325 
Due after one year and through 3 years
4,495,103 
3,266,907 
Due after 3 years and through 5 years
1,164,308 
929,645 
Due after 5 years
44,053 
83,284 
Total streaming content obligations
$ 9,451,112 
$ 7,252,161 
Commitments and Contingencies (Lease Obligations) (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Mar. 31, 2010
Land, Buildings and Improvements[Member]
Los Gatos Buildings [Member]
Dec. 31, 2014
Land, Buildings and Improvements[Member]
Los Gatos Buildings [Member]
Dec. 31, 2014
Land, Buildings and Improvements[Member]
Los Gatos Buildings [Member]
Accrued Expenses [Member]
Dec. 31, 2014
Land, Buildings and Improvements[Member]
Los Gatos Buildings [Member]
Other non-current liabilities [Member]
Dec. 31, 2014
Land, Buildings and Improvements[Member]
Los Gatos Buildings Expanded Site [Member]
Capital Leased Assets [Line Items]
 
 
 
 
 
 
 
 
Total costs of buildings and improvements
 
 
 
 
$ 40.7 
 
 
 
Extended lease term
 
 
 
5 years 
 
 
 
 
Capital leases increase in future minimum payments due
 
 
 
14 
 
 
 
 
Capital lease obligations
 
 
 
 
29.6 
1.2 
28.4 
 
Capital leases, future minimum payments due
 
 
 
 
9.4 
 
 
122.2 
Capital lease financing obligation under extended lease term
 
 
 
 
25.8 
 
 
 
Lease term
 
 
 
 
 
 
 
124 months 
Rent expense
$ 26.6 
$ 27.9 
$ 29.7 
 
 
 
 
 
Commitments and Contingencies (Future Minimum Payments Under Lease Financing Obligations and Non-Cancelable Operating Leases) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
 
2015
$ 35,501 
2016
37,078 
2017
27,697 
2018
19,804 
2019
14,923 
Thereafter
76,130 
Total minimum payments
$ 211,133 
Commitments and Contingencies (Legal Proceedings) (Details) (Pending Litigation [Member])
Apr. 2, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 29, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 24, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 13, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Jan. 27, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Jan. 13, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
May 2, 2012
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Feb. 9, 2012
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Nov. 23, 2011
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Shareholder suits
1 
1 
1 
1 
1 
1 
1 
1 
1 
Stockholders' Equity (Narrative) (Details) (USD $)
0 Months Ended 1 Months Ended
Nov. 2, 2012
Apr. 30, 2013
Dec. 31, 2014
Dec. 31, 2013
Nov. 2, 2012
Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]
 
 
 
 
 
Number of rights
 
 
 
 
1 
Common stock, par value
 
 
$ 0.001 
$ 0.001 
$ 0.001 
Right to purchase preferred stock, conversion ratio
 
 
 
 
0.001 
Preferred stock, par value
 
 
$ 0.001 
$ 0.001 
$ 0.001 
Right to purchase preferred stock, exercise price
 
 
 
 
$ 350,000 
Percent ownership threshold of common stock to become exercisable
10.00% 
 
 
 
 
Percent ownership threshold of common stock to become exercisable for certain institutional investors
20.00% 
 
 
 
 
Common stock, shares issued
 
2,300,000 
 
 
 
Stockholders' Equity (Preferred Stock and Voting Rights) (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2014
vote
Dec. 31, 2013
Nov. 2, 2012
Dec. 31, 2012
Series A [Member]
Dec. 31, 2012
Undesignated Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
Preferred stock, shares authorized
10,000,000 
10,000,000 
 
1,000,000 
9,000,000 
Preferred stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
$ 0.001 
$ 0.001 
Preferred stock, shares issued
0 
0 
 
 
 
Preferred stock, shares outstanding
0 
0 
 
 
 
Number of voting rights per share
1 
 
 
 
 
Stockholders' Equity (Stock Option Plans) (Narrative) (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
2011 Stock Plan [Member]
Employee Stock Option [Member]
Mar. 31, 2012
2002 Stock Plan [Member]
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
Shares available for future issuance
 
 
 
2,900,000 
1,200,000 
Total intrinsic value of options exercised
$ 265.1 
$ 274.2 
$ 14.7 
 
 
Cash received from option exercised
$ 60.5 
$ 124.6 
$ 4.1 
 
 
Stockholders' Equity (Summary of Activity Related to Stock Option Plans) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
Shares Available for Grant, Beginning Balances
3,406,317 
4,049,037 
7,013,508 
Options Outstanding, Number of Shares, Beginning Balances
3,526,898 
4,572,952 
2,957,754 
Options Outstanding, Number of Shares, Granted
(545,573)
(642,720)
(1,803,798)
Options Outstanding, Number of Shares, Exercised
(808,840)
(1,688,774)
(188,552)
Options Outstanding, Number of Shares, Canceled
 
 
(48)
Shares Available for Grant, Expired
 
 
(1,160,721)
Shares Available for Grant, Ending Balances
2,860,744 
3,406,317 
4,049,037 
Options Outstanding, Number of Shares, Ending Balances
3,263,631 
3,526,898 
4,572,952 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
 
 
 
Options Outstanding, Weighted-Average Exercise Price, Beginning Balances
$ 95.25 
$ 71.33 
$ 66.59 
Options Outstanding, Weighted-Average Exercise Price, Granted
$ 402.85 
$ 208.94 
$ 73.94 
Options Outstanding, Weighted-Average Exercise Price, Exercised
$ 75.65 
$ 73.75 
$ 21.85 
Options Outstanding, Weighted-Average Exercise Price, Canceled
 
 
$ 35.95 
Options Outstanding, Weighted-Average Exercise Price, Ending Balances
$ 151.53 
$ 95.25 
$ 71.33 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
 
 
 
Options Outstanding, Number of Shares, Vested and exercisable
3,263,631 
 
 
Options Outstanding, Weighted-Average Exercise Price, Vested and exercisable
$ 151.53 
 
 
Weighted-Average Remaining Contractual Term, Vested and exercisable (in Years)
6 years 1 month 21 days 
 
 
Aggregate Intrinsic Value, Vested and exercisable
$ 654,673 
 
 
Stockholders' Equity (Employee Stock Purchase Plan) (Narrative) (Details) (2002 Employee Stock Purchase Plan [Member])
0 Months Ended
Feb. 2, 2002
Dec. 31, 2014
Feb. 2, 2002
2002 Employee Stock Purchase Plan [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Purchase price as a percent of closing price
85.00% 
 
 
Common stock purchase period
6 months 
 
 
Common stock look-back period
6 months 
 
 
Maximum percent employees can invest of their gross compensation through payroll deductions
 
 
15.00% 
Maximum number of shares employee can purchase
8,334 
 
 
Shares available for future issuance
 
2,785,721 
 
Stockholders' Equity (Stock-Based Compensation) (Narrative) (Details)
12 Months Ended 96 Months Ended 30 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Jan. 1, 2007
Granted after June 30, 2004 and before January 1, 2007 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
Exercise period after employment termination
 
 
 
 
1 year 
Full exercise period
 
 
 
10 years 
 
Dividend yield
0.00% 
0.00% 
0.00% 
 
 
Stockholders' Equity (Summary of Assumptions Used to Value Stock Option Grants) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
suboptimal_exercise_factor
Dec. 31, 2013
suboptimal_exercise_factor
Dec. 31, 2012
suboptimal_exercise_factor
Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]
 
 
 
Dividend yield
0.00% 
0.00% 
0.00% 
Expected volatility, minimum
41.00% 
51.00% 
55.00% 
Expected volatility, maximum
48.00% 
54.00% 
65.00% 
Risk-free interest rate, minimum
2.39% 
1.87% 
1.61% 
Risk-free interest rate, maximum
2.83% 
2.71% 
2.01% 
Suboptimal exercise factor, minimum
2.66 
2.33 
2.26 
Suboptimal exercise factor, maximum
5.44 
3.92 
3.65 
Valuation data:
 
 
 
Weighted-average fair value (per share)
$ 211.22 
$ 113.74 
$ 41.00 
Total stock-based compensation expense (in thousands)
$ 115,239 
$ 73,100 
$ 73,948 
Total income tax benefit related to stock options (in thousands)
$ 43,999 
$ 28,096 
$ 28,537 
Stockholders' Equity (Stock Repurchase Program) (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Jun. 11, 2010
Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]
 
 
Authorized amount
 
$ 300,000,000 
Amount repurchased
259,000,000 
 
Remaining authorized repurchase amount
$ 41,000,000 
 
Accumulated Other Comprehensive (Loss) Income (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
 
 
Beginning balance
$ 3,575 
$ 2,919 
Other comprehensive (loss) income before reclassifications
(7,431)
175 
Amounts reclassified from accumulated other comprehensive (loss) income
(590)
481 
Net increase (decrease) in other comprehensive income
(8,021)
656 
Ending balance
(4,446)
3,575 
Foreign currency [Member]
 
 
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
 
 
Beginning balance
3,153 
1,381 
Other comprehensive (loss) income before reclassifications
(7,768)
1,772 
Amounts reclassified from accumulated other comprehensive (loss) income
0 
0 
Net increase (decrease) in other comprehensive income
(7,768)
1,772 
Ending balance
(4,615)
3,153 
Change in unrealized gains on available for sale securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
 
 
Beginning balance
422 
1,538 
Other comprehensive (loss) income before reclassifications
337 
(1,597)
Amounts reclassified from accumulated other comprehensive (loss) income
(590)
481 
Net increase (decrease) in other comprehensive income
(253)
(1,116)
Ending balance
$ 169 
$ 422 
Income Taxes (Schedule of Income before Income Taxes) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
United States
$ 325,081 
$ 159,126 
$ 27,885 
Foreign
24,288 
11,948 
2,595 
Income before income taxes
$ 349,369 
$ 171,074 
$ 30,480 
Income Taxes (Components of Provision for Income Taxes) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current tax provision:
 
 
 
Federal
$ 86,623 
$ 58,558 
$ 34,387 
State
9,866 
15,154 
7,850 
Foreign
16,144 
7,003 
1,162 
Total current
112,633 
80,715 
43,399 
Deferred tax provision:
 
 
 
Federal
(10,994)
(18,930)
(26,903)
State
(17,794)
(2,751)
(3,168)
Foreign
(1,275)
(363)
0 
Total deferred
(30,063)
(22,044)
(30,071)
Provision for income taxes
$ 82,570 
$ 58,671 
$ 13,328 
Income Taxes (Narrative) (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Operating Loss Carryforwards [Line Items]
 
 
 
 
Undistributed earnings of foreign subsidiaries
$ 29,200,000 
$ 29,200,000 
 
 
Unrecognized deferred tax liability related to undistributed foreign earnings
10,200,000 
10,200,000 
 
 
Income tax benefits attributable to the exercise of employee stock options
 
88,900,000 
80,000,000 
4,400,000 
R&D tax credit
10,700,000 
18,655,000 
13,841,000 
1,803,000 
Unrecognized tax benefits
34,812,000 
34,812,000 
68,231,000 
43,337,000 
Reduction in provision for income taxes due to impact of effective tax rate
29,200,000 
29,200,000 
 
 
Gross interest and penalties accrued
400,000 
400,000 
3,900,000 
 
Tax reserves released
38,600,000 
 
 
 
State and Local Jurisdiction [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Tax credit carryforward amount
41,900,000 
41,900,000 
 
 
Tax credit carryforward not subject to expiration
41,100,000 
41,100,000 
 
 
Tax credit carryforward subject to expiration
800,000 
800,000 
 
 
Other Current Assets [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Deferred tax assets, current
13,400,000 
13,400,000 
21,500,000 
 
Other Noncurrent Assets [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Deferred tax assets, noncurrent
$ 106,900,000 
$ 106,900,000 
$ 69,100,000 
 
Income Taxes (Reconciliation of Provision for Income Taxes) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
Expected tax expense at U.S. federal statutory rate of 35%
 
$ 122,279 
$ 59,878 
$ 10,667 
State income taxes, net of Federal income tax effect
 
13,274 
8,053 
2,914 
R&D tax credit
(10,700)
(18,655)
(13,841)
(1,803)
Release of tax reserves on previously unrecognized tax benefits
 
(38,612)
0 
0 
Other
 
4,284 
4,581 
1,550 
Provision for income taxes
 
$ 82,570 
$ 58,671 
$ 13,328 
Federal statutory rate
 
35.00% 
 
 
Income Taxes (Deferred Tax Assets and Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets (liabilities):
 
 
Stock-based compensation
$ 100,397 
$ 69,201 
Accruals and reserves
13,415 
13,022 
Depreciation and amortization
(11,708)
(11,159)
R&D credits
21,014 
19,196 
Other
(2,778)
824 
Total deferred tax assets
120,340 
91,084 
Valuation allowance
0 
(481)
Net deferred tax assets
$ 120,340 
$ 90,603 
Income Taxes (Summary of Changes in Unrecognized Tax Benefits) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
Beginning Balance
$ 68,231 
$ 43,337 
Increases related to tax positions taken during prior periods
 
4 
Decreases related to tax positions taken during prior periods
(39,015)
(25)
Increases related to tax positions taken during the current period
11,174 
24,915 
Decreases related to settlements with taxing authorities
(5,578)
 
Ending Balance
$ 34,812 
$ 68,231 
Employee Benefit Plan (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Compensation and Retirement Disclosure [Abstract]
 
 
 
Eligible employees maximum contribution percentage
60.00% 
 
 
Contributions by employer
$ 8.3 
$ 6.5 
$ 5.2 
Segment Information (Narrative) (Details)
12 Months Ended
Dec. 31, 2014
segment
Segment Reporting [Abstract]
 
Number of reportable segments
3 
Segment Information (Long-lived Assets by Geographic Areas) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
United States [Member]
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
Long-lived assets
$ 138,704 
$ 126,455 
International [Member]
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
Long-lived assets
$ 11,171 
$ 7,150 
Segment Information (Information on Reportable Segments and Reconciliation to Consolidated Net Income) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
subscription
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
subscription
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
subscription
Dec. 31, 2013
subscription
Dec. 31, 2012
subscription
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total members at end of period
0 1
 
 
 
0 1
 
 
 
0 1
0 1
0 1
Revenues
$ 1,484,728 
$ 1,409,432 
$ 1,340,407 
$ 1,270,089 
$ 1,175,230 
$ 1,105,999 
$ 1,069,372 
$ 1,023,961 
$ 5,504,656 
$ 4,374,562 
$ 3,609,282 
Cost of revenues
 
 
 
 
 
 
 
 
3,752,760 
3,117,203 
2,652,058 
Marketing
 
 
 
 
 
 
 
 
607,186 
469,942 
439,208 
Contribution profit (loss)
 
 
 
 
 
 
 
 
1,144,710 
787,417 
518,016 
Other operating expenses
 
 
 
 
 
 
 
 
742,062 
559,070 
468,024 
Operating income
 
 
 
 
 
 
 
 
402,648 
228,347 
49,992 
Other income (expense)
 
 
 
 
 
 
 
 
(53,279)
(57,273)
(19,512)
Provision for income taxes
 
 
 
 
 
 
 
 
82,570 
58,671 
13,328 
Net income
83,371 
59,295 
71,018 
53,115 
48,421 
31,822 
29,471 
2,689 
266,799 
112,403 
17,152 
Total content library, net
4,899,028 
 
 
 
3,797,492 
 
 
 
4,899,028 
3,797,492 
2,874,170 
Amortization of content library
 
 
 
 
 
 
 
 
2,727,770 
2,193,306 
1,656,614 
Domestic Streaming [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total members at end of period
39,114,000 1
 
 
 
33,420,000 1
 
 
 
39,114,000 1
33,420,000 1
27,146,000 1
Revenues
 
 
 
 
 
 
 
 
3,431,434 
2,751,375 
2,184,868 
Cost of revenues
 
 
 
 
 
 
 
 
2,201,761 
1,863,376 
1,570,600 
Marketing
 
 
 
 
 
 
 
 
293,453 
265,232 
245,259 
Contribution profit (loss)
 
 
 
 
 
 
 
 
936,220 
622,767 
369,009 
Total content library, net
3,476,226 
 
 
 
2,973,023 
 
 
 
3,476,226 
2,973,023 
2,317,070 
Amortization of content library
 
 
 
 
 
 
 
 
1,657,673 
1,420,076 
1,152,446 
International Streaming [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total members at end of period
18,277,000 1
 
 
 
10,930,000 1
 
 
 
18,277,000 1
10,930,000 1
6,121,000 1
Revenues
 
 
 
 
 
 
 
 
1,308,061 
712,390 
287,542 
Cost of revenues
 
 
 
 
 
 
 
 
1,154,117 
782,304 
483,295 
Marketing
 
 
 
 
 
 
 
 
313,733 
204,418 
193,390 
Contribution profit (loss)
 
 
 
 
 
 
 
 
(159,789)
(274,332)
(389,143)
Total content library, net
1,392,701 
 
 
 
804,690 
 
 
 
1,392,701 
804,690 
527,235 
Amortization of content library
 
 
 
 
 
 
 
 
998,606 
701,905 
438,772 
Domestic DVD [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total members at end of period
5,767,000 1
 
 
 
6,930,000 1
 
 
 
5,767,000 1
6,930,000 1
8,224,000 1
Revenues
 
 
 
 
 
 
 
 
765,161 
910,797 
1,136,872 
Cost of revenues
 
 
 
 
 
 
 
 
396,882 
471,523 
598,163 
Marketing
 
 
 
 
 
 
 
 
0 
292 
559 
Contribution profit (loss)
 
 
 
 
 
 
 
 
368,279 
438,982 
538,150 
Total content library, net
30,101 
 
 
 
19,779 
 
 
 
30,101 
19,779 
29,865 
Amortization of content library
 
 
 
 
 
 
 
 
$ 71,491 
$ 71,325 
$ 65,396 
[1] A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. 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 new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. 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.
Selected Quarterly Financial Data (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$ 1,484,728 
$ 1,409,432 
$ 1,340,407 
$ 1,270,089 
$ 1,175,230 
$ 1,105,999 
$ 1,069,372 
$ 1,023,961 
$ 5,504,656 
$ 4,374,562 
$ 3,609,282 
Gross profit
470,396 
455,038 
425,559 
400,903 
354,553 
307,099 
308,698 
287,009 
 
 
 
Net income (loss)
$ 83,371 
$ 59,295 
$ 71,018 
$ 53,115 
$ 48,421 
$ 31,822 
$ 29,471 
$ 2,689 
$ 266,799 
$ 112,403 
$ 17,152 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in dollars per share)
$ 1.38 
$ 0.99 
$ 1.18 
$ 0.89 
$ 0.81 
$ 0.54 
$ 0.51 
$ 0.05 
$ 4.44 
$ 1.93 
$ 0.31 
Diluted (in dollars per share)
$ 1.35 
$ 0.96 
$ 1.15 
$ 0.86 
$ 0.79 
$ 0.52 
$ 0.49 
$ 0.05 
$ 4.32 
$ 1.85 
$ 0.29