NETFLIX INC, 10-K filed on 1/28/2016
Annual Report
v3.3.1.900
Document And Entity Information - USD ($)
 12 Months Ended
Dec. 31, 2015
Jan. 27, 2016
Jun. 30, 2015
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, 2015    
Document Fiscal Year Focus 2015    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   428,081,221  
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Public Float     $ 33,823,183,533
v3.3.1.900
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]      
Revenues $ 6,779,511 $ 5,504,656 $ 4,374,562
Cost of revenues 4,591,476 3,752,760 3,117,203
Marketing 824,092 607,186 469,942
Technology and development 650,788 472,321 378,769
General and administrative 407,329 269,741 180,301
Operating income 305,826 402,648 228,347
Other income (expense):      
Interest expense (132,716) (50,219) (29,142)
Interest and other income (expense) (31,225) (3,060) (3,002)
Loss on extinguishment of debt 0 0 (25,129)
Income before income taxes 141,885 349,369 171,074
Provision for income taxes 19,244 82,570 58,671
Net income $ 122,641 $ 266,799 $ 112,403
Earnings per share:      
Basic (in USD per share) $ 0.29 $ 0.63 $ 0.28
Diluted (in USD per share) $ 0.28 $ 0.62 $ 0.26
Weighted-average common shares outstanding:      
Basic (in shares) 425,889 420,544 407,385
Diluted (in shares) 436,456 431,894 425,327
v3.3.1.900
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement of Comprehensive Income [Abstract]      
Net income $ 122,641 $ 266,799 $ 112,403
Other comprehensive income (loss):      
Foreign currency translation adjustments (37,887) (7,768) 1,772
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $(598), $(156), and $(697), respectively (975) (253) (1,116)
Total other comprehensive income (loss) (38,862) (8,021) 656
Comprehensive income $ 83,779 $ 258,778 $ 113,059
v3.3.1.900
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement of Comprehensive Income [Abstract]      
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax, Portion Attributable to Parent $ (598) $ (156) $ (697)
v3.3.1.900
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash flows from operating activities:      
Net income $ 122,641 $ 266,799 $ 112,403
Adjustments to reconcile net income to net cash (used in) provided by operating activities:      
Additions to streaming content assets (5,771,652) (3,773,019) (3,030,701)
Change in streaming content liabilities 1,162,413 593,125 673,785
Amortization of streaming content assets 3,405,382 2,656,279 2,121,981
Amortization of DVD content assets 79,380 71,491 71,325
Depreciation and amortization of property, equipment and intangibles 62,283 54,028 48,374
Stock-based compensation expense 124,725 115,239 73,100
Excess tax benefits from stock-based compensation (80,471) (89,341) (81,663)
Other non-cash items 31,628 15,282 5,332
Loss on extinguishment of debt 0 0 25,129
Deferred taxes (58,655) (30,063) (22,044)
Changes in operating assets and liabilities:      
Other current assets 18,693 (9,198) 43,177
Accounts payable 51,615 83,812 18,374
Accrued expenses 48,810 55,636 1,941
Deferred revenue 72,135 58,819 46,295
Other non-current assets and liabilities (18,366) (52,406) (8,977)
Net cash (used in) provided by operating activities (749,439) 16,483 97,831
Cash flows from investing activities:      
Acquisition of DVD content assets (77,958) (74,790) (65,927)
Purchases of property and equipment (91,248) (69,726) (54,143)
Other assets (1,912) 1,334 5,939
Purchases of short-term investments (371,915) (426,934) (550,264)
Proceeds from sale of short-term investments 259,079 385,300 347,502
Proceeds from maturities of short-term investments 104,762 141,950 60,925
Net cash used in investing activities (179,192) (42,866) (255,968)
Cash flows from financing activities:      
Proceeds from issuance of common stock 77,980 60,544 124,557
Proceeds from issuance of debt 1,500,000 400,000 500,000
Issuance costs (17,629) (7,080) (9,414)
Redemption of debt 0 0 (219,362)
Excess tax benefits from stock-based compensation 80,471 89,341 81,663
Principal payments of lease financing obligations (545) (1,093) (1,180)
Net cash provided by financing activities 1,640,277 541,712 476,264
Effect of exchange rate changes on cash and cash equivalents (15,924) (6,686) (3,453)
Net increase in cash and cash equivalents 695,722 508,643 314,674
Cash and cash equivalents, beginning of year 1,113,608 604,965 290,291
Cash and cash equivalents, end of year 1,809,330 1,113,608 604,965
Supplemental disclosure:      
Income taxes paid 27,658 50,573 7,465
Interest paid 111,761 41,085 19,114
Investing activities included in liabilities $ 18,824 $ 23,802 $ 11,508
v3.3.1.900
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Current assets:    
Cash and cash equivalents $ 1,809,330 $ 1,113,608
Short-term investments 501,385 494,888
Current content assets, net 2,905,998 2,166,134
Other current assets 215,127 152,423
Total current assets 5,431,840 3,927,053
Non-current content assets, net 4,312,817 2,773,326
Property and equipment, net 173,412 149,875
Other non-current assets 284,802 192,246
Total assets 10,202,871 7,042,500
Current liabilities:    
Current content liabilities 2,789,023 2,117,241
Accounts payable 253,491 201,581
Accrued expenses 140,389 69,746
Deferred revenue 346,721 274,586
Total current liabilities 3,529,624 2,663,154
Non-current content liabilities 2,026,360 1,575,832
Long-term debt 2,371,362 885,849
Other non-current liabilities 52,099 59,957
Total liabilities 7,979,445 5,184,792
Stockholders’ equity:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2015 and 2014; no shares issued and outstanding at December 31, 2015 and 2014 0 0
Common stock, $0.001 par value; 4,990,000,000 and 160,000,000 shares authorized at December 31, 2015 and December 31, 2014, respectively; 427,940,440 and 422,910,887 issued and outstanding at December 31, 2015 and December 31, 2014, respectively 1,324,809 1,042,870
Accumulated other comprehensive loss (43,308) (4,446)
Retained earnings 941,925 819,284
Total stockholders’ equity 2,223,426 1,857,708
Total liabilities and stockholders’ equity $ 10,202,871 $ 7,042,500
v3.3.1.900
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]    
Preferred stock, par value (per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (per share) $ 0.001 $ 0.001
Common stock, shares authorized 4,990,000,000 160,000,000
Common stock, shares issued 427,940,440 422,910,887
Common stock, shares outstanding 427,940,440 422,910,887
v3.3.1.900
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock and Additional Paid-in Capital [Member]
Accumulated Other Comprehensive (Loss) Income [Member]
Retained Earnings [Member]
Beginning Balance (in shares) at Dec. 31, 2012   389,110,169    
Beginning Balance at Dec. 31, 2012 $ 744,673 $ 301,672 $ 2,919 $ 440,082
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) 11,821,418 11,821,418    
Issuance of common stock upon exercise of options $ 124,557 $ 124,557    
Note conversion (in shares)   16,317,420    
Note conversion 198,208 $ 198,208    
Stock-based compensation expense 73,100 73,100    
Excess stock option income tax benefits 79,964 $ 79,964    
Ending Balance (in shares) at Dec. 31, 2013   417,249,007    
Ending Balance at Dec. 31, 2013 1,333,561 $ 777,501 3,575 552,485
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) 5,661,880 5,661,880    
Issuance of common stock upon exercise of options $ 61,190 $ 61,190    
Stock-based compensation expense 115,239 115,239    
Excess stock option income tax benefits 88,940 $ 88,940    
Ending Balance (in shares) at Dec. 31, 2014   422,910,887    
Ending Balance at Dec. 31, 2014 1,857,708 $ 1,042,870 (4,446) 819,284
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income 122,641     122,641
Other comprehensive income (loss) $ (38,862)   (38,862)  
Issuance of common stock upon exercise of options (in shares) 5,029,553 5,029,553    
Issuance of common stock upon exercise of options $ 77,334 $ 77,334    
Stock-based compensation expense 124,725 124,725    
Excess stock option income tax benefits 79,880 $ 79,880    
Ending Balance (in shares) at Dec. 31, 2015   427,940,440    
Ending Balance at Dec. 31, 2015 $ 2,223,426 $ 1,324,809 $ (43,308) $ 941,925
v3.3.1.900
Organization and Summary of Significant Accounting Policies
 12 Months Ended
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
Description of Business
Netflix, Inc. (the “Company”) was incorporated on August 29, 1997 and began operations on April 14, 1998. The Company is the world’s leading Internet television network with over 75 million streaming members in over 190 countries enjoying more than 125 million hours of hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments. Additionally, in the United States ("U.S."), members can receive DVDs.
The Company has three reportable segments, Domestic streaming, International streaming and Domestic DVD. 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 assets; 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.
Stock Split
On July 14, 2015, the Company completed a seven-for-one stock split in the form of a stock dividend. References made to outstanding shares or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this seven-for-one stock split. The number of authorized shares as reflected on the Consolidated Balance Sheets was not affected by the stock split and accordingly has not been adjusted. See Note 8 for additional information.
Accounting Guidance Adopted in 2015
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. The Company elected to early adopt the ASU in the third quarter of 2015 and has applied the guidance prospectively to all arrangements. The impact of the adoption of the ASU was not material to the Company's consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The Company elected to early adopt ASU 2015-03 as of December 31, 2015, and retrospectively reclassifed $14.2 million of debt issuance costs associated with the Company's long-term debt as of December 31, 2014 from other non-current assets to long-term debt.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company has elected to early adopt ASU 2015-17 as of December 31, 2015 and retrospectively applied ASU 2015-17 to all periods presented. As of December 31, 2014 the Company reclassified $13.4 million of deferred tax assets from "Other current assets" to "Other non-current assets" on the Consolidated Balance Sheets.
Accounting Guidance Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). 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” 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 acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV shows and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash (used in) provided by operating activities" on the Consolidated Statements of Cash Flows.
For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets.
For productions, the Company capitalizes costs associated with the production, including development cost and direct costs. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs.
Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years. For most of the content, the Company amortizes on a straight-line basis. For certain content where the Company expects more upfront viewing, due to the additional merchandising and marketing efforts, the amortization is on an accelerated basis. The Company reviews factors impacting the amortization of the content assets on a regular basis, including changes in merchandising and marketing efforts. The Company's estimates related to these factors require considerable management judgment.  Changes in estimates could have a significant impact on the Company's future results of operations. In the third quarter of 2015, the Company changed the amortization method of certain content given changes in estimated viewing patterns of this content. The effect of this change in estimate was a $25.5 million decrease in operating income and a $15.8 million decrease in net income for the year ended December 31, 2015. The effect on both basic earnings per share and diluted earnings per share was a decrease of $0.04 for the year ended December 31, 2015.
Content assets are stated at the lower of unamortized cost or net realizable value which approximates fair value of the capitalized costs for produced content. Content assets are reviewed in aggregate at the operating segment level for write-down when an event or change in circumstances indicates a change in the expected usefulness of the content. Unamortized costs for assets that have been or are expected to be abandoned are written off. No material write-down from unamortized cost to a lower net realizable value was recorded in any of the periods presented.
The Company has entered into certain licenses with collective management organizations ("CMOs"), and are currently involved in negotiations with other CMOs, 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 changes 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.

DVD Content
The Company acquires DVD content for the purpose of renting such content to its domestic DVD members and earning membership rental revenues, and, as such, the Company considers its direct purchase DVD assets to be a productive asset. Accordingly, the Company classifies its DVD assets in “Non-current content assets, net” on the Consolidated Balance Sheets. The acquisition of DVD content assets, 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 assets are 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.
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 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 digital and television advertising. Advertising costs are expensed as incurred. Advertising expenses were $714.3 million, $533.1 million and $404.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Income Taxes
The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.
The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. See Note 10 to the consolidated financial statements for further information regarding income taxes.
Foreign Currency
The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive loss" in Stockholders’ equity on the Consolidated Balance Sheets.
Prior to January 1, 2015, the functional currency of certain of the Company's European entities was the British pound. The Company changed the functional currency of these entities to the euro effective January 1, 2015 following the redomiciliation of the European headquarters and the launch of the Netflix service in several significant European countries. The change in functional currency was applied prospectively from January 1, 2015. Monetary assets and liabilities have been remeasured to the euro at current exchange rates. Non-monetary assets and liabilities have been remeasured to the euro using the exchange rate effective for the period in which the balance arose. As a result of this change of functional currency, the Company recorded a $21.8 million cumulative translation adjustment included in other comprehensive loss for year ended December 31, 2015.
The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense). Foreign currency transactions resulted in losses of $37.3 million, $8.2 million, and $8.4 million for the years ended December 31, 2015, 2014, and 2013 respectively.
Earnings Per Share
In June 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015 ("Stock Split").
Outstanding share and per-share amounts disclosed for all periods provided have been retroactively adjusted to reflect the effects of the Stock Split. 
Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of 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, as adjusted for the Stock Split, is as follows:
 
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
122,641

 
$
266,799

 
$
112,403

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
425,889

 
420,544

 
407,385

Basic earnings per share
$
0.29

 
$
0.63

 
$
0.28

Diluted earnings per share:
 
 
 
 
 
Net income
$
122,641

 
$
266,799

 
$
112,403

Convertible Notes interest expense, net of tax
—

 
—

 
49

Numerator for diluted earnings per share
122,641

 
266,799

 
112,452

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
425,889

 
420,544

 
407,385

Convertible Notes shares
—

 
—

 
5,007

Employee stock options
10,567

 
11,350

 
12,935

Weighted-average number of shares
436,456

 
431,894

 
425,327

Diluted earnings per share
$
0.28

 
$
0.62

 
$
0.26


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, as adjusted for the Stock Split:
 
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
Employee stock options
517

 
917

 
1,386


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.
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Reclassifications
 12 Months Ended
Dec. 31, 2015
Accounting Changes and Error Corrections [Abstract]  
Reclassifications
Reclassifications
In addition to the retrospective adoption of ASU 2015-03 and ASU 2015-17 as detailed in Note 1, certain prior year amounts have been reclassified to conform to the current year presentation in the consolidated financial statements.
Specifically, the Company reclassified prepaid content from "Other current assets" on the Consolidated Balance Sheets to "Current content assets, net". The reclassifications for the years ended December 31, 2014 and 2013, were $40.4 million and $40.9 million respectively. The Company also reclassified the change in prepaid content of $0.4 million and $19.1 million for the years ended December 31, 2014 and 2013, respectively, from "Other current assets" to "Additions to streaming content assets" on the Consolidated Statements of Cash Flows.
v3.3.1.900
Short-term Investments
 12 Months Ended
Dec. 31, 2015
Short-term Investments [Abstract]  
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, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,708,220

 
$
—

 
$
—

 
$
1,708,220

 
$
1,706,592

 
$
—

 
$
1,628

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
107,199

 
—

 
—

 
107,199

 
102,738

 
—

 
4,461

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
240,867

 
154

 
(409
)
 
240,612

 
—

 
240,612

 
—

Government securities
235,252

 
—

 
(1,046
)
 
234,206

 
—

 
234,206

 
—

Agency securities
26,576

 
—

 
(9
)
 
26,567

 
—

 
26,567

 
—

Total
$
2,318,114

 
$
154

 
$
(1,464
)
 
$
2,316,804

 
$
1,809,330

 
$
501,385

 
$
6,089


 
 
As of December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,007,543

 
$
—

 
$
—

 
$
1,007,543

 
$
1,007,543

 
$
—

 
$
—

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
111,759

 
—

 
—

 
111,759

 
106,065

 
—

 
5,694

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
295,500

 
432

 
(199
)
 
295,733

 
—

 
295,733

 
—

Government securities
168,749

 
120

 
(95
)
 
168,774

 
—

 
168,774

 
—

Asset and mortgage-backed securities
112

 
—

 
—

 
112

 
—

 
112

 
—

Certificate of deposits
3,600

 
—

 
—

 
3,600

 
—

 
3,600

 
—

Agency securities
26,665

 
5

 
(1
)
 
26,669

 
—

 
26,669

 
—

Total
$
1,613,928

 
$
557

 
$
(295
)
 
$
1,614,190

 
$
1,113,608

 
$
494,888

 
$
5,694


(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.
Fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy level assigned to each security in the Company’s available-for-sale portfolio and cash equivalents is based on its assessment of the transparency and reliability of the inputs used in the valuation of such instrument at the measurement date. The fair value of available-for-sale securities and cash equivalents included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. The fair value of available-for-sale securities included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. These values were obtained from an independent pricing service and were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. The Company’s procedures include controls to ensure that appropriate fair values are recorded, such as comparing prices obtained from multiple independent sources. See Note 5 to the consolidated financial statements for further information regarding the fair value of the Company’s 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, 2015. There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the years ended December 31, 2015, 2014 or 2013.
There were no material gross realized gains or losses from the sale of available-for-sale investments in the years ended December 31, 2015, 2014 and 2013. 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, 2015 is as follows:
 
 
 
(in thousands)
Due within one year
 
$
137,927

Due after one year and through 5 years
 
363,458

Total short-term investments
 
$
501,385
v3.3.1.900
Balance Sheet Components
 12 Months Ended
Dec. 31, 2015
Balance Sheet Components Disclosure [Abstract]  
Balance Sheet Components
Balance Sheet Components
Content Assets
Content assets consisted of the following:
 
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Total content assets, gross
$
12,284,097

 
$
8,537,835

Accumulated amortization
(5,065,282
)
 
(3,598,375
)
Total content assets, net
7,218,815

 
4,939,460

Current content assets, net
2,905,998

 
2,166,134

Non-current content assets, net
$
4,312,817

 
$
2,773,326



The vast majority of content assets relate to licensed streaming content. Total content assets also include costs capitalized for production of original content, prepaid content and DVD content.

 Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
 
 
 
As of December 31,
 
Estimated Useful Lives (in Years)
 
 
2015
 
2014
 
 
 
(in thousands)
 
 
Information technology assets
 
$
194,054

 
$
189,274

 
3 years
Furniture and fixtures
 
30,914

 
25,758

 
3 years
Building
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
107,793

 
57,339

 
Over life of lease
DVD operations equipment
 
88,471

 
89,144

 
5 years
Capital work-in-progress
 
8,845

 
12,495

 
 
Property and equipment, gross
 
470,758

 
414,691

 
 
Less: Accumulated depreciation
 
(297,346
)
 
(264,816
)
 
 
Property and equipment, net
 
$
173,412

 
$
149,875

 
 
v3.3.1.900
Long-term Debt
 12 Months Ended
Dec. 31, 2015
Debt Disclosure [Abstract]  
Long-term Debt
Long-term Debt

As of December 31, 2015, the Company had aggregate outstanding $2,371.4 million, net of $28.6 million of issuance costs, in long-term notes with varying maturities (the "Notes"). Each of the Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at fixed rates.

The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2015 and December 31, 2014:

 
 
 
 
 
 
 
 
 
Level 2 Fair Value as of
 
Principal Amount at Par
 
Issuance Date
 
Maturity
 
Interest Due Dates
 
December 31,
2015
 
December 31,
2014
 
(in millions)
 
 
 
 
 
 
 
(in millions)
5.50% Senior Notes
$
700.0

 
February 2015
 
2022
 
April 15 and October 15
 
$
717.5

 
$
—

5.875% Senior Notes
800.0

 
February 2015
 
2025
 
April 15 and October 15
 
820.0

 
—

5.750% Senior Notes
400.0

 
February 2014
 
2024
 
March 1 and September 1
 
411.0

 
416.0

5.375% Senior Notes
500.0

 
February 2013
 
2021
 
February 1 and August 1
 
525.0

 
520.0


Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of December 31, 2015 and December 31, 2014, the Company was in compliance with all related covenants.
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. In April 2013, the Company elected to cause the conversion of all outstanding Convertible Notes in accordance with the terms of the Indenture governing such notes. Pursuant to this conversion, the Company issued 16.3 million shares of common stock to the holders of the Convertible Notes at a conversion ratio of 81.5871, as adjusted for the Stock Split. The fair market value of one share of common stock on the date of conversion was $31.00 per share, as adjusted for the Stock Split.
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"). Interest was payable semi-annually at a rate of 8.50% per annum on May 15 and November 15 of each year. 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.
v3.3.1.900
Commitments and Contingencies
 12 Months Ended
Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Streaming Content
At December 31, 2015, the Company had $10.9 billion of obligations comprised of $2.8 billion included in "Current content liabilities" and $2.0 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $6.1 billion of obligations that are not reflected on the Consolidated Balance Sheets as they do not yet meet the criteria for asset recognition.
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 Sheets as they do not yet meet the criteria for asset recognition.
The expected timing of payments for these streaming content obligations is as follows:
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Less than one year
$
4,703,172

 
$
3,747,648

Due after one year and through 3 years
5,249,147

 
4,495,103

Due after 3 years and through 5 years
891,864

 
1,164,308

Due after 5 years
58,048

 
44,053

Total streaming content obligations
$
10,902,231

 
$
9,451,112


    
Content obligations include amounts related to the acquisition, licensing and production of content. Obligations that are in non U.S. Dollar currencies are translated to U.S. Dollar at period end rates. A content obligation for the production of original content includes non-cancellable commitments under creative talent and employment agreements. A content obligation for the acquisition and licensing of content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. Traditional film output deals, like the U.S. output deal with Disney, or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of such license agreements. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. However, the unknown obligations are expected to be significant.

Lease obligations
The Company leases facilities under non-cancelable operating leases with various expiration dates through 2028. Several lease agreements contain rent escalation clauses or rent holidays. For purposes of recognizing minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation for intended use. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the Consolidated Statements of Operations. The Company has the option to extend or renew most of its leases which may increase the future minimum lease commitments.
Because the terms of the Company’s facilities lease agreements for its original Los Gatos, California headquarters site required the Company’s involvement in the construction funding of the buildings, the Company is the “deemed owner” (for accounting purposes only) of these buildings. Accordingly, the Company recorded an asset of $40.7 million, representing the total costs of the buildings and improvements, including the costs paid by the lessor (the legal owner of the buildings), with corresponding liabilities. Upon completion of construction of each building, the Company did not meet the sale-leaseback criteria for de-recognition of the building assets and liabilities. Therefore the leases are accounted for as financing obligations.
In the third quarter of 2015, the Company extended the facilities leases for the original Los Gatos buildings for an additional three years term, increasing the future minimum payments under the lease financing obligations by approximately $13.7 million. In this extension, 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, 2015, the lease financing obligation balance was $29.0 million, the majority of which is recorded in “Other non-current liabilities,” on the Consolidated Balance Sheets. The remaining future minimum payments under the lease financing obligation are $21.1 million. The lease financing obligation balance at the end of the extended lease term will be approximately $21.8 million which approximates the net book value of the buildings to be relinquished to the lessor.
In addition to the lease financing obligation, future minimum lease payments include $428.7 million as of December 31, 2015 related to non-cancelable operating leases for the expanded headquarters in Los Gatos, California and the new office space in Los Angeles, California.
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2015 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2016
$
42,545

2017
54,811

2018
58,015

2019
53,152

2020
51,844

Thereafter
269,377

Total minimum payments
$
529,744


Rent expense associated with the operating leases was $34.7 million, $26.6 million and $27.9 million for the years ended December 31, 2015, 2014 and 2013, 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, oral argument has been set for March 17, 2016. 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.
v3.3.1.900
Guarantees—Indemnification Obligations
 12 Months Ended
Dec. 31, 2015
Guarantees [Abstract]  
Guarantees—Indemnification Obligations
Guarantees—Indemnification Obligations
In the ordinary course of business, the Company has entered into contractual arrangements under which it has agreed to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements and out of intellectual property infringement claims made by third parties. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract.
The Company’s obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations vary.
It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. No amount has been accrued in the accompanying financial statements with respect to these indemnification guarantees.
v3.3.1.900
Stockholders' Equity
 12 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
Stockholders' Equity
Stockholders’ Equity
In April 2013, the Company issued 16.3 million shares of common stock in connection with the conversion of the Convertible Notes, as adjusted for the Stock Split. See Note 5 to the consolidated financial statements for further details.
Stock Split
In March 2015, the Company's Board of Directors adopted an amendment to the Company's Certificate of Incorporation, to increase the number of shares of capital stock the Company is authorized to issue from 170,000,000 (160,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001 to 5,000,000,000 (4,990,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001. This amendment to the Company's certificate of incorporation was approved by the Company's stockholders at the 2015 Annual Meeting held on June 9, 2015.
On June 23, 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015. Outstanding share and per-share amounts disclosed for all periods presented have been retroactively adjusted to reflect the effects of the Stock Split. 
Preferred Stock
The Company has authorized 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. None of the preferred shares were issued and outstanding at December 31, 2015 and 2014.
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, 2015, 16.8 million shares were reserved for future grants under the 2011 Stock Plan.
A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:
 
 
Shares Available
for Grant
 
Options Outstanding
 
Weighted- Average Remaining Contractual Term (in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
 
Number of
Shares
 
Weighted- Average Exercise Price
(per Share)
 
Balances as of December 31, 2012
28,343,259

 
32,010,664

 
$
10.19

 
 
 
 
Granted
(4,499,040
)
 
4,499,040

 
29.85

 
 
 
 
Exercised
—

 
(11,821,418
)
 
10.54

 
 
 
 
Balances as of December 31, 2013
23,844,219

 
24,688,286

 
$
13.61

 
 
 
 
Granted
(3,819,011
)
 
3,819,011

 
57.55

 
 
 
 
Exercised
—

 
(5,661,880
)
 
10.81

 
 
 
 
Balances as of December 31, 2014
20,025,208

 
22,845,417

 
$
21.65

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

 
82.67

 
 
 
 
Exercised
—

 
(5,029,553
)
 
15.38

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

 
20,995,756

 
$
32.39

 
6.26
 
$
1,723,505

Vested and exercisable at
December 31, 2015
 
 
20,995,756

 
$
32.39

 
6.26
 
$
1,723,505


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 2015 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 2015. 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, 2015, 2014 and 2013 was $368.4 million, $265.1 million and $274.2 million, respectively.
Cash received from option exercises for the years ended December 31, 2015, 2014 and 2013 was $78.0 million, $60.5 million and $124.6 million, respectively.
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, as adjusted for the Stock Split:
 
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Dividend yield
 
—
%
 
—
%
 
—
%
Expected volatility
 
36% - 53%

 
41% - 48%

 
51% - 54%

Risk-free interest rate
 
2.03% - 2.29%

 
2.39% - 2.83%

 
1.87% - 2.71%

Suboptimal exercise factor
 
2.47 - 2.48

 
2.66 - 5.44

 
2.33 - 3.92

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
39.22

 
$
30.17

 
$
16.25

Total stock-based compensation expense (in thousands)
 
124,725

 
115,239

 
73,100

Total income tax impact on provision (in thousands)
 
47,125

 
43,999

 
28,096



The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior and the employee groupings. Prior to January 1, 2015, the Company bifurcated its option grants into two employee groupings (executive and non-executive) to determine the suboptimal exercise factor. Beginning on January 1, 2015, the Company began aggregating employee groupings for its determination of the suboptimal exercise factor as the previous bifurcation into two groupings did not have a material impact on the fair value of the options granted.
Prior to January 1, 2015, the Company's computation of expected volatility was based on a blend of historical volatility of its common stock and implied volatility of tradable forward call options to purchase shares of its common stock, as low trade volume of its tradable forward call options prior to 2011 precluded sole reliance on implied volatility. Beginning on January 1, 2015, expected volatility is based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.
In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.
v3.3.1.900
Accumulated Other Comprehensive (Loss) Income
 12 Months Ended
Dec. 31, 2015
Equity [Abstract]  
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, 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
)
Other comprehensive (loss) income before reclassifications
(37,887
)
 
(771
)
 
(38,658
)
Amounts reclassified from accumulated other comprehensive (loss)income
—

 
(204
)
 
(204
)
Net decrease in other comprehensive (loss) income
(37,887
)
 
(975
)
 
(38,862
)
Balance as of December 31, 2015
$
(42,502
)
 
$
(806
)
 
$
(43,308
)


As discussed in Note 1, other comprehensive (loss) income for the year ended December 31, 2015 includes the impact of the change in functional currency for certain of the Company's European entities.
All amounts reclassified from accumulated other comprehensive (loss) income related to realized gains on available-for-sale securities. These reclassifications impacted "Interest and other income (expense)" on the Consolidated Statements of Operations.
v3.3.1.900
Income Taxes
 12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
United States
$
95,644

 
$
325,081

 
$
159,126

Foreign
46,241

 
24,288

 
11,948

Income before income taxes
$
141,885

 
$
349,369

 
$
171,074


The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
52,557

 
$
86,623

 
$
58,558

State
(1,576
)
 
9,866

 
15,154

Foreign
26,918

 
16,144

 
7,003

Total current
77,899

 
112,633

 
80,715

Deferred tax provision:
 
 
 
 
 
Federal
(37,669
)
 
(10,994
)
 
(18,930
)
State
(17,635
)
 
(17,794
)
 
(2,751
)
Foreign
(3,351
)
 
(1,275
)
 
(363
)
Total deferred
(58,655
)
 
(30,063
)
 
(22,044
)
Provision for income taxes
$
19,244

 
$
82,570

 
$
58,671



U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of certain foreign subsidiaries were not provided for on a cumulative total of $65.3 million of undistributed earnings for certain foreign subsidiaries as of December 31, 2015. 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 $22.8 million.
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,
 
2015
 
2014
 
2013
 
(in thousands)
Expected tax expense at U.S. Federal statutory rate of 35%
$
49,658

 
$
122,279

 
$
59,878

State income taxes, net of Federal income tax effect
4,783

 
13,274

 
8,053

R&D tax credit
(29,363
)
 
(18,655
)
 
(13,841
)
Release of tax reserves on previously unrecognized tax benefits
(13,438
)
 
(38,612
)
 
—

Foreign earnings at other than US rates
5,310

 
2,959

 
821

Other
2,294

 
1,325

 
3,760

Provision for income taxes
$
19,244

 
$
82,570

 
$
58,671



On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 (H.R. 2029) was signed into law which retroactively and permanently extended the Federal R&D credit from January 1, 2015. As a result, the Company recognized the retroactive benefit of the 2015 R&D credit of approximately $16.5 million as a discrete item in the fourth quarter of 2015, the period in which the legislation was enacted.

The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Deferred tax assets (liabilities):
 
 
 
Stock-based compensation
$
131,339

 
$
100,397

Accruals and reserves
14,367

 
13,415

Depreciation and amortization
(43,204
)
 
(11,708
)
R&D credits
74,091

 
21,014

Other
3,980

 
(2,778
)
Total deferred tax assets
$
180,573

 
$
120,340



All deferred tax assets are classified as “Other non-current assets” on the Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014. 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, 2015 and 2014, it was considered more likely than not that substantially all deferred tax assets would be realized, and no valuation allowance was recorded.
As of December 31, 2015, the Company's Federal R&D tax credit and state tax credit carryforwards for tax return purposes were $44.1 million, and $59.3 million, respectively. The Federal R&D tax credit carryforwards expire through 2035. State tax credit carryforwards of $58.8 million can be carried forward indefinitely and $0.5 million expire in 2024.
As of December 31, 2015, the Company’s net operating loss carryforwards for Federal and state tax return purposes were $104.8 million and $237.0 million, respectively, which expire in 2035. These net operating losses were generated as a result of excess stock option deductions. Pursuant to Accounting Standards Codification 718, Compensation - Stock Compensation , the Company has not recognized the related $45.0 million tax benefit from the Federal and state net operating losses attributable to excess stock option deductions in gross deferred tax assets. The $45.0 million tax benefit will be credited directly to additional paid-in capital when net operating losses attributable to excess stock option deductions are utilized to reduce taxes payable.
Income tax benefits attributable to the exercise of employee stock options of $79.9 million, $88.9 million and $80.0 million for the years ended December 31, 2015, 2014 and 2013, respectively, were recorded directly to additional paid-in-capital.
The Company classified $3.6 million of unrecognized tax benefits that are expected to result in payment or receipt of cash within one year as “Accrued expenses”. The unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year are classified as “Other non-current liabilities” and a reduction of deferred tax assets which is classified as "Other non-current assets" in the Consolidated Balance Sheets. As of December 31, 2015, the total amount of gross unrecognized tax benefits was $17.1 million, of which $13.5 million, if recognized, would favorably impact the Company’s effective tax rate. 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, 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

 Increases related to tax positions taken during prior periods
1,960

 Decreases related to tax positions taken during prior periods
(12,334
)
 Increases related to tax positions taken during the current period
7,077

 Decreases related to settlements with taxing authorities
(14,398
)
Balance as of December 31, 2015
$
17,117


The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes and in “Other non-current liabilities” in the Consolidated Balance Sheets. Interest and penalties included in the Company's provision for income taxes were not material in all the periods presented.
The Company files U.S. Federal, state and foreign tax returns. In December 2015, the Company reached a settlement with the IRS for tax years 2010 through 2013. The 2014 Federal tax return remains subject to examination by the IRS. California had previously completed its Field Exam of the 2006 and 2007 California tax returns and had issued a Notice of 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 Franchise Tax Board for tax years 1997 through 2007 in November 2015. The years 2008 through 2014, remain subject to examination by the state of California. As a result of the above audit settlements, the Company has reassessed the tax reserves on the related uncertain tax position for all open years and released $13.4 million of tax reserves in the fourth quarter of 2015. The Company has no significant foreign jurisdiction audits underway. The years 2011 through 2014 remain subject to examination by foreign jurisdictions.
Given the potential outcome of the current examinations as well as the impact of the current examinations on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible adjustments cannot be made.
v3.3.1.900
Employee Benefit Plan
 12 Months Ended
Dec. 31, 2015
Compensation and Retirement Disclosure [Abstract]  
Employee Benefit Plan
Employee Benefit Plan
The Company maintains a 401(k) savings plan covering substantially all of its employees. Eligible employees may contribute up to 60% of their annual salary through payroll deductions, but not more than the statutory limits set by the Internal Revenue Service. The Company matches employee contributions at the discretion of the Board. During 2015, 2014 and 2013, the Company’s matching contributions totaled $11.2 million, $8.3 million and $6.5 million, respectively.
v3.3.1.900
Segment Information
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Segment Information
Segment Information
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 ("CODM") reviews the operating results in assessing performance and allocating resources. The Company’s CODM reviews revenue and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses incurred by the segment. The Company has aggregated the results of the International operating segments into one reportable segment because these operating segments share similar long-term economic and other qualitative characteristics.
The Domestic streaming segment derives revenues from monthly membership fees for services consisting solely of streaming content to the members in the United States. The International streaming segment derives revenues from monthly membership fees for services consisting solely of streaming content to members outside of the United States. The Domestic DVD segment derives revenues from monthly membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment card fees are attributed to the operating segment based on the nature of the underlying membership (streaming or DVD) and the geographic region from which the membership originates. There are no internal revenue transactions between the Company’s segments.
The majority of cost of revenues relate to content expenses directly incurred by the segment. However, in connection with global expansion, content acquired, licensed, and produced increasingly includes global rights. The Company allocates this content between the International and Domestic streaming segments based on estimated fair market value. Other costs of revenues such as delivery costs are primarily attributed to the operating segment based on amounts directly incurred by the segment. Marketing expenses consist primarily of advertising expenses and payments made to our affiliates and device partners 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,
 
2015
 
2014
 
(in thousands)
United States
$
159,566

 
$
138,704

International
13,846

 
11,171



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

 
30,024

 
4,904

 
—

Revenues
$
4,180,339

 
$
1,953,435

 
$
645,737

 
$
6,779,511

Cost of revenues
2,487,193

 
1,780,375

 
323,908

 
4,591,476

Marketing
317,646

 
506,446

 
—

 
824,092

Contribution profit (loss)
$
1,375,500

 
$
(333,386
)
 
$
321,829

 
$
1,363,943

Other operating expenses
 
 
 
 
 
 
1,058,117

Operating income
 
 
 
 
 
 
305,826

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

Net income
 
 
 
 
 
 
$
122,641



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

 
1,500,313

 
79,380

 
3,484,762


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 memberships 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)
Amortization of content assets
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 memberships 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)
Amortization of content assets
1,420,076

 
701,905

 
71,325

 
2,193,306

(1)
A membership (also referred to as a subscription or a member) is defined as the right to receive the Netflix service following sign-up and a method of payment being provided. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by our internal systems, which utilize industry standard geo-location technology. We offer free-trial memberships to new and certain rejoining members. Total members include those who are on a free-trial as long as a method of payment has been provided. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately except in limited circumstances where a short grace period is offered to ensure the streaming service is not interrupted for members who are impacted by payment processing delays by our banks or integrated payment partners. The number of members in a grace period at any given point is not material.
v3.3.1.900
Selected Quarterly Financial Data (Unaudited)
 12 Months Ended
Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data (Unaudited)
Selected Quarterly Financial Data (Unaudited)
 
 
December 31
 
September 30
 
June 30
 
March 31
 
(in thousands, except for per share data)
2015
 
Total revenues
$
1,823,333

 
$
1,738,355

 
$
1,644,694

 
$
1,573,129

Gross profit
573,968

 
564,397

 
522,942

 
526,728

Net income
43,178

 
29,432

 
26,335

 
23,696

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.10

 
$
0.07

 
$
0.06

 
$
0.06

Diluted
0.10

 
0.07

 
0.06

 
0.05

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
$
0.20

 
$
0.14

 
$
0.17

 
$
0.13

Diluted
0.19

 
0.14

 
0.16

 
0.12
v3.3.1.900
Organization and Summary of Significant Accounting Policies (Policy)
 12 Months Ended
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
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 assets; 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.
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” 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.
New Accounting Pronouncements
Accounting Guidance Adopted in 2015
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. The Company elected to early adopt the ASU in the third quarter of 2015 and has applied the guidance prospectively to all arrangements. The impact of the adoption of the ASU was not material to the Company's consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The Company elected to early adopt ASU 2015-03 as of December 31, 2015, and retrospectively reclassifed $14.2 million of debt issuance costs associated with the Company's long-term debt as of December 31, 2014 from other non-current assets to long-term debt.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company has elected to early adopt ASU 2015-17 as of December 31, 2015 and retrospectively applied ASU 2015-17 to all periods presented. As of December 31, 2014 the Company reclassified $13.4 million of deferred tax assets from "Other current assets" to "Other non-current assets" on the Consolidated Balance Sheets.
Accounting Guidance Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). 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.
Streaming Content
The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV shows and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash (used in) provided by operating activities" on the Consolidated Statements of Cash Flows.
For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets.
For productions, the Company capitalizes costs associated with the production, including development cost and direct costs. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs.
Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years. For most of the content, the Company amortizes on a straight-line basis. For certain content where the Company expects more upfront viewing, due to the additional merchandising and marketing efforts, the amortization is on an accelerated basis. The Company reviews factors impacting the amortization of the content assets on a regular basis, including changes in merchandising and marketing efforts. The Company's estimates related to these factors require considerable management judgment.  Changes in estimates could have a significant impact on the Company's future results of operations. In the third quarter of 2015, the Company changed the amortization method of certain content given changes in estimated viewing patterns of this content. The effect of this change in estimate was a $25.5 million decrease in operating income and a $15.8 million decrease in net income for the year ended December 31, 2015. The effect on both basic earnings per share and diluted earnings per share was a decrease of $0.04 for the year ended December 31, 2015.
Content assets are stated at the lower of unamortized cost or net realizable value which approximates fair value of the capitalized costs for produced content. Content assets are reviewed in aggregate at the operating segment level for write-down when an event or change in circumstances indicates a change in the expected usefulness of the content. Unamortized costs for assets that have been or are expected to be abandoned are written off. No material write-down from unamortized cost to a lower net realizable value was recorded in any of the periods presented.
The Company has entered into certain licenses with collective management organizations ("CMOs"), and are currently involved in negotiations with other CMOs, 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 changes 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.
DVD Content
The Company acquires DVD content for the purpose of renting such content to its domestic DVD members and earning membership rental revenues, and, as such, the Company considers its direct purchase DVD assets to be a productive asset. Accordingly, the Company classifies its DVD assets in “Non-current content assets, net” on the Consolidated Balance Sheets. The acquisition of DVD content assets, 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 assets are 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.
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 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 digital and television advertising. Advertising costs are expensed as incurred.
Income Taxes
The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.
The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. See Note 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" in Stockholders’ equity on the Consolidated Balance Sheets.
Prior to January 1, 2015, the functional currency of certain of the Company's European entities was the British pound. The Company changed the functional currency of these entities to the euro effective January 1, 2015 following the redomiciliation of the European headquarters and the launch of the Netflix service in several significant European countries. The change in functional currency was applied prospectively from January 1, 2015. Monetary assets and liabilities have been remeasured to the euro at current exchange rates. Non-monetary assets and liabilities have been remeasured to the euro using the exchange rate effective for the period in which the balance arose. As a result of this change of functional currency, the Company recorded a $21.8 million cumulative translation adjustment included in other comprehensive loss for year ended December 31, 2015.
The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period.
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
The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures.
v3.3.1.900
Organization and Summary of Significant Accounting Policies (Tables)
 12 Months Ended
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Computation of Net Income Per Share
The computation of earnings per share, as adjusted for the Stock Split, is as follows:
 
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
Net income
$
122,641

 
$
266,799

 
$
112,403

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
425,889

 
420,544

 
407,385

Basic earnings per share
$
0.29

 
$
0.63

 
$
0.28

Diluted earnings per share:
 
 
 
 
 
Net income
$
122,641

 
$
266,799

 
$
112,403

Convertible Notes interest expense, net of tax
—

 
—

 
49

Numerator for diluted earnings per share
122,641

 
266,799

 
112,452

Shares used in computation:
 
 
 
 
 
Weighted-average common shares outstanding
425,889

 
420,544

 
407,385

Convertible Notes shares
—

 
—

 
5,007

Employee stock options
10,567

 
11,350

 
12,935

Weighted-average number of shares
436,456

 
431,894

 
425,327

Diluted earnings per share
$
0.28

 
$
0.62

 
$
0.26
Summary of Potential Common Shares Excluded from Diluted Calculation
The following table summarizes the potential common shares excluded from the diluted calculation, as adjusted for the Stock Split:
 
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
Employee stock options
517

 
917

 
1,386
v3.3.1.900
Short-term Investments (Tables)
 12 Months Ended
Dec. 31, 2015
Short-term Investments [Abstract]  
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, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,708,220

 
$
—

 
$
—

 
$
1,708,220

 
$
1,706,592

 
$
—

 
$
1,628

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
107,199

 
—

 
—

 
107,199

 
102,738

 
—

 
4,461

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
240,867

 
154

 
(409
)
 
240,612

 
—

 
240,612

 
—

Government securities
235,252

 
—

 
(1,046
)
 
234,206

 
—

 
234,206

 
—

Agency securities
26,576

 
—

 
(9
)
 
26,567

 
—

 
26,567

 
—

Total
$
2,318,114

 
$
154

 
$
(1,464
)
 
$
2,316,804

 
$
1,809,330

 
$
501,385

 
$
6,089


 
 
As of December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Cash and cash equivalents
 
Short-term investments
 
Non-current assets (1)
 
(in thousands)
Cash
$
1,007,543

 
$
—

 
$
—

 
$
1,007,543

 
$
1,007,543

 
$
—

 
$
—

Level 1 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
111,759

 
—

 
—

 
111,759

 
106,065

 
—

 
5,694

Level 2 securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
295,500

 
432

 
(199
)
 
295,733

 
—

 
295,733

 
—

Government securities
168,749

 
120

 
(95
)
 
168,774

 
—

 
168,774

 
—

Asset and mortgage-backed securities
112

 
—

 
—

 
112

 
—

 
112

 
—

Certificate of deposits
3,600

 
—

 
—

 
3,600

 
—

 
3,600

 
—

Agency securities
26,665

 
5

 
(1
)
 
26,669

 
—

 
26,669

 
—

Total
$
1,613,928

 
$
557

 
$
(295
)
 
$
1,614,190

 
$
1,113,608

 
$
494,888

 
$
5,694


(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.
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, 2015 is as follows:
 
 
 
(in thousands)
Due within one year
 
$
137,927

Due after one year and through 5 years
 
363,458

Total short-term investments
 
$
501,385
v3.3.1.900
Balance Sheet Components (Tables)
 12 Months Ended
Dec. 31, 2015
Balance Sheet Components Disclosure [Abstract]  
Components of Content Library
Content assets consisted of the following:
 
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Total content assets, gross
$
12,284,097

 
$
8,537,835

Accumulated amortization
(5,065,282
)
 
(3,598,375
)
Total content assets, net
7,218,815

 
4,939,460

Current content assets, net
2,905,998

 
2,166,134

Non-current content assets, net
$
4,312,817

 
$
2,773,326
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)
 
 
2015
 
2014
 
 
 
(in thousands)
 
 
Information technology assets
 
$
194,054

 
$
189,274

 
3 years
Furniture and fixtures
 
30,914

 
25,758

 
3 years
Building
 
40,681

 
40,681

 
30 years
Leasehold improvements
 
107,793

 
57,339

 
Over life of lease
DVD operations equipment
 
88,471

 
89,144

 
5 years
Capital work-in-progress
 
8,845

 
12,495

 
 
Property and equipment, gross
 
470,758

 
414,691

 
 
Less: Accumulated depreciation
 
(297,346
)
 
(264,816
)
 
 
Property and equipment, net
 
$
173,412

 
$
149,875

 
 
v3.3.1.900
Long-term Debt (Tables)
 12 Months Ended
Dec. 31, 2015
Debt Disclosure [Abstract]  
Schedule of Long-term Debt Instruments
The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2015 and December 31, 2014:

 
 
 
 
 
 
 
 
 
Level 2 Fair Value as of
 
Principal Amount at Par
 
Issuance Date
 
Maturity
 
Interest Due Dates
 
December 31,
2015
 
December 31,
2014
 
(in millions)
 
 
 
 
 
 
 
(in millions)
5.50% Senior Notes
$
700.0

 
February 2015
 
2022
 
April 15 and October 15
 
$
717.5

 
$
—

5.875% Senior Notes
800.0

 
February 2015
 
2025
 
April 15 and October 15
 
820.0

 
—

5.750% Senior Notes
400.0

 
February 2014
 
2024
 
March 1 and September 1
 
411.0

 
416.0

5.375% Senior Notes
500.0

 
February 2013
 
2021
 
February 1 and August 1
 
525.0

 
520.0
v3.3.1.900
Commitments and Contingencies (Tables)
 12 Months Ended
Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
Expected timing of payments for streaming content obligations
The expected timing of payments for these streaming content obligations is as follows:
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Less than one year
$
4,703,172

 
$
3,747,648

Due after one year and through 3 years
5,249,147

 
4,495,103

Due after 3 years and through 5 years
891,864

 
1,164,308

Due after 5 years
58,048

 
44,053

Total streaming content obligations
$
10,902,231

 
$
9,451,112
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, 2015 are as follows:
 
Year Ending December 31,
Future
Minimum
Payments
 
(in thousands)
2016
$
42,545

2017
54,811

2018
58,015

2019
53,152

2020
51,844

Thereafter
269,377

Total minimum payments
$
529,744
v3.3.1.900
Stockholders' Equity (Tables)
 12 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
Summary of Activity Related to Stock Option Plans
A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:
 
 
Shares Available
for Grant
 
Options Outstanding
 
Weighted- Average Remaining Contractual Term (in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
 
Number of
Shares
 
Weighted- Average Exercise Price
(per Share)
 
Balances as of December 31, 2012
28,343,259

 
32,010,664

 
$
10.19

 
 
 
 
Granted
(4,499,040
)
 
4,499,040

 
29.85

 
 
 
 
Exercised
—

 
(11,821,418
)
 
10.54

 
 
 
 
Balances as of December 31, 2013
23,844,219

 
24,688,286

 
$
13.61

 
 
 
 
Granted
(3,819,011
)
 
3,819,011

 
57.55

 
 
 
 
Exercised
—

 
(5,661,880
)
 
10.81

 
 
 
 
Balances as of December 31, 2014
20,025,208

 
22,845,417

 
$
21.65

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

 
82.67

 
 
 
 
Exercised
—

 
(5,029,553
)
 
15.38

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

 
20,995,756

 
$
32.39

 
6.26
 
$
1,723,505

Vested and exercisable at
December 31, 2015
 
 
20,995,756

 
$
32.39

 
6.26
 
$
1,723,505
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, as adjusted for the Stock Split:
 
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Dividend yield
 
—
%
 
—
%
 
—
%
Expected volatility
 
36% - 53%

 
41% - 48%

 
51% - 54%

Risk-free interest rate
 
2.03% - 2.29%

 
2.39% - 2.83%

 
1.87% - 2.71%

Suboptimal exercise factor
 
2.47 - 2.48

 
2.66 - 5.44

 
2.33 - 3.92

Valuation data:
 
 
 
 
 
 
Weighted-average fair value (per share)
 
$
39.22

 
$
30.17

 
$
16.25

Total stock-based compensation expense (in thousands)
 
124,725

 
115,239

 
73,100

Total income tax impact on provision (in thousands)
 
47,125

 
43,999

 
28,096
v3.3.1.900
Accumulated Other Comprehensive (Loss) Income (Tables)
 12 Months Ended
Dec. 31, 2015
Equity [Abstract]  
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, 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
)
Other comprehensive (loss) income before reclassifications
(37,887
)
 
(771
)
 
(38,658
)
Amounts reclassified from accumulated other comprehensive (loss)income
—

 
(204
)
 
(204
)
Net decrease in other comprehensive (loss) income
(37,887
)
 
(975
)
 
(38,862
)
Balance as of December 31, 2015
$
(42,502
)
 
$
(806
)
 
$
(43,308
)
v3.3.1.900
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Schedule of Income before Income Taxes
Income before provision for income taxes was as follows:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
United States
$
95,644

 
$
325,081

 
$
159,126

Foreign
46,241

 
24,288

 
11,948

Income before income taxes
$
141,885

 
$
349,369

 
$
171,074
Components of Provision for Income Taxes
The components of provision for income taxes for all periods presented were as follows:
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(in thousands)
Current tax provision:
 
 
 
 
 
Federal
$
52,557

 
$
86,623

 
$
58,558

State
(1,576
)
 
9,866

 
15,154

Foreign
26,918

 
16,144

 
7,003

Total current
77,899

 
112,633

 
80,715

Deferred tax provision:
 
 
 
 
 
Federal
(37,669
)
 
(10,994
)
 
(18,930
)
State
(17,635
)
 
(17,794
)
 
(2,751
)
Foreign
(3,351
)
 
(1,275
)
 
(363
)
Total deferred
(58,655
)
 
(30,063
)
 
(22,044
)
Provision for income taxes
$
19,244

 
$
82,570

 
$
58,671
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,
 
2015
 
2014
 
2013
 
(in thousands)
Expected tax expense at U.S. Federal statutory rate of 35%
$
49,658

 
$
122,279

 
$
59,878

State income taxes, net of Federal income tax effect
4,783

 
13,274

 
8,053

R&D tax credit
(29,363
)
 
(18,655
)
 
(13,841
)
Release of tax reserves on previously unrecognized tax benefits
(13,438
)
 
(38,612
)
 
—

Foreign earnings at other than US rates
5,310

 
2,959

 
821

Other
2,294

 
1,325

 
3,760

Provision for income taxes
$
19,244

 
$
82,570

 
$
58,671
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities were as follows:
 
 
As of December 31,
 
2015
 
2014
 
(in thousands)
Deferred tax assets (liabilities):
 
 
 
Stock-based compensation
$
131,339

 
$
100,397

Accruals and reserves
14,367

 
13,415

Depreciation and amortization
(43,204
)
 
(11,708
)
R&D credits
74,091

 
21,014

Other
3,980

 
(2,778
)
Total deferred tax assets
$
180,573

 
$
120,340
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, 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

 Increases related to tax positions taken during prior periods
1,960

 Decreases related to tax positions taken during prior periods
(12,334
)
 Increases related to tax positions taken during the current period
7,077

 Decreases related to settlements with taxing authorities
(14,398
)
Balance as of December 31, 2015
$
17,117
v3.3.1.900
Segment Information (Tables)
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Long-lived Assets by Geographic Areas
The Company's long-lived tangible assets were located as follows:
 
As of December 31,
 
2015
 
2014
 
(in thousands)
United States
$
159,566

 
$
138,704

International
13,846

 
11,171
Information on Reportable Segments and Reconciliation to Consolidated Net Income
The following tables represent segment information for the year ended December 31, 2015:
 
 
As of/Year ended December 31, 2015
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total memberships at end of period (1)
44,738

 
30,024

 
4,904

 
—

Revenues
$
4,180,339

 
$
1,953,435

 
$
645,737

 
$
6,779,511

Cost of revenues
2,487,193

 
1,780,375

 
323,908

 
4,591,476

Marketing
317,646

 
506,446

 
—

 
824,092

Contribution profit (loss)
$
1,375,500

 
$
(333,386
)
 
$
321,829

 
$
1,363,943

Other operating expenses
 
 
 
 
 
 
1,058,117

Operating income
 
 
 
 
 
 
305,826

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

Net income
 
 
 
 
 
 
$
122,641



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

 
1,500,313

 
79,380

 
3,484,762


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 memberships 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)
Amortization of content assets
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 memberships 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)
Amortization of content assets
1,420,076

 
701,905

 
71,325

 
2,193,306

(1)
A membership (also referred to as a subscription or a member) is defined as the right to receive the Netflix service following sign-up and a method of payment being provided. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by our internal systems, which utilize industry standard geo-location technology. We offer free-trial memberships to new and certain rejoining members. Total members include those who are on a free-trial as long as a method of payment has been provided. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately except in limited circumstances where a short grace period is offered to ensure the streaming service is not interrupted for members who are impacted by payment processing delays by our banks or integrated payment partners. The number of members in a grace period at any given point is not material.
v3.3.1.900
Selected Quarterly Financial Data (Tables)
 12 Months Ended
Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data
 
December 31
 
September 30
 
June 30
 
March 31
 
(in thousands, except for per share data)
2015
 
Total revenues
$
1,823,333

 
$
1,738,355

 
$
1,644,694

 
$
1,573,129

Gross profit
573,968

 
564,397

 
522,942

 
526,728

Net income
43,178

 
29,432

 
26,335

 
23,696

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.10

 
$
0.07

 
$
0.06

 
$
0.06

Diluted
0.10

 
0.07

 
0.06

 
0.05

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
$
0.20

 
$
0.14

 
$
0.17

 
$
0.13

Diluted
0.19

 
0.14

 
0.16

 
0.12
v3.3.1.900
Organization and Summary of Significant Accounting Policies (Narrative) (Details)
$ / shares in Units, $ in Thousands, member in Millions
 3 Months Ended 12 Months Ended
Jul. 14, 2015
Jun. 30, 2015
Dec. 31, 2015
USD ($)
country
member
Sep. 30, 2015
USD ($)
Jun. 30, 2015
USD ($)
Mar. 31, 2015
USD ($)
Dec. 31, 2014
USD ($)
Sep. 30, 2014
USD ($)
Jun. 30, 2014
USD ($)
Mar. 31, 2014
USD ($)
Dec. 31, 2015
USD ($)
country
segment
member
$ / shares
Dec. 31, 2014
USD ($)
Dec. 31, 2013
USD ($)
Organization And Summary Of Significant Accounting Policies [Line Items]                          
Number of streaming members (more than) | member     75               75    
Number of countries (over) | country     190               190    
Number of hours (more than)                     125000000 hours    
Number of reportable segments | segment                     3    
Stock split, conversion ratio 7 7                      
Decrease in operating income                     $ (305,826) $ (402,648) $ (228,347)
Advertising expense                     714,300 533,100 404,000
Foreign currency translation adjustment, other comprehensive loss                     21,800    
Foreign currency transaction loss                     (37,300) (8,200) (8,400)
Decrease in net income     $ (43,178) $ (29,432) $ (26,335) $ (23,696) $ (83,371) $ (59,295) $ (71,018) $ (53,115) $ (122,641) (266,799) $ (112,403)
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    
Property and equipment 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    
Intangible Assets, Amortization Period [Member]                          
Organization And Summary Of Significant Accounting Policies [Line Items]                          
Decrease in operating income                     $ 25,500    
Decrease in net income                     $ 15,800    
Decrease in earnings per share, basic and diluted | $ / shares                     $ 0.04    
New Accounting Pronouncement, Early Adoption, Effect [Member]                          
Organization And Summary Of Significant Accounting Policies [Line Items]                          
Amount of deferred tax assets to be retrospectively reclassified             (13,400)         (13,400)  
Amount of deferred tax assets to be retrospectively reclassified             13,400         13,400  
New Accounting Pronouncement, Early Adoption, Effect [Member] | Other Noncurrent Assets [Member]                          
Organization And Summary Of Significant Accounting Policies [Line Items]                          
Amount of debt issuance costs to be retrospectively reclassified             (14,200)         (14,200)  
New Accounting Pronouncement, Early Adoption, Effect [Member] | Long-term Debt [Member]                          
Organization And Summary Of Significant Accounting Policies [Line Items]                          
Amount of debt issuance costs to be retrospectively reclassified             $ 14,200         $ 14,200  
v3.3.1.900
Organization and Summary of Significant Accounting Policies (Computation of Net Income Per Share) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Basic earnings per share:                      
Net income $ 43,178 $ 29,432 $ 26,335 $ 23,696 $ 83,371 $ 59,295 $ 71,018 $ 53,115 $ 122,641 $ 266,799 $ 112,403
Weighted-average common shares outstanding                 425,889 420,544 407,385
Basic earnings per share (in USD per share) $ 0.10 $ 0.07 $ 0.06 $ 0.06 $ 0.20 $ 0.14 $ 0.17 $ 0.13 $ 0.29 $ 0.63 $ 0.28
Diluted earnings per share:                      
Net income $ 43,178 $ 29,432 $ 26,335 $ 23,696 $ 83,371 $ 59,295 $ 71,018 $ 53,115 $ 122,641 $ 266,799 $ 112,403
Convertible Notes interest expense, net of tax                 0 0 49
Numerator for diluted earnings per share                 $ 122,641 $ 266,799 $ 112,452
Shares used in computation:                      
Weighted-average common shares outstanding                 425,889 420,544 407,385
Convertible Notes shares                 0 0 5,007
Employee stock options                 10,567 11,350 12,935
Weighted-average number of shares                 436,456 431,894 425,327
Diluted earnings per share (in USD per share) $ 0.10 $ 0.07 $ 0.06 $ 0.05 $ 0.19 $ 0.14 $ 0.16 $ 0.12 $ 0.28 $ 0.62 $ 0.26
v3.3.1.900
Organization And Summary Of Significant Accounting Policies (Summary of Potential Common Shares Excluded From Diluted Calculation) (Details) - shares
shares in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Equity Option [Member]      
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Employee stock options 517 917 1,386
v3.3.1.900
Reclassifications (Narrative) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
New Accounting Pronouncements or Change in Accounting Principle [Line Items]      
Other current assets $ 215,127 $ 152,423  
Current content assets, net 2,905,998 2,166,134  
Other current assets (18,693) 9,198 $ (43,177)
Additions to streaming content assets $ (5,771,652) (3,773,019) (3,030,701)
Restatement Adjustment [Member]      
New Accounting Pronouncements or Change in Accounting Principle [Line Items]      
Other current assets   (40,400) (40,900)
Current content assets, net   40,400 40,900
Other current assets   (400) (19,100)
Additions to streaming content assets   $ 400 $ 19,100
v3.3.1.900
Short-term Investments (Available-For-Sale Securities Reported At Fair Value) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Level 1 Securities [Member] | Money market funds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash and Money market funds, Amortized Cost $ 107,199 $ 111,759
Cash and Money market funds, Fair Value Disclosure 107,199 111,759
Cash [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash and Money market funds, Amortized Cost 1,708,220 1,007,543
Cash and Money market funds, Fair Value Disclosure 1,708,220 1,007,543
Fair Value, Measurements, Recurring [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Gross Unrealized Gains 154 557
Available-for-sale Securities, Gross Unrealized Losses (1,464) (295)
Total, Amortized Cost 2,318,114 1,613,928
Total, Estimated Fair Value 2,316,804 1,614,190
Fair Value, Measurements, Recurring [Member] | Cash and Cash Equivalents [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value 1,809,330 1,113,608
Fair Value, Measurements, Recurring [Member] | Short-term Investments [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value 501,385 494,888
Fair Value, Measurements, Recurring [Member] | Non-current Assets [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total, Estimated Fair Value 6,089 5,694
Fair Value, Measurements, Recurring [Member] | Level 1 Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash and Money market funds, Non-current assets 4,461 5,694
Fair Value, Measurements, Recurring [Member] | Level 1 Securities [Member] | Money market funds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Losses 0 0
Cash and Money market funds, Fair Value Disclosure 102,738 106,065
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Corporate debt securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost 240,867 295,500
Available-for-sale Securities, Gross Unrealized Gains 154 432
Available-for-sale Securities, Gross Unrealized Losses (409) (199)
Available-for-sale Securities, Estimated Fair Value 240,612 295,733
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Government securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost 235,252 168,749
Available-for-sale Securities, Gross Unrealized Gains 0 120
Available-for-sale Securities, Gross Unrealized Losses (1,046) (95)
Available-for-sale Securities, Estimated Fair Value 234,206 168,774
Fair Value, Measurements, Recurring [Member] | 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
Available-for-sale Securities, Gross Unrealized Gains   0
Available-for-sale Securities, Gross Unrealized Losses   0
Available-for-sale Securities, Estimated Fair Value   112
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Certificates of deposit [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost   3,600
Available-for-sale Securities, Gross Unrealized Gains   0
Available-for-sale Securities, Gross Unrealized Losses   0
Available-for-sale Securities, Estimated Fair Value   3,600
Fair Value, Measurements, Recurring [Member] | Level 2 Securities [Member] | Agency securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale Securities, Amortized Cost 26,576 26,665
Available-for-sale Securities, Gross Unrealized Gains 0 5
Available-for-sale Securities, Gross Unrealized Losses (9) (1)
Available-for-sale Securities, Estimated Fair Value 26,567 26,669
Fair Value, Measurements, Recurring [Member] | Cash [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Restricted Cash, Gross Unrealized Losses 0 0
Cash and Money market funds, Fair Value Disclosure 1,706,592 $ 1,007,543
Cash and Money market funds, Non-current assets $ 1,628  
v3.3.1.900
Short-term Investments (Estimated Fair Value Of Short-Term Investments By Contractual Maturity) (Details)
$ in Thousands
Dec. 31, 2015
USD ($)
Short-term Investments [Abstract]  
Due within one year $ 137,927
Due after one year and through 5 years 363,458
Total short-term investments $ 501,385
v3.3.1.900
Balance Sheet Components (Components of Content Library) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Balance Sheet Related Disclosures [Abstract]    
Total content assets, gross $ 12,284,097 $ 8,537,835
Accumulated amortization (5,065,282) (3,598,375)
Total content assets, net 7,218,815 4,939,460
Current content assets, net 2,905,998 2,166,134
Non-current content assets, net $ 4,312,817 $ 2,773,326
v3.3.1.900
Balance Sheet Components (Property and Equipment and Accumulated Depreciation) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 470,758 $ 414,691
Less: Accumulated depreciation (297,346) (264,816)
Property and equipment, net 173,412 149,875
Information technology assets Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 194,054 189,274
Estimated Useful Lives 3 years  
Furniture and fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 30,914 25,758
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 $ 107,793 57,339
DVD operations equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 88,471 89,144
Estimated Useful Lives 5 years  
Capital work-in-progress [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 8,845 $ 12,495
v3.3.1.900
Long-term Debt (Narrative) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Debt Instrument [Line Items]    
Aggregate outstanding principal $ 2,371,362 $ 885,849
Debt issuance cost $ 28,600  
Senior Notes [Member]    
Debt Instrument [Line Items]    
Redemption price, percent of outstanding principal 101.00%  
v3.3.1.900
Long-term Debt (Summary of Long-term Debt) (Details) - Senior Notes [Member] - USD ($)
Dec. 31, 2015
Dec. 31, 2014
5.50% Senior Notes [Member]    
Debt Instrument [Line Items]    
Interest rate 5.50% 5.50%
Face amount $ 700,000,000  
Long-term debt, fair value $ 717,500,000 $ 0
5.875% Senior Notes [Member]    
Debt Instrument [Line Items]    
Interest rate 5.875% 5.875%
Face amount $ 800,000,000  
Long-term debt, fair value $ 820,000,000 $ 0
5.750% Senior Notes [Member]    
Debt Instrument [Line Items]    
Interest rate 5.75% 5.75%
Face amount $ 400,000,000  
Long-term debt, fair value $ 411,000,000 $ 416,000,000
5.375% Senior Notes [Member]    
Debt Instrument [Line Items]    
Interest rate 5.375% 5.375%
Face amount $ 500,000,000  
Long-term debt, fair value $ 525,000,000 $ 520,000,000
v3.3.1.900
Long-term Debt (Senior Convertible Notes) (Narrative) (Details)
$ / shares in Units, shares in Millions, $ in Millions
 1 Months Ended
Apr. 30, 2013
$ / shares
shares
Nov. 30, 2011
USD ($)
Debt Instrument [Line Items]    
Common stock, shares issued | shares 16.3  
Director [Member] | Convertible Debt [Member] | Senior Convertible Notes [Member]    
Debt Instrument [Line Items]    
Long-term debt due to related party | $   $ 200.0
Common stock conversion ratio 81.5871  
Fair value at conversion (in USD per share) | $ / shares $ 31.0  
v3.3.1.900
Long-term Debt (8.50% Senior Notes) (Narrative) (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2013
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sep. 30, 2009
Debt Instrument [Line Items]          
Interest paid   $ 111,761,000 $ 41,085,000 $ 19,114,000  
Loss on extinguishment of debt   $ 0 $ 0 $ 25,129,000  
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%
Make-whole premium $ 19,400,000        
Interest paid 5,100,000        
Loss on extinguishment of debt 25,100,000        
Write off of unamortized deferred financing costs $ 4,200,000        
v3.3.1.900
Commitments and Contingencies (Streaming Content) (Narrative) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Contractual Obligation [Line Items]    
Total streaming content obligations $ 10,902,231 $ 9,451,112
Unrecorded streaming obligations 6,100,000 5,800,000
Current Content Liabilities [Member]    
Contractual Obligation [Line Items]    
Recorded streaming obligations 2,800,000 2,100,000
Non-current Content Liabilities [Member]    
Contractual Obligation [Line Items]    
Recorded streaming obligations $ 2,000,000 $ 1,600,000
v3.3.1.900
Commitments and Contingencies (Expected Timing of Payments for Commitments) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]    
Less than one year $ 4,703,172 $ 3,747,648
Due after one year and through 3 years 5,249,147 4,495,103
Due after 3 years and through 5 years 891,864 1,164,308
Due after 5 years 58,048 44,053
Total streaming content obligations $ 10,902,231 $ 9,451,112
v3.3.1.900
Commitments and Contingencies (Lease Obligations) (Narrative) (Details) - USD ($)
$ in Millions
 3 Months Ended 12 Months Ended
Sep. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Capital Leased Assets [Line Items]        
Extended lease term 3 years      
Capital leases increase in future minimum payments due $ 13.7      
Rent expense   $ 34.7 $ 26.6 $ 27.9
Land, Buildings and Improvements [Member] | Los Gatos Buildings [Member]        
Capital Leased Assets [Line Items]        
Total costs of buildings and improvements   40.7    
Capital lease obligations   29.0    
Capital leases, future minimum payments due   21.1    
Capital lease financing obligation under extended lease term   21.8    
Land, Buildings and Improvements [Member] | Los Gatos Buildings Expanded Site and Los Angeles [Member]        
Capital Leased Assets [Line Items]        
Capital leases, future minimum payments due   $ 428.7    
v3.3.1.900
Commitments and Contingencies (Future Minimum Payments Under Lease Financing Obligations and Non-Cancelable Operating Leases) (Details)
$ in Thousands
Dec. 31, 2015
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2016 $ 42,545
2017 54,811
2018 58,015
2019 53,152
2020 51,844
Thereafter 269,377
Total minimum payments $ 529,744
v3.3.1.900
Commitments and Contingencies (Legal Proceedings) (Details) - Pending Litigation [Member] - lawsuit_filed
May. 02, 2012
Apr. 02, 2012
Feb. 29, 2012
Feb. 24, 2012
Feb. 13, 2012
Feb. 09, 2012
Jan. 27, 2012
Jan. 13, 2012
Nov. 23, 2011
United States District Court for the Northern District of California [Member]                  
Loss Contingencies [Line Items]                  
Shareholder suits     1       1 1  
Superior Court of California, Santa Clara County [Member]                  
Loss Contingencies [Line Items]                  
Shareholder suits 1 1   1 1 1     1
v3.3.1.900
Stockholders' Equity (Narrative) (Details)
shares in Millions
 1 Months Ended
Apr. 30, 2013
shares
Stockholders' Equity Note [Abstract]  
Common stock, shares issued 16.3
v3.3.1.900
Stockholders' Equity Stockholders' Equity (Stock Split) (Narrative) (Details)
Jul. 14, 2015
Jun. 30, 2015
Dec. 31, 2015
$ / shares
shares
Mar. 31, 2015
$ / shares
shares
Feb. 28, 2015
$ / shares
shares
Dec. 31, 2014
$ / shares
shares
Stockholders' Equity Note [Abstract]            
Capital units, authorized       5,000,000,000 170,000,000  
Common stock, shares authorized     4,990,000,000 4,990,000,000 160,000,000 160,000,000
Preferred stock, shares authorized     10,000,000 10,000,000 10,000,000 10,000,000
Common stock, par value (per share) | $ / shares     $ 0.001 $ 0.001 $ 0.001 $ 0.001
Stock split, conversion ratio 7 7        
v3.3.1.900
Stockholders' Equity (Preferred Stock and Voting Rights) (Narrative) (Details)
 12 Months Ended
Dec. 31, 2015
vote
$ / shares
shares
Mar. 31, 2015
shares
Feb. 28, 2015
shares
Dec. 31, 2014
$ / shares
shares
Stockholders' Equity Note [Abstract]        
Preferred stock, shares authorized 10,000,000 10,000,000 10,000,000 10,000,000
Preferred stock, par value (per share) | $ / shares $ 0.001     $ 0.001
Preferred stock, shares issued 0     0
Preferred stock, shares outstanding 0     0
Number of voting rights per share | vote 1      
v3.3.1.900
Stockholders' Equity (Stock Option Plans) (Narrative) (Details) - USD ($)
shares in Millions, $ in Millions
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Total intrinsic value of options exercised $ 368.4 $ 265.1 $ 274.2
Cash received from option exercised $ 78.0 $ 60.5 $ 124.6
Two Thousand And Eleven Stock Plan [Member] | Employee Stock Option [Member]      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Shares available for future issuance 16.8    
v3.3.1.900
Stockholders' Equity (Summary of Activity Related to Stock Option Plans) (Details) - USD ($)
$ / shares in Units, $ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]      
Shares Available for Grant, Beginning Balances 20,025,208 23,844,219 28,343,259
Options Outstanding, Number of Shares, Beginning Balances 22,845,417 24,688,286 32,010,664
Options Outstanding, Number of Shares, Granted (3,179,892) (3,819,011) (4,499,040)
Options Outstanding, Number of Shares, Exercised (5,029,553) (5,661,880) (11,821,418)
Shares Available for Grant, Ending Balances 16,845,316.000 20,025,208 23,844,219
Options Outstanding, Number of Shares, Ending Balances 20,995,756 22,845,417 24,688,286
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]      
Options Outstanding, Weighted-Average Exercise Price, Beginning Balances $ 21.65 $ 13.61 $ 10.19
Options Outstanding, Weighted-Average Exercise Price, Granted 82.67 57.55 29.85
Options Outstanding, Weighted-Average Exercise Price, Exercised 15.38 10.81 10.54
Options Outstanding, Weighted-Average Exercise Price, Ending Balances $ 32.39 $ 21.65 $ 13.61
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]      
Options Outstanding, Number of Shares, Vested and exercisable 20,995,756    
Options Outstanding, Weighted-Average Exercise Price, Vested and exercisable $ 32.39    
Weighted-Average Remaining Contractual Term, Vested and exercisable (in Years) 6 years 3 months 4 days    
Aggregate Intrinsic Value, Vested and exercisable $ 1,723,505    
v3.3.1.900
Stockholders' Equity (Stock-Based Compensation) (Narrative) (Details)
 30 Months Ended 96 Months Ended
Jan. 01, 2007
Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Full exercise period   10 years
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  
v3.3.1.900
Stockholders' Equity (Summary of Assumptions Used to Value Stock Option Grants) (Details)
$ / shares in Units, $ in Thousands
 12 Months Ended
Dec. 31, 2015
USD ($)
$ / shares
Dec. 31, 2014
USD ($)
$ / shares
Dec. 31, 2013
USD ($)
$ / shares
Stockholders' Equity Note [Abstract]      
Dividend yield 0.00% 0.00% 0.00%
Expected volatility, minimum 36.00% 41.00% 51.00%
Expected volatility, maximum 53.00% 48.00% 54.00%
Risk-free interest rate, minimum 2.03% 2.39% 1.87%
Risk-free interest rate, maximum 2.29% 2.83% 2.71%
Suboptimal exercise factor, minimum 2.47 2.66 2.33
Suboptimal exercise factor, maximum 2.48 5.44 3.92
Valuation data:      
Weighted-average fair value (in USD per share) | $ / shares $ 39.22 $ 30.17 $ 16.25
Total stock-based compensation expense (in thousands) $ 124,725 $ 115,239 $ 73,100
Total income tax impact on provision (in thousands) $ 47,125 $ 43,999 $ 28,096
v3.3.1.900
Accumulated Other Comprehensive (Loss) Income (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning balance $ (4,446) $ 3,575
Other comprehensive (loss) income before reclassifications (38,658) (7,431)
Amounts reclassified from accumulated other comprehensive (loss) income (204) (590)
Net decrease in other comprehensive (loss) income (38,862) (8,021)
Ending balance (43,308) (4,446)
Foreign currency [Member]    
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning balance (4,615) 3,153
Other comprehensive (loss) income before reclassifications (37,887) (7,768)
Amounts reclassified from accumulated other comprehensive (loss) income 0 0
Net decrease in other comprehensive (loss) income (37,887) (7,768)
Ending balance (42,502) (4,615)
Change in unrealized gains on available for sale securities [Member]    
Accumulated Other Comprehensive Income (Loss) [Roll Forward]    
Beginning balance 169 422
Other comprehensive (loss) income before reclassifications (771) 337
Amounts reclassified from accumulated other comprehensive (loss) income (204) (590)
Net decrease in other comprehensive (loss) income (975) (253)
Ending balance $ (806) $ 169
v3.3.1.900
Income Taxes (Schedule of Income before Income Taxes) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]      
United States $ 95,644 $ 325,081 $ 159,126
Foreign 46,241 24,288 11,948
Income before income taxes $ 141,885 $ 349,369 $ 171,074
v3.3.1.900
Income Taxes (Components of Provision for Income Taxes) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Current tax provision:      
Federal $ 52,557 $ 86,623 $ 58,558
State (1,576) 9,866 15,154
Foreign 26,918 16,144 7,003
Total current 77,899 112,633 80,715
Deferred tax provision:      
Federal (37,669) (10,994) (18,930)
State (17,635) (17,794) (2,751)
Foreign (3,351) (1,275) (363)
Total deferred (58,655) (30,063) (22,044)
Provision for income taxes $ 19,244 $ 82,570 $ 58,671
v3.3.1.900
Income Taxes (Narrative) (Details) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Operating Loss Carryforwards [Line Items]        
Undistributed earnings of foreign subsidiaries $ 65,300 $ 65,300    
Unrecognized deferred tax liability related to undistributed foreign earnings 22,800 22,800    
R&D tax credit 16,500 29,363 $ 18,655 $ 13,841
Deferred federal, state and local tax benefit   45,000    
Income tax benefits attributable to the exercise of employee stock options   79,900 88,900 80,000
Unrecognized tax benefits 17,117 17,117 34,812 $ 68,231
Reduction in provision for income taxes due to impact of effective tax rate 13,500 13,500 $ 29,200  
Tax reserves released 13,400      
Domestic Tax Authority [Member]        
Operating Loss Carryforwards [Line Items]        
Tax credit carryforward amount 44,100 44,100    
State and Local Jurisdiction [Member]        
Operating Loss Carryforwards [Line Items]        
Tax credit carryforward amount 59,300 59,300    
Tax credit carryforward not subject to expiration 58,800 58,800    
Tax credit carryforward subject to expiration 500 500    
Accrued Expenses [Member]        
Operating Loss Carryforwards [Line Items]        
Unrecognized tax benefits 3,600 3,600    
Internal Revenue Service (IRS) [Member]        
Operating Loss Carryforwards [Line Items]        
Deferred federal, state and local tax benefit   45,000    
Internal Revenue Service (IRS) [Member] | Domestic Tax Authority [Member]        
Operating Loss Carryforwards [Line Items]        
Operating loss carryforwards 104,800 104,800    
Internal Revenue Service (IRS) [Member] | State and Local Jurisdiction [Member]        
Operating Loss Carryforwards [Line Items]        
Operating loss carryforwards $ 237,000 $ 237,000    
v3.3.1.900
Income Taxes (Reconciliation of Provision for Income Taxes) (Details) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]        
Federal statutory rate   35.00% 35.00% 35.00%
Expected tax expense at U.S. federal statutory rate of 35%   $ 49,658 $ 122,279 $ 59,878
State income taxes, net of Federal income tax effect   4,783 13,274 8,053
R&D tax credit $ (16,500) (29,363) (18,655) (13,841)
Release of tax reserves on previously unrecognized tax benefits   (13,438) (38,612) 0
Foreign earnings at other than US rates   5,310 2,959 821
Other   2,294 1,325 3,760
Provision for income taxes   $ 19,244 $ 82,570 $ 58,671
v3.3.1.900
Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
Deferred tax assets (liabilities):    
Stock-based compensation $ 131,339 $ 100,397
Accruals and reserves 14,367 13,415
Depreciation and amortization (43,204) (11,708)
R&D credits 74,091 21,014
Other 3,980 (2,778)
Total deferred tax assets $ 180,573 $ 120,340
v3.3.1.900
Income Taxes (Summary of Changes in Unrecognized Tax Benefits) (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]    
Beginning Balance $ 34,812 $ 68,231
Decreases related to tax positions taken during prior periods (12,334) (39,015)
Increases related to tax positions taken during the current period 7,077 11,174
Decreases related to settlements with taxing authorities (14,398) (5,578)
Increases related to tax positions taken during prior periods 1,960  
Ending Balance $ 17,117 $ 34,812
v3.3.1.900
Employee Benefit Plan (Details) - USD ($)
$ in Millions
 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]      
Eligible employees maximum contribution percentage 60.00%    
Contributions by employer $ 11.2 $ 8.3 $ 6.5
v3.3.1.900
Segment Information (Narrative) (Details)
 12 Months Ended
Dec. 31, 2015
segment
Segment Reporting [Abstract]  
Number of reportable segments 3
v3.3.1.900
Segment Information (Long-lived Assets by Geographic Areas) (Details) - USD ($)
$ in Thousands
Dec. 31, 2015
Dec. 31, 2014
United States [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 159,566 $ 138,704
International [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 13,846 $ 11,171
v3.3.1.900
Segment Information (Information on Reportable Segments and Reconciliation to Consolidated Net Income) (Details)
subscription in Thousands, $ in Thousands
 3 Months Ended 12 Months Ended
Dec. 31, 2015
USD ($)
subscription
Sep. 30, 2015
USD ($)
Jun. 30, 2015
USD ($)
Mar. 31, 2015
USD ($)
Dec. 31, 2014
USD ($)
subscription
Sep. 30, 2014
USD ($)
Jun. 30, 2014
USD ($)
Mar. 31, 2014
USD ($)
Dec. 31, 2015
USD ($)
subscription
Dec. 31, 2014
USD ($)
subscription
Dec. 31, 2013
USD ($)
subscription
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription                     0
Revenues $ 1,823,333 $ 1,738,355 $ 1,644,694 $ 1,573,129 $ 1,484,728 $ 1,409,432 $ 1,340,407 $ 1,270,089 $ 6,779,511 $ 5,504,656 $ 4,374,562
Cost of revenues                 4,591,476 3,752,760 3,117,203
Marketing                 824,092 607,186 469,942
Contribution profit (loss)                 1,363,943 1,144,710 787,417
Other operating expenses                 1,058,117 742,062 559,070
Operating income                 305,826 402,648 228,347
Other income (expense)                 (163,941) (53,279) (57,273)
Provision for income taxes                 19,244 82,570 58,671
Net income $ 43,178 $ 29,432 $ 26,335 $ 23,696 $ 83,371 $ 59,295 $ 71,018 $ 53,115 122,641 266,799 112,403
Amortization of content assets                 $ 3,484,762 $ 2,727,770 $ 2,193,306
Domestic Streaming [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 44,738       39,114       44,738 39,114 33,420
Revenues                 $ 4,180,339 $ 3,431,434 $ 2,751,375
Cost of revenues                 2,487,193 2,201,761 1,863,376
Marketing                 317,646 293,453 265,232
Contribution profit (loss)                 1,375,500 936,220 622,767
Amortization of content assets                 $ 1,905,069 $ 1,657,673 $ 1,420,076
International Streaming [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 30,024       18,277       30,024 18,277 10,930
Revenues                 $ 1,953,435 $ 1,308,061 $ 712,390
Cost of revenues                 1,780,375 1,154,117 782,304
Marketing                 506,446 313,733 204,418
Contribution profit (loss)                 (333,386) (159,789) (274,332)
Amortization of content assets                 $ 1,500,313 $ 998,606 $ 701,905
Domestic DVD [Member]                      
Segment Reporting Information [Line Items]                      
Total members at end of period | subscription 4,904       5,767       4,904 5,767 6,930
Revenues                 $ 645,737 $ 765,161 $ 910,797
Cost of revenues                 323,908 396,882 471,523
Marketing                     292
Contribution profit (loss)                 321,829 368,279 438,982
Amortization of content assets                 $ 79,380 $ 71,491 $ 71,325
v3.3.1.900
Selected Quarterly Financial Data (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]                      
Total revenues $ 1,823,333 $ 1,738,355 $ 1,644,694 $ 1,573,129 $ 1,484,728 $ 1,409,432 $ 1,340,407 $ 1,270,089 $ 6,779,511 $ 5,504,656 $ 4,374,562
Gross profit 573,968 564,397 522,942 526,728 470,396 455,038 425,559 400,903      
Net income $ 43,178 $ 29,432 $ 26,335 $ 23,696 $ 83,371 $ 59,295 $ 71,018 $ 53,115 $ 122,641 $ 266,799 $ 112,403
Earnings (loss) per share:                      
Basic (in USD per share) $ 0.10 $ 0.07 $ 0.06 $ 0.06 $ 0.20 $ 0.14 $ 0.17 $ 0.13 $ 0.29 $ 0.63 $ 0.28
Diluted (in USD per share) $ 0.10 $ 0.07 $ 0.06 $ 0.05 $ 0.19 $ 0.14 $ 0.16 $ 0.12 $ 0.28 $ 0.62 $ 0.26