NETFLIX INC, 10-Q filed on 8/2/2012
Quarterly Report
Document And Entity Information
6 Months Ended
Jun. 30, 2012
Document And Entity Information [Abstract]
 
Document Type
10-Q 
Amendment Flag
false 
Document Period End Date
Jun. 30, 2012 
Document Fiscal Year Focus
2012 
Document Fiscal Period Focus
Q2 
Entity Registrant Name
NETFLIX INC 
Entity Central Index Key
0001065280 
Current Fiscal Year End Date
--12-31 
Entity Filer Category
Large Accelerated Filer 
Entity Common Stock, Shares Outstanding
55,534,266 
Consolidated Statements Of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Income Statement [Abstract]
 
 
 
 
Revenues
$ 889,163 
$ 788,610 
$ 1,758,954 
$ 1,507,163 
Cost of revenues:
 
 
 
 
Subscription
583,636 
428,203 
1,147,651 
805,195 
Fulfillment expenses
59,792 
61,775 
119,710 
122,934 
Total cost of revenues
643,428 
489,978 
1,267,361 
928,129 
Gross profit
245,735 
298,632 
491,593 
579,034 
Operating expenses:
 
 
 
 
Marketing
118,224 
94,983 
254,124 
199,242 
Technology and development
81,547 
57,865 
164,348 
108,770 
General and administrative
29,810 
30,670 
58,902 
53,668 
Total operating expenses
229,581 
183,518 
477,374 
361,680 
Operating income
16,154 
115,114 
14,219 
217,354 
Other income (expense):
 
 
 
 
Interest expense
(5,006)
(5,303)
(9,980)
(10,168)
Interest and other income (expense)
(493)
1,013 
(609)
1,878 
Income before income taxes
10,655 
110,824 
3,630 
209,064 
Provision for income taxes
4,491 
42,610 
2,050 
80,617 
Net income
$ 6,164 
$ 68,214 
$ 1,580 
$ 128,447 
Earnings per share:
 
 
 
 
Basic
$ 0.11 
$ 1.30 
$ 0.03 
$ 2.44 
Diluted
$ 0.11 
$ 1.26 
$ 0.03 
$ 2.37 
Weighted average common shares outstanding:
 
 
 
 
Basic
55,526 
52,470 
55,491 
52,614 
Diluted
58,809 
53,909 
58,878 
54,077 
Conslidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Statement of Income and Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 6,164 
$ 68,214 
$ 1,580 
$ 128,447 
Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments
(767)
0 
44 
0 
Change in unrealized gains on available-for-sale securities
246 
647 
344 
385 
Other comprehensive income (loss) before tax
(521)
647 
388 
385 
Income tax expense related to items of other comprehensive income
(95)
(353)
(133)
(251)
Other comprehensive income (loss), net of tax
(616)
294 
255 
134 
Comprehensive income
$ 5,548 
$ 68,508 
$ 1,835 
$ 128,581 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and cash equivalents
$ 402,251 
$ 508,053 
Short-term investments
411,092 
289,758 
Current content library, net
1,223,638 
919,709 
Prepaid content
48,510 
56,007 
Other current assets
52,294 
57,330 
Total current assets
2,137,785 
1,830,857 
Non-current content library, net
1,147,805 
1,046,934 
Property and equipment, net
124,644 
136,353 
Other non-current assets
68,056 
55,052 
Total assets
3,478,290 
3,069,196 
Current liabilities:
 
 
Content liabilities
1,204,209 
935,036 
Accounts payable
90,961 
86,992 
Accrued expenses
50,884 
54,231 
Deferred revenue
152,790 
148,796 
Total current liabilities
1,498,844 
1,225,055 
Non-current content liabilities
829,163 
739,628 
Long-term debt
200,000 
200,000 
Long-term debt due to related party
200,000 
200,000 
Other non-current liabilities
62,057 
61,703 
Total liabilities
2,790,064 
2,426,386 
Commitments and contingencies (Note 8)
   
   
Stockholders' equity:
 
 
Common stock, $0.001 par value; 160,000,000 shares authorized at June 30, 2012 and December 31, 2011; 55,534,266 and 55,398,615 issued and outstanding at June 30, 2012 and December 31, 2011, respectively
56 
55 
Additional paid-in capital
262,699 
219,119 
Accumulated other comprehensive income, net
961 
706 
Retained earnings
424,510 
422,930 
Total stockholders' equity
688,226 
642,810 
Total liabilities and stockholders' equity
$ 3,478,290 
$ 3,069,196 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
 
 
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
160,000,000 
160,000,000 
Common stock, shares issued
55,534,266 
55,398,615 
Common stock, shares outstanding
55,534,266 
55,398,615 
Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Cash flows from operating activities:
 
 
 
 
Net income
$ 6,164 
$ 68,214 
$ 1,580 
$ 128,447 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Additions to streaming content library
(374,252)
(612,595)
(1,139,145)
(804,902)
Change in streaming content liabilities
(39,947)
422,080 
357,606 
506,128 
Amortization of streaming content library
375,997 
144,466 
715,733 
230,403 
Amortization of DVD content library
16,304 
24,000 
36,350 
50,990 
Depreciation and amortization of property, equipment and intangibles
11,047 
10,182 
22,378 
20,008 
Stock-based compensation expense
18,450 
15,536 
37,782 
27,800 
Excess tax benefits from stock-based compensation
(307)
(17,868)
(4,062)
(33,522)
Other non-cash items
(1,579)
(802)
(3,098)
(1,727)
Deferred taxes
0 
(3,927)
(10,843)
(8,909)
Changes in operating assets and liabilities:
 
 
 
 
Prepaid content
4,503 
14,787 
7,497 
2,407 
Other current assets
(8,077)
4,015 
3,664 
13,513 
Accounts payable
601 
(4,231)
(1,155)
11,001 
Accrued expenses
6,854 
15,459 
8,637 
35,752 
Deferred revenue
2,188 
3,892 
3,994 
19,754 
Other non-current assets and liabilities
1,746 
3,184 
1,883 
5,572 
Net cash provided by operating activities
19,692 
86,392 
38,801 
202,715 
Cash flows from investing activities:
 
 
 
 
Acquisitions of DVD content library
(8,012)
(19,065)
(21,540)
(41,184)
Purchases of short-term investments
(63,303)
(40,597)
(362,770)
(92,863)
Proceeds from sale of short-term investments
48,173 
16,510 
220,508 
31,471 
Proceeds from maturities of short-term investments
12,715 
15,985 
20,990 
16,635 
Purchases of property and equipment
(3,644)
(8,626)
(8,410)
(24,946)
Other assets
3,132 
844 
4,466 
2,263 
Net cash used in investing activities
(10,939)
(34,949)
(146,756)
(108,624)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock upon exercise of options
524 
7,418 
1,748 
14,180 
Financing costs
(371)
0 
(759)
0 
Repurchases of common stock
0 
(51,421)
0 
(160,064)
Excess tax benefits from stock-based compensation
307 
17,868 
4,062 
33,522 
Principal payments of lease financing obligations
(577)
(520)
(1,136)
(1,021)
Net cash provided by (used in) financing activities
(117)
(26,655)
3,915 
(113,383)
Effect of exchange rate changes on cash and cash equivalents
(2,377)
0 
(1,762)
0 
Net increase (decrease) in cash and cash equivalents
6,259 
24,788 
(105,802)
(19,292)
Cash and cash equivalents, beginning of period
395,992 
150,419 
508,053 
194,499 
Cash and cash equivalents, end of period
$ 402,251 
$ 175,207 
$ 402,251 
$ 175,207 
Basis Of Presentation And Summary Of Significant Accounting Policies
Basis Of Presentation And Summary Of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
The accompanying consolidated interim financial statements of Netflix, Inc. and its wholly owned subsidiaries (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission (the “SEC”) on February 10, 2012. The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the amortization policy of the Company’s content library; the valuation of stock-based compensation; and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. The actual results experienced by the Company may differ from management’s estimates.
The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Interim results are not necessarily indicative of the results for a full year.
The Company is organized into three operating segments: Domestic streaming, International streaming and Domestic DVD. Substantially all of the Company’s revenues are generated in the U.S., and substantially all of the Company’s long-lived tangible assets are held in the U.S. The Company’s revenues are derived from monthly subscription fees.
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not impact total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Net Income (Loss) Per Share
Net Income (Loss) Per Share
Earnings Per Share

Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential outstanding shares of common stock during the period. Potential common shares consist of shares issuable upon the assumed conversion of the Company’s Senior Convertible Notes and incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
 
 
Net income
$
6,164

 
$
68,214

 
$
1,580

 
$
128,447

Shares used in computation:
 
 
 
 
 
 
 
Weighted-average common shares outstanding
55,526

 
52,470

 
55,491

 
52,614

Basic earnings per share
$
0.11

 
$
1.30

 
$
0.03

 
$
2.44

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Net income
$
6,164

 
$
68,214

 
$
1,580

 
$
128,447

Convertible Notes interest expense, net of tax
48

 
—

 
98

 
—

Numerator for diluted earnings per share
$
6,212

 
$
68,214

 
$
1,678

 
$
128,447

Shares used in computation:
 
 
 
 
 
 
 
Weighted-average common shares outstanding
55,526

 
52,470

 
55,491

 
52,614

Convertible notes shares
2,331

 
—

 
2,331

 
—

Employee stock options
952

 
1,439

 
1,056

 
1,463

Weighted-average number of shares
58,809

 
53,909

 
58,878

 
54,077

Diluted earnings per share
$
0.11

 
$
1.26

 
$
0.03

 
$
2.37



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:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands)
Employee stock options
1,184

 
12

 
908

 
19

Cash, Cash Equivalents, Short-Term Investments And Fair Value Measurment
Short-Term Investments And Fair Value Measurement
Short-Term Investments and Fair Value Measurement
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 table summarizes, 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:
 
 
As of
 
June 30, 2012
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
402,192

 
$
—

 
$
—

 
$
402,192

Level 1 securities (1):
 
 
 
 
 
 
 
Money market funds
4,928

 
—

 
—

 
4,928

Level 2 securities (3):
 
 
 
 
 
 
 
Corporate debt securities
108,956

 
807

 
(20
)
 
109,743

Government and agency securities
210,477

 
281

 
(38
)
 
210,720

Asset and mortgage-backed securities
90,226

 
420

 
(17
)
 
90,629

 
$
816,779

 
$
1,508

 
$
(75
)
 
$
818,212

Less: Restricted cash (1)
 
 
 
 
 
 
(4,869
)
Total cash, cash equivalents and short-term investments
 
 
 
 
 
 
$
813,343

 
 
As of
 
December 31, 2011
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
388,941

 
$
—

 
$
—

 
$
388,941

Level 1 securities (2):
 
 
 
 
 
 
 
Money market funds
123,608

 
—

 
—

 
123,608

Level 2 securities (3):
 
 
 
 
 
 
 
Corporate debt securities
112,264

 
603

 
(214
)
 
112,653

Government and agency securities
175,464

 
694

 
(56
)
 
176,102

Asset and mortgage-backed securities
941

 
62

 
—

 
1,003

 
$
801,218

 
$
1,359

 
$
(270
)
 
$
802,307

Less: Restricted cash (2)
 
 
 
 
 
 
(4,496
)
Total cash, cash equivalents and short-term investments
 
 
 
 
 
 
$
797,811

(1)
Includes $4.9 million of restricted cash classified in other non-current assets.
(2)
Includes $119.1 million classified in cash and cash equivalents and $4.5 million of restricted cash classified in other current assets and non-current assets.
(3)
Included in short-term investments.

Fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy level assigned to each security in the Company’s available-for-sale portfolio and cash equivalents is based on its assessment of the transparency and reliability of the inputs used in the valuation of such instrument at the measurement date. The fair value of available-for-sale securities and cash equivalents included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. The fair value of available-for-sale securities included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. These values were obtained from an independent pricing service and were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. The Company's procedures include controls to ensure that appropriate fair values are recorded, such as comparing prices obtained from multiple independent sources. See Note 5 to the consolidated financial statements for further information regarding the fair value of the Company’s Senior Convertible Notes and Senior Notes.

Because the Company does not intend to sell the investments that are in an unrealized loss position and it is not likely that the Company will be required to sell any investments before recovery of their amortized cost basis, the Company does not consider those investments with an unrealized loss to be other-than-temporarily impaired at June 30, 2012. There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the three or six months ended June 30, 2012 and 2011. In addition, there were no material gross realized gains or losses in the three or six months ended June 30, 2012 and 2011.
The estimated fair value of short-term investments by contractual maturity as of June 30, 2012 is as follows:
 
 
(in thousands)
Due within one year
$
15,676

Due after one year and through 5 years
355,328

Due after 5 years and through 10 years
9,223

Due after 10 years
30,865

Total short-term investments
$
411,092

Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
Content Library
Content library consisted of the following:
 
 
As of
 
June 30, 2012
 
December 31, 2011
 
Streaming
 
DVD
 
Total
 
Streaming
 
DVD
 
Total
 
(in thousands)
Total content library, gross
$
3,434,683

 
$
552,691

 
$
3,987,374

 
$
2,552,284

 
$
599,155

 
$
3,151,439

Accumulated amortization
(1,091,253
)
 
(524,678
)
 
(1,615,931
)
 
(632,270
)
 
(552,526
)
 
(1,184,796
)
Total content library, net
2,343,430

 
28,013

 
2,371,443

 
1,920,014

 
46,629

 
1,966,643

Current content library, net
1,223,638

 
—

 
1,223,638

 
919,709

 
—

 
919,709

Non-current content library, net
$
1,119,792

 
$
28,013

 
$
1,147,805

 
$
1,000,305

 
$
46,629

 
$
1,046,934



Content Liabilities
Content liabilities consisted of the following:
 
 
As of
 
June 30, 2012
 
December 31, 2011
 
Streaming
 
DVD 
 
Total
 
Streaming
 
DVD
 
Total
 
(in thousands)
Content liabilities
$
1,183,867

 
$
20,342

 
$
1,204,209

 
$
915,796

 
$
19,240

 
$
935,036

Non-current content liabilities
829,163

 
—

 
829,163

 
739,628

 
—

 
739,628

Total content liabilities
$
2,013,030

 
$
20,342

 
$
2,033,372

 
$
1,655,424

 
$
19,240

 
$
1,674,664



The Company typically enters into multi-year streaming content licenses with studios and other distributors that may result in an increase in the streaming content library and a corresponding increase in current and non-current streaming content liabilities. The payment terms for these streaming license fees may extend over the term of the license agreement, which typically ranges from six months to five years. As of June 30, 2012, streaming content liabilities increased $357.6 million, over December 31, 2011, as compared to an increase in streaming content library, net, of $423.4 million.
Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:

 
 
 
As of
 
 
 
June 30,
2012
 
December 31,
2011
 
 
 
(in thousands)
Computer equipment
 
3 years
$
70,641

 
$
67,090

Operations and other equipment
 
5 years
100,308

 
100,306

Software, including internal-use software
 
3 years
36,264

 
35,356

Furniture and fixtures
 
3 years
16,842

 
17,310

Buildings
 
30 years
40,681

 
40,681

Leasehold improvements
 
Over life of lease
43,008

 
44,473

Capital work-in-progress
 
 
2,554

 
822

Property and equipment, gross
 
 
310,298

 
306,038

Less: Accumulated depreciation
 
 
(185,654
)
 
(169,685
)
Property and equipment, net
 
 
$
124,644

 
$
136,353

Long-Term Debt
Long-Term Debt
Long-term Debt
Senior Convertible Notes

As of June 30, 2012, the Company had outstanding $200.0 million aggregate principal amount of zero coupon senior convertible notes due on December 1, 2018 (the “Convertible Notes”). The Convertible Notes were issued 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 was considered a related party transaction. At any time following May 28, 2012, the Company may elect to cause the conversion of the Convertible Notes into shares of the Company’s common stock when specified conditions are satisfied, including that the daily volume weighted average price of the Company’s common stock is equal or greater than $111.54 for at least 50 trading days during a 65 trading day period prior to the conversion date. The Convertible Notes include, among other terms and conditions, limitations on the Company’s ability to pay cash dividends or to repurchase shares of its common stock, subject to specified exceptions. At June 30, 2012 and December 31, 2011, the Company was in compliance with these covenants.
Based on quoted market prices of the Company’s publicly traded debt, the fair value of the Convertible Notes as of June 30, 2012 and December 31, 2011 was approximately $210.5 million and $206.5 million, respectively.
Senior Notes
As of June 30, 2012, the Company also had outstanding $200.0 million aggregate principal amount of 8.50% senior notes due November 15, 2017 (the “8.50% Notes”). Interest on the 8.50% Notes is payable semi-annually at a rate of 8.50% per annum on May 15 and November 15 of each year.
The 8.50% Notes include, among other terms and conditions, limitations on the Company’s ability to create, incur, assume or be liable for indebtedness (other than specified types of permitted indebtedness); dispose of assets outside the ordinary course (subject to specified exceptions); acquire, merge or consolidate with or into another person or entity (other than specified types of permitted acquisitions); create, incur or allow any lien on any of its property or assign any right to receive income (except for specified permitted liens); make investments (other than specified types of investments); or pay dividends, make distributions, or purchase or redeem the Company’s equity interests (each subject to specified exceptions). At June 30, 2012 and December 31, 2011, the Company was in compliance with these covenants.
Based on quoted market prices, the fair value of the 8.50% Notes as of June 30, 2012 and December 31, 2011 was approximately $210.5 million and $206.5 million, respectively.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity
Stock Option Plan
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 June 30, 2012, 5.1 million shares were reserved for future grants under the 2011 Stock Plan.
In February 2002, the Company adopted the 2002 Stock Plan, which was amended and restated in May 2006. The 2002 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options and stock purchase rights to employees, directors and consultants. In the first quarter of 2012, 1.2 million shares reserved for future grants under the 2002 Stock Plan expired.
A summary of the activity related to the Company’s stock option plans during the six months ended June 30, 2012 is as follows:
 
 
 
 
Options Outstanding
 
 
 
 
 
Shares
Available
for Grant
 
Number of
Shares
 
Weighted-
Average
Exercise Price
 
Weighted-Average
Remaining
Contractual Term
(in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
Balances as of December 31, 2011
7,013,508

 
2,957,754

 
$
66.59

 
 
 
 
Granted
(753,972
)
 
753,972

 
88.81

 
 
 
 
Exercised
—

 
(135,651
)
 
12.88

 
 
 
 
Canceled
48

 
(48
)
 
35.95

 
 
 
 
Expired
(1,160,721
)
 
—

 
—

 
 
 
 
Balances as of June 30, 2012
5,098,863

 
3,576,027

 
73.31

 
6.76
 
$
76,199

Vested and exercisable at June 30, 2012
 
 
3,576,027

 
73.31

 
6.76
 
$
76,199



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 the second quarter of 2012 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 June 30, 2012. This amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised for the three months ended June 30, 2012 and 2011 was $1.0 million and $49.3 million, respectively. Total intrinsic value of options exercised for the six months ended June 30, 2012 and 2011 was $12.8 million and $93.4 million, respectively.
Cash received from option exercises for the three months ended June 30, 2012 and 2011 was $0.5 million and $7.4 million, respectively. Cash received from option exercises for the six months ended June 30, 2012 and 2011 was $1.7 million and $14.2 million, respectively.
Stock Option Expense

Vested stock options granted before June 30, 2004 can be exercised up to three months following termination of employment. 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 stock option grants using the lattice-binomial model:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Dividend yield
—
%
 
—
%
 
—
%
 
—
%
Expected volatility
61
%
 
51
%
 
61% - 65%

 
51% - 52%

Risk-free interest rate
2.01
%
 
3.35
%
 
1.97% - 2.01%

 
3.35% - 3.42%

Suboptimal exercise factor
2.26 - 3.65

 
2.22 – 3.54

 
2.26 - 3.65

 
2.17 – 3.54



The Company bifurcates its option grants into two employee groupings (executive and non-executive) based on exercise behavior and considers several factors in determining the estimate of expected term for each group, including the historical option exercise behavior, the terms and vesting periods of the options granted.

The weighted-average fair value of employee stock options granted during the three months ended June 30, 2012 and 2011 was $45.38 and $134.77 per share, respectively. The weighted-average fair value of employee stock options granted during the six months ended June 30, 2012 and 2011 was $50.11 and $122.16 per share, respectively.

The following table summarizes stock-based compensation expense, net of tax, related to stock option plans which was allocated as follows:
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands)
Fulfillment expenses
$
90

 
$
679

 
$
157

 
$
1,240

Marketing
817

 
1,485

 
2,221

 
2,734

Technology and development
10,440

 
7,005

 
21,040

 
12,297

General and administrative
7,103

 
6,367

 
14,364

 
11,529

Stock-based compensation expense before income taxes
18,450

 
15,536

 
37,782

 
27,800

Income tax benefit
(7,120
)
 
(5,973
)
 
(14,580
)
 
(10,720
)
Stock-based compensation after income taxes
$
11,330

 
$
9,563

 
$
23,202

 
$
17,080



Stock Repurchases

Under the Company’s current stock repurchase plan, announced on June 11, 2010, the Company is authorized to repurchase up to $300.0 million of its common stock through the end of 2012. The Company did not repurchase stock during the six months ended June 30, 2012. As of June 30, 2012, $41.0 million of this authorization remained. The timing and actual number of shares repurchased is at management’s discretion and will depend on various factors including price, corporate and regulatory requirements, debt covenant requirements, alternative investment opportunities and other market conditions.
Income Taxes
Income Taxes
Income Taxes

The effective tax rates for the three months ended June 30, 2012 and 2011 were 42.1% and 38.4%, respectively. The effective tax rates for the six months ended June 30, 2012 and 2011 were 56.5% and 38.6%, respectively. These rates differed from the federal statutory rate due primarily to state taxes which were partially offset by the California R&D tax credit. As of December 31, 2011, the Company had $28.1 million of gross unrecognized tax benefits. During the six months ended June 30, 2012, the Company had an increase in gross unrecognized tax benefits of approximately $1.4 million. The gross unrecognized tax benefits, if recognized by the Company, will result in a reduction of approximately $23.3 million to the provision for income taxes thereby favorably impacting the Company’s effective tax rate. The Company’s unrecognized tax benefits are classified as “Other non-current liabilities” on the Consolidated Balance Sheets. The Company includes interest and penalties related to unrecognized tax benefits within the "Provision for income taxes" on the Consolidated Statements of Operations. As of June 30, 2012, the total amount of gross interest and penalties accrued was $2.7 million, and is classified as “Other non-current liabilities” on the Consolidated Balance Sheet.
Deferred tax assets include $9.0 million and $10.0 million classified as “Other current assets” and $40.1 million and $28.3 million classified as “Other non-current assets” on the Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively. In evaluating its ability to realize the net deferred tax assets, the Company considered all available positive and negative evidence, including its past operating results and the forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. As of June 30, 2012 and December 31, 2011, it was considered more likely than not that substantially all deferred tax assets would be realized, and no significant valuation allowance was recorded.
Income tax benefits attributable to the exercise of employee stock options of $0.3 million and $18.3 million, during the three months ended June 30, 2012 and 2011, respectively, were recorded directly to "Additional paid-in capital" on the Consolidated Balance Sheets. Income tax benefits attributable to the exercise of employee stock options of $4.1 million and $33.4 million, during the six months ended June 30, 2012 and 2011, respectively, were recorded directly to "Additional paid-in capital" on the Consolidated Balance Sheets.

The Company files U.S. federal, state and foreign tax returns. The Company is currently under examination by the IRS for the years 2008 through 2010.  The Company is currently under examination by the state of California for the years 2006 and 2007. The years 1997 through 2005, as well as 2008 through 2010, remain subject to examination by the state of California. Given the potential outcome of the current examinations, as well as the impact of the current examination on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.
Commitments And Contingencies
Commitments And Contingencies
Commitments and Contingencies

Streaming Content

The Company had $5.0 billion and $4.8 billion of obligations at June 30, 2012 and December 31, 2011, respectively, including agreements to acquire and license streaming content that represent current or long-term liabilities or that are not reflected on the Consolidated Balance Sheets because they do not meet content library asset recognition criteria. The license agreements that are not reflected on the Consolidated Balance Sheets do not meet content library asset recognition criteria because either the fee is not known or reasonably determinable for a specific title or it is known but the title is not yet available for streaming to subscribers.

For those agreements with variable terms, the Company does not estimate what the total obligation may be beyond any minimum quantities and/or pricing as of the reporting date. For those agreements that include renewal provisions that are solely at the option of the content provider, the Company includes the commitments associated with the renewal period to the extent such commitments are fixed or a minimum amount is specified.
The Company has entered into certain license agreements that include an unspecified or a maximum number of titles that the Company may or may not receive in the future and/or that include pricing contingent upon certain variables, such as theatrical exhibition receipts for the title. As of the reporting date, it is unknown whether the Company will receive access to these titles or what the ultimate price per title will be. Accordingly, such amounts are not reflected in the commitments described above. However such amounts are expected to be significant and the expected timing of payments could range from less than one year to more than five years.

The expected timing of payments for these obligations is as follows:
 
 
As of 
 
 
June 30,
2012
 
March 31,
2012
 
December 31,
2011
 
 
(in thousands)
 
Less than one year
$
2,053,397

 
$
1,874,417

(1)
$
1,713,445

(1)
Due after one year and through 3 years
2,427,772

 
2,374,734

 
2,384,373

 
Due after 3 years and through 5 years
482,281

 
505,553

 
650,480

 
Due after 5 years
60,298

 
74,155

 
74,696

 
Total streaming content obligations
$
5,023,748

 
$
4,828,859

 
$
4,822,994

 


(1) Prior period amounts have been presented to conform to the current period presentation which includes the streaming portion of current "Content liabilities" reflected on the Consolidated Balance Sheets. Note that total streaming content obligations remain unchanged with this presentation. Specifically, payments for streaming content obligations expected to be made in less than one year as of March 31, 2012 and December 31, 2011, as shown above, include $1.1 billion and $0.9 billion, respectively, of current "Content liabilities" reflected on the Consolidated Balance Sheets.

The Company has licenses with certain performing rights organizations (“PRO”), and is currently involved in negotiations with other PROs, that hold certain rights to musical compositions used in connection with streaming content. For the latter, the Company accrues for estimated royalties that are due to PROs and adjusts these accruals based on any changes in estimates. These amounts are included in the Company's streaming content obligations. While the Company anticipates finalizing these negotiations, the outcome of these negotiations is uncertain. The results of any negotiation may be materially different from management’s estimates.

Legal Proceedings
From time to time, in the normal course of its operations, the Company is a party 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, respectively, alleging substantially similar claims. These lawsuits have been consolidated and the Court has selected lead plaintiffs. Lead plaintiffs filed a consolidated complaint on June 26, 2012. The consolidated complaint alleges violations of the federal securities laws and seeks unspecified compensatory damages and other relief on behalf of a class of purchasers of the Company's common stock between October 20, 2010 and October 24, 2011. The complaint alleges among other things, that the Company issued materially false and misleading statements regarding the Company’s business practices and violated accounting rules concerning segment reporting, which led to artificially inflated stock prices. 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 and lead counsel was appointed. A consolidated complaint has not yet been filed. The original complaints alleged, among other things, that the Company’s officers and directors breached their fiduciary duties, wasted valuable corporate assets, and were unjustly enriched as a result of causing the Company to buy back stock at artificially inflated prices to the detriment of the Company and its shareholders. Additionally, certain of the original complaints contained allegations regarding false and misleading statements surrounding the Company’s business practices and its contracts with content providers. 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.

Indemnification
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 obligations.
Segment Information
Segment Information
Segment Information
Effective in the fourth quarter of 2011, the Company has three operating segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented along the same lines that the Company’s chief operating decision maker reviews the operating results in assessing performance and allocating resources. The Company’s chief operating decision maker reviews revenue and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses.
Revenues and the related credit card fees are attributed to the operating segment based on the nature of the underlying subscription (DVD or streaming) and the geographic region from which the subscription originates. Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by the segment to obtain content and deliver it to the specific region. Certain allocations of corporate costs related to customer service are included in the total cost of revenues within each operating segment. Marketing is primarily comprised of advertising expenses which are generally included in the segment in which the expenditures are directly incurred. Marketing also includes an allocation of the cost of revenues incurred by that segment related to free trials.
There are no internal revenue transactions between the Company’s reportable segments. The Company's chief operating decision maker does not review an allocation of assets by reportable segment. The Domestic and International streaming segments derive revenue from monthly subscription services consisting solely of streaming content. The Domestic DVD segment derives revenue from monthly subscription services consisting solely of DVDs-by-mail.
Between the fourth quarter of 2010 and the third quarter of 2011, the Company had two operating segments: Domestic and International. During this time, the Company’s domestic streaming service and DVDs-by-mail operations were combined. Subscribers in the U.S. were able to receive both streaming services and DVDs under a single hybrid plan. Accordingly, revenues were generated and marketing expenses were incurred in connection with the subscription offerings as a whole. Therefore, it is impracticable to allocate revenues or marketing expenses or present discrete segment information for the Domestic streaming and Domestic DVD segments for periods prior to the fourth quarter of 2011.
In the third quarter of 2011, the Company made certain changes to its domestic pricing and plan structure which require subscribers who wish to receive both streaming services and DVDs-by-mail to have two separate subscription plans. Following this change, beginning in the fourth quarter of 2011, the Company was able to generate discrete financial information for its Domestic streaming and Domestic DVD operations and began reporting this information to the chief operating decision maker for review.
 The following tables represent segment information for the quarter ended June 30, 2012:
 
 
As of/ Three months ended June 30, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total subscriptions at end of period (1)
23,938

 
3,624

 
9,240

 
—

Revenues
$
532,705

 
$
64,973

 
$
291,485

 
$
889,163

Cost of revenues and marketing expense
449,533

 
154,400

 
157,719

 
761,652

Contribution profit (loss)
$
83,172

 
$
(89,427
)
 
$
133,766

 
$
127,511

Other operating expenses
 
 
 
 
 
 
111,357

Operating income
 
 
 
 
 
 
16,154

Other income (expense)
 
 
 
 
 
 
(5,499
)
Provision for income taxes
 
 
 
 
 
 
4,491

Net income
 
 
 
 
 
 
$
6,164

 
As of/ Six months ended June 30, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total subscriptions at end of period (1)
23,938

 
3,624

 
9,240

 
—

Revenues
$
1,039,370

 
$
108,398

 
$
611,186

 
$
1,758,954

Cost of revenues and marketing expense
889,690

 
300,508

 
331,287

 
1,521,485

Contribution profit (loss)
$
149,680

 
$
(192,110
)
 
$
279,899

 
$
237,469

Other operating expenses
 
 
 
 
 
 
223,250

Operating income
 
 
 
 
 
 
14,219

Other income (expense)
 
 
 
 
 
 
(10,589
)
Provision for income taxes
 
 
 
 
 
 
2,050

Net income
 
 
 
 
 
 
$
1,580


The following tables represent the Company’s segment information for the quarter ended June 30, 2011:
 
 
As of/ Three months ended June 30, 2011
 
Domestic
 
International
 
Consolidated
 
(in thousands)
Total unique subscribers at end of period (1)
24,594

 
967

 
25,561

Revenues
$
769,714

 
$
18,896

 
$
788,610

Cost of revenues and marketing expense
556,719

 
28,242

 
584,961

Contribution profit (loss)
$
212,995

 
$
(9,346
)
 
$
203,649

Other operating expenses
 
 
 
 
88,535

Operating income
 
 
 
 
115,114

Other income (expense)
 
 
 
 
(4,290
)
Provision for income taxes
 
 
 
 
42,610

Net income
 
 
 
 
$
68,214



 
As of/ Six months ended June 30, 2011
 
Domestic
 
International
 
Consolidated
 
(in thousands)
Total unique subscribers at end of period (1)
24,594

 
967

 
25,561

Revenues
$
1,475,988

 
$
31,175

 
$
1,507,163

Cost of revenues and marketing expense
1,076,108

 
51,263

 
1,127,371

Contribution profit (loss)
$
399,880

 
$
(20,088
)
 
$
379,792

Other operating expenses
 
 
 
 
162,438

Operating income
 
 
 
 
217,354

Other income (expense)
 
 
 
 
(8,290
)
Provision for income taxes
 
 
 
 
80,617

Net income
 
 
 
 
$
128,447




(1) A subscription is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with our subscription services, we offer free-trial memberships to new and certain rejoining members. A method of payment is required to be provided even during the free-trial period for the membership to be defined as a subscription and included in the above metrics. Total unique subscribers and total subscriptions include those subscribers who are on a free-trial. Paid unique subscribers and paid subscriptions exclude free trial memberships. A subscription would cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly subscription period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

For purposes of determining the number of unique subscribers, domestic subscribers who have elected both a DVD and a streaming subscription plan are considered a single unique subscriber.
Basis Of Presentation And Summary Of Significant Accounting Policies Organization And Summary Of Significant Accounting Policies (Policies)
Use of Estimates, Policy [Policy Text Block] 
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the amortization policy of the Company’s content library; the valuation of stock-based compensation; and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. The actual results experienced by the Company may differ from management’s estimates.
Segment Reporting, Policy [Policy Text Block] 
The Company is organized into three operating segments: Domestic streaming, International streaming and Domestic DVD. Substantially all of the Company’s revenues are generated in the U.S., and substantially all of the Company’s long-lived tangible assets are held in the U.S. The Company’s revenues are derived from monthly subscription fees.
Reclassifications [Text Block] 
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not impact total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
Net Income (Loss) Per Share (Tables)
Computation Of Net Income (Loss) Per Share 
The computation of earnings per share is as follows:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands, except per share data)
Basic earnings per share:
 
 
 
 
 
 
 
Net income
$
6,164

 
$
68,214

 
$
1,580

 
$
128,447

Shares used in computation:
 
 
 
 
 
 
 
Weighted-average common shares outstanding
55,526

 
52,470

 
55,491

 
52,614

Basic earnings per share
$
0.11

 
$
1.30

 
$
0.03

 
$
2.44

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Net income
$
6,164

 
$
68,214

 
$
1,580

 
$
128,447

Convertible Notes interest expense, net of tax
48

 
—

 
98

 
—

Numerator for diluted earnings per share
$
6,212

 
$
68,214

 
$
1,678

 
$
128,447

Shares used in computation:
 
 
 
 
 
 
 
Weighted-average common shares outstanding
55,526

 
52,470

 
55,491

 
52,614

Convertible notes shares
2,331

 
—

 
2,331

 
—

Employee stock options
952

 
1,439

 
1,056

 
1,463

Weighted-average number of shares
58,809

 
53,909

 
58,878

 
54,077

Diluted earnings per share
$
0.11

 
$
1.26

 
$
0.03

 
$
2.37

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share 
The following table summarizes the potential common shares excluded from the diluted calculation:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands)
Employee stock options
1,184

 
12

 
908

 
19

Cash, Cash Equivalents, Short-Term Investments And Fair Value Measurment (Tables)
Available-For-Sale Securities Reported At Fair Value 
The following table summarizes, 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:
 
 
As of
 
June 30, 2012
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
402,192

 
$
—

 
$
—

 
$
402,192

Level 1 securities (1):
 
 
 
 
 
 
 
Money market funds
4,928

 
—

 
—

 
4,928

Level 2 securities (3):
 
 
 
 
 
 
 
Corporate debt securities
108,956

 
807

 
(20
)
 
109,743

Government and agency securities
210,477

 
281

 
(38
)
 
210,720

Asset and mortgage-backed securities
90,226

 
420

 
(17
)
 
90,629

 
$
816,779

 
$
1,508

 
$
(75
)
 
$
818,212

Less: Restricted cash (1)
 
 
 
 
 
 
(4,869
)
Total cash, cash equivalents and short-term investments
 
 
 
 
 
 
$
813,343

 
 
As of
 
December 31, 2011
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(in thousands)
Cash
$
388,941

 
$
—

 
$
—

 
$
388,941

Level 1 securities (2):
 
 
 
 
 
 
 
Money market funds
123,608

 
—

 
—

 
123,608

Level 2 securities (3):
 
 
 
 
 
 
 
Corporate debt securities
112,264

 
603

 
(214
)
 
112,653

Government and agency securities
175,464

 
694

 
(56
)
 
176,102

Asset and mortgage-backed securities
941

 
62

 
—

 
1,003

 
$
801,218

 
$
1,359

 
$
(270
)
 
$
802,307

Less: Restricted cash (2)
 
 
 
 
 
 
(4,496
)
Total cash, cash equivalents and short-term investments
 
 
 
 
 
 
$
797,811

(1)
Includes $4.9 million of restricted cash classified in other non-current assets.
(2)
Includes $119.1 million classified in cash and cash equivalents and $4.5 million of restricted cash classified in other current assets and non-current assets.
(3)
Included in short-term investments.
Estimated Fair Value Of Short-Term Investments By Contractual Maturity 
The estimated fair value of short-term investments by contractual maturity as of June 30, 2012 is as follows:
 
 
(in thousands)
Due within one year
$
15,676

Due after one year and through 5 years
355,328

Due after 5 years and through 10 years
9,223

Due after 10 years
30,865

Total short-term investments
$
411,092

Balance Sheet Components (Tables)
Components Of Content Library 
Content library consisted of the following:
 
 
As of
 
June 30, 2012
 
December 31, 2011
 
Streaming
 
DVD
 
Total
 
Streaming
 
DVD
 
Total
 
(in thousands)
Total content library, gross
$
3,434,683

 
$
552,691

 
$
3,987,374

 
$
2,552,284

 
$
599,155

 
$
3,151,439

Accumulated amortization
(1,091,253
)
 
(524,678
)
 
(1,615,931
)
 
(632,270
)
 
(552,526
)
 
(1,184,796
)
Total content library, net
2,343,430

 
28,013

 
2,371,443

 
1,920,014

 
46,629

 
1,966,643

Current content library, net
1,223,638

 
—

 
1,223,638

 
919,709

 
—

 
919,709

Non-current content library, net
$
1,119,792

 
$
28,013

 
$
1,147,805

 
$
1,000,305

 
$
46,629

 
$
1,046,934

Components of Content Liabilities 
Content liabilities consisted of the following:
 
 
As of
 
June 30, 2012
 
December 31, 2011
 
Streaming
 
DVD 
 
Total
 
Streaming
 
DVD
 
Total
 
(in thousands)
Content liabilities
$
1,183,867

 
$
20,342

 
$
1,204,209

 
$
915,796

 
$
19,240

 
$
935,036

Non-current content liabilities
829,163

 
—

 
829,163

 
739,628

 
—

 
739,628

Total content liabilities
$
2,013,030

 
$
20,342

 
$
2,033,372

 
$
1,655,424

 
$
19,240

 
$
1,674,664

Property And Equipment And Accumulated Depreciation 
Property and equipment and accumulated depreciation consisted of the following:

 
 
 
As of
 
 
 
June 30,
2012
 
December 31,
2011
 
 
 
(in thousands)
Computer equipment
 
3 years
$
70,641

 
$
67,090

Operations and other equipment
 
5 years
100,308

 
100,306

Software, including internal-use software
 
3 years
36,264

 
35,356

Furniture and fixtures
 
3 years
16,842

 
17,310

Buildings
 
30 years
40,681

 
40,681

Leasehold improvements
 
Over life of lease
43,008

 
44,473

Capital work-in-progress
 
 
2,554

 
822

Property and equipment, gross
 
 
310,298

 
306,038

Less: Accumulated depreciation
 
 
(185,654
)
 
(169,685
)
Property and equipment, net
 
 
$
124,644

 
$
136,353

Stockholders' Equity (Tables)
Summary Of Activity Related To Stock Option Plans 
A summary of the activity related to the Company’s stock option plans during the six months ended June 30, 2012 is as follows:
 
 
 
 
Options Outstanding
 
 
 
 
 
Shares
Available
for Grant
 
Number of
Shares
 
Weighted-
Average
Exercise Price
 
Weighted-Average
Remaining
Contractual Term
(in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
Balances as of December 31, 2011
7,013,508

 
2,957,754

 
$
66.59

 
 
 
 
Granted
(753,972
)
 
753,972

 
88.81

 
 
 
 
Exercised
—

 
(135,651
)
 
12.88

 
 
 
 
Canceled
48

 
(48
)
 
35.95

 
 
 
 
Expired
(1,160,721
)
 
—

 
—

 
 
 
 
Balances as of June 30, 2012
5,098,863

 
3,576,027

 
73.31

 
6.76
 
$
76,199

Vested and exercisable at June 30, 2012
 
 
3,576,027

 
73.31

 
6.76
 
$
76,199

Summary Of Assumptions Used To Value Stock Option Grants Using Lattice-Binomial Model 
The following table summarizes the assumptions used to value stock option grants using the lattice-binomial model:

 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Dividend yield
—
%
 
—
%
 
—
%
 
—
%
Expected volatility
61
%
 
51
%
 
61% - 65%

 
51% - 52%

Risk-free interest rate
2.01
%
 
3.35
%
 
1.97% - 2.01%

 
3.35% - 3.42%

Suboptimal exercise factor
2.26 - 3.65

 
2.22 – 3.54

 
2.26 - 3.65

 
2.17 – 3.54

Summary Of Stock-Based Compensation Expense 
The following table summarizes stock-based compensation expense, net of tax, related to stock option plans which was allocated as follows:
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
 
(in thousands)
Fulfillment expenses
$
90

 
$
679

 
$
157

 
$
1,240

Marketing
817

 
1,485

 
2,221

 
2,734

Technology and development
10,440

 
7,005

 
21,040

 
12,297

General and administrative
7,103

 
6,367

 
14,364

 
11,529

Stock-based compensation expense before income taxes
18,450

 
15,536

 
37,782

 
27,800

Income tax benefit
(7,120
)
 
(5,973
)
 
(14,580
)
 
(10,720
)
Stock-based compensation after income taxes
$
11,330

 
$
9,563

 
$
23,202

 
$
17,080

Commitments And Contingencies (Tables)
Expected Timing Of Payments For Commitments
The expected timing of payments for these obligations is as follows:
 
 
As of 
 
 
June 30,
2012
 
March 31,
2012
 
December 31,
2011
 
 
(in thousands)
 
Less than one year
$
2,053,397

 
$
1,874,417

(1)
$
1,713,445

(1)
Due after one year and through 3 years
2,427,772

 
2,374,734

 
2,384,373

 
Due after 3 years and through 5 years
482,281

 
505,553

 
650,480

 
Due after 5 years
60,298

 
74,155

 
74,696

 
Total streaming content obligations
$
5,023,748

 
$
4,828,859

 
$
4,822,994

 
Segment Information (Tables)
Information On Reportable Segments And Reconciliation To Consolidated Net Income
The following tables represent segment information for the quarter ended June 30, 2012:
 
 
As of/ Three months ended June 30, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total subscriptions at end of period (1)
23,938

 
3,624

 
9,240

 
—

Revenues
$
532,705

 
$
64,973

 
$
291,485

 
$
889,163

Cost of revenues and marketing expense
449,533

 
154,400

 
157,719

 
761,652

Contribution profit (loss)
$
83,172

 
$
(89,427
)
 
$
133,766

 
$
127,511

Other operating expenses
 
 
 
 
 
 
111,357

Operating income
 
 
 
 
 
 
16,154

Other income (expense)
 
 
 
 
 
 
(5,499
)
Provision for income taxes
 
 
 
 
 
 
4,491

Net income
 
 
 
 
 
 
$
6,164

 
As of/ Six months ended June 30, 2012
 
Domestic
Streaming
 
International
Streaming
 
Domestic
DVD
 
Consolidated
 
(in thousands)
Total subscriptions at end of period (1)
23,938

 
3,624

 
9,240

 
—

Revenues
$
1,039,370

 
$
108,398

 
$
611,186

 
$
1,758,954

Cost of revenues and marketing expense
889,690

 
300,508

 
331,287

 
1,521,485

Contribution profit (loss)
$
149,680

 
$
(192,110
)
 
$
279,899

 
$
237,469

Other operating expenses
 
 
 
 
 
 
223,250

Operating income
 
 
 
 
 
 
14,219

Other income (expense)
 
 
 
 
 
 
(10,589
)
Provision for income taxes
 
 
 
 
 
 
2,050

Net income
 
 
 
 
 
 
$
1,580


The following tables represent the Company’s segment information for the quarter ended June 30, 2011:
 
 
As of/ Three months ended June 30, 2011
 
Domestic
 
International
 
Consolidated
 
(in thousands)
Total unique subscribers at end of period (1)
24,594

 
967

 
25,561

Revenues
$
769,714

 
$
18,896

 
$
788,610

Cost of revenues and marketing expense
556,719

 
28,242

 
584,961

Contribution profit (loss)
$
212,995

 
$
(9,346
)
 
$
203,649

Other operating expenses
 
 
 
 
88,535

Operating income
 
 
 
 
115,114

Other income (expense)
 
 
 
 
(4,290
)
Provision for income taxes
 
 
 
 
42,610

Net income
 
 
 
 
$
68,214



 
As of/ Six months ended June 30, 2011
 
Domestic
 
International
 
Consolidated
 
(in thousands)
Total unique subscribers at end of period (1)
24,594

 
967

 
25,561

Revenues
$
1,475,988

 
$
31,175

 
$
1,507,163

Cost of revenues and marketing expense
1,076,108

 
51,263

 
1,127,371

Contribution profit (loss)
$
399,880

 
$
(20,088
)
 
$
379,792

Other operating expenses
 
 
 
 
162,438

Operating income
 
 
 
 
217,354

Other income (expense)
 
 
 
 
(8,290
)
Provision for income taxes
 
 
 
 
80,617

Net income
 
 
 
 
$
128,447




(1) A subscription is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with our subscription services, we offer free-trial memberships to new and certain rejoining members. A method of payment is required to be provided even during the free-trial period for the membership to be defined as a subscription and included in the above metrics. Total unique subscribers and total subscriptions include those subscribers who are on a free-trial. Paid unique subscribers and paid subscriptions exclude free trial memberships. A subscription would cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly subscription period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

For purposes of determining the number of unique subscribers, domestic subscribers who have elected both a DVD and a streaming subscription plan are considered a single unique subscriber.
Basis Of Presentation And Summary Of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies (Details)
6 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2012
segments
Jun. 30, 2012
segments
Sep. 30, 2011
segments
Organization And Summary Of Significant Accounting Policies [Abstract]
 
 
 
Number of Operating Segments
3 
3 
2 
Net Income (Loss) Per Share (Computation Of Net Income (Loss) Per Share) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Net income
$ 6,164 
$ 68,214 
$ 1,580 
$ 128,447 
Weighted-average common shares outstanding
55,526 
52,470 
55,491 
52,614 
Basic earnings per share
$ 0.11 
$ 1.30 
$ 0.03 
$ 2.44 
Convertible Notes interest expense, net of tax
48 
0 
98 
0 
Numerator for diluted earning per share
$ 6,212 
$ 68,214 
$ 1,678 
$ 128,447 
Weighted-average number of shares
58,809 
53,909 
58,878 
54,077 
Diluted earnings per share
$ 0.11 
$ 1.26 
$ 0.03 
$ 2.37 
Convertible notes shares
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Employee stock options
2,331 
0 
2,331 
0 
Employee stock options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Employee stock options
952 
1,439 
1,056 
1,463 
Net Income (Loss) Per Share Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) (Employee stock options)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Employee stock options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive shares excluded from calculation of diluted earnings per share
1,184 
12 
908 
19 
Cash, Cash Equivalents, Short-Term Investments And Fair Value Measurment (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Short-Term Investments And Fair Value Measurement [Abstract]
 
 
 
 
Material other-than-temporary impairments or credit losses related to available-for-sale securities
$ 0 
$ 0 
$ 0 
$ 0 
Material gross realized gains or losses
$ 0 
$ 0 
$ 0 
$ 0 
Cash, Cash Equivalents, Short-Term Investments And Fair Value Measurment (Available-For-Sale Securities Reported At Fair Value) (Details) (USD $)
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
$ 816,779,000 
 
$ 801,218,000 
 
 
 
Gross Unrealized Gains
1,508,000 
 
1,359,000 
 
 
 
Gross Unrealized Losses
(75,000)
 
(270,000)
 
 
 
Estimated Fair Value
818,212,000 
 
802,307,000 
 
 
 
Less: Restricted cash
(4,869,000)1
 
(4,496,000)2
 
 
 
Total cash, cash equivalents and short-term investments
813,343,000 
 
797,811,000 
 
 
 
Cash and cash equivalents
402,251,000 
395,992,000 
508,053,000 
175,207,000 
150,419,000 
194,499,000 
Long-term restricted cash
4,900,000 
 
 
 
 
 
Cash [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
402,192,000 
 
388,941,000 
 
 
 
Gross Unrealized Gains
0 
 
0 
 
 
 
Gross Unrealized Losses
0 
 
0 
 
 
 
Estimated Fair Value
402,192,000 
 
388,941,000 
 
 
 
Cash And Cash Equivalent [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Cash and cash equivalents
 
 
119,100,000 
 
 
 
Level 1 Securities [Member] |
Money Market Funds [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
4,928,000 1
 
123,608,000 2
 
 
 
Gross Unrealized Gains
0 1
 
0 2
 
 
 
Gross Unrealized Losses
0 1
 
0 2
 
 
 
Estimated Fair Value
4,928,000 1
 
123,608,000 2
 
 
 
Level 2 Securities [Member] |
Corporate Debt Securities [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
108,956,000 3
 
112,264,000 3
 
 
 
Gross Unrealized Gains
807,000 3
 
603,000 3
 
 
 
Gross Unrealized Losses
(20,000)3
 
(214,000)3
 
 
 
Estimated Fair Value
109,743,000 3
 
112,653,000 3
 
 
 
Level 2 Securities [Member] |
US Treasury and Government [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
210,477,000 3
 
175,464,000 3
 
 
 
Gross Unrealized Gains
281,000 3
 
694,000 3
 
 
 
Gross Unrealized Losses
(38,000)3
 
(56,000)3
 
 
 
Estimated Fair Value
210,720,000 3
 
176,102,000 3
 
 
 
Level 2 Securities [Member] |
Asset And Mortgage-Backed Securities [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Amortized Cost
90,226,000 3
 
941,000 3
 
 
 
Gross Unrealized Gains
420,000 3
 
62,000 3
 
 
 
Gross Unrealized Losses
(17,000)3
 
0 3
 
 
 
Estimated Fair Value
90,629,000 3
 
1,003,000 3
 
 
 
Workers Compensation Deposits [Member]
 
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
 
Long-term restricted cash
 
 
$ 4,500,000 
 
 
 
Cash, Cash Equivalents, Short-Term Investments And Fair Value Measurment (Estimated Fair Value Of Short-Term Investments By Contractual Maturity) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Short-Term Investments And Fair Value Measurement [Abstract]
 
 
Due within one year
$ 15,676 
 
Due after one year and through 5 years
355,328 
 
Due after 5 years and through 10 years
9,223 
 
Due after 10 years
30,865 
 
Total short-term investments
$ 411,092 
$ 289,758 
Balance Sheet Components (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Y
M
Jun. 30, 2012
Balance Sheet Related Disclosures [Abstract]
 
 
License agreement, payment terms minimum (months)
6 
 
License agreement, payment terms maximum (years)
5 
 
Increase in non-current streaming content liabilities
 
$ 357.6 
Increase Decrease In Content Library
 
$ 423.4 
Balance Sheet Components (Components of Content Library ) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Schedule of Balance Sheet Components [Line Items]
 
 
Total content library, gross
$ 3,987,374 
$ 3,151,439 
Accumulated amortization
(1,615,931)
(1,184,796)
Total content library, net
2,371,443 
1,966,643 
Current content library, net
1,223,638 
919,709 
Non-current content library, net
1,147,805 
1,046,934 
Streaming [Member]
 
 
Schedule of Balance Sheet Components [Line Items]
 
 
Total content library, gross
3,434,683 
2,552,284 
Accumulated amortization
(1,091,253)
(632,270)
Total content library, net
2,343,430 
1,920,014 
Current content library, net
1,223,638 
919,709 
Non-current content library, net
1,119,792 
1,000,305 
DVD [Member]
 
 
Schedule of Balance Sheet Components [Line Items]
 
 
Total content library, gross
552,691 
599,155 
Accumulated amortization
(524,678)
(552,526)
Total content library, net
28,013 
46,629 
Current content library, net
0 
0 
Non-current content library, net
$ 28,013 
$ 46,629 
Balance Sheet Components (Components of Content Liabilites) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Dec. 31, 2011
Schedule of Balance Sheet Components [Line Items]
 
 
Content liabilities
$ 1,204,209 
$ 935,036 
Non-current content liabilities
829,163 
739,628 
Total content liabilities
2,033,372 
1,674,664 
Streaming [Member]
 
 
Schedule of Balance Sheet Components [Line Items]
 
 
Content liabilities
1,183,867 
915,796 
Non-current content liabilities
829,163 
739,628 
Total content liabilities
2,013,030 
1,655,424 
DVD [Member]
 
 
Schedule of Balance Sheet Components [Line Items]
 
 
Content liabilities
20,342 
19,240 
Non-current content liabilities
0 
0 
Total content liabilities
$ 20,342 
$ 19,240 
Balance Sheet Components (Property And Equipment And Accumulated Depreciation) (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Y
Dec. 31, 2011
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 310,298 
$ 306,038 
Less: Accumulated depreciation
(185,654)
(169,685)
Property and equipment, net
124,644 
136,353 
Computer Equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
70,641 
67,090 
Property and equipment, useful life (years)
3 
 
Operations And Other Equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
100,308 
100,306 
Property and equipment, useful life (years)
5 
 
Software, including internal-use software [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
36,264 
35,356 
Property and equipment, useful life (years)
3 
 
Furniture And Fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
16,842 
17,310 
Property and equipment, useful life (years)
3 
 
Building [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
40,681 
40,681 
Property and equipment, useful life (years)
30 
 
Leasehold Improvements [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
43,008 
44,473 
Property and equipment useful life over life of lease (years)
Over life of lease 
 
Capital work-in-progress [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 2,554 
$ 822 
Long-Term Debt (Details) (USD $)
6 Months Ended
Jun. 30, 2012
Dec. 31, 2011
Debt Instrument [Line Items]
 
 
Long-term debt outstanding
$ 200,000,000 
$ 200,000,000 
Senior Convertible Note [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt outstanding
200,000,000 
 
Senior notes, maturity date
Dec. 01, 2018 
 
Debt Instrument, Convertible, Earliest Date
May 28, 2012 
 
Weighted Average Price Of Common Stock
$ 111.54 
 
Senior notes, fair value
210,500,000 
206,500,000 
Interest rate
0.00% 
 
Senior Convertible Note [Member] |
Minimum [Member]
 
 
Debt Instrument [Line Items]
 
 
Trading Days Prior To Conversion Date Required For Conversion
50 
 
Senior Convertible Note [Member] |
Maximum [Member]
 
 
Debt Instrument [Line Items]
 
 
Trading Days Prior To Conversion Date Required For Conversion
65 
 
Eight Point Five Zero Percentage Senior Notes [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt outstanding
200,000,000 
 
Senior notes, maturity date
Nov. 15, 2017 
 
Senior notes, fair value
$ 210,500,000 
$ 206,500,000 
Interest rate
8.50% 
 
Stockholders' Equity (Narrative) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
0 Months Ended 3 Months Ended 6 Months Ended 30 Months Ended 66 Months Ended
Jun. 11, 2010
Jun. 30, 2004
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
employee_groups
Jun. 30, 2011
Jan. 1, 2007
Jun. 30, 2012
Components of Stockholders' Equity [Line Items]
 
 
 
 
 
 
 
 
Total intrinsic value of options exercised
 
 
$ 1.0 
$ 49.3 
$ 12.8 
$ 93.4 
 
 
Cash received from option exercised
 
 
0.5 
7.4 
1.7 
14.2 
 
 
Exercise period after employment termination
 
3 months 
 
 
 
 
1 year 
 
Full exercise period
 
 
 
 
 
 
 
10 years 
Number of employee groups
 
 
 
 
2 
 
 
 
Weighted-average fair value of employee stock options granted per share
 
 
$ 45.38 
$ 134.77 
$ 50.11 
$ 122.16 
 
 
Stock repurchase plan, authorized amount
300.0 
 
 
 
 
 
 
 
Stock repurchase program, remaining authorized repurchase amount
 
 
 
 
$ 41.0 
 
 
 
Two Thousand And Eleven Stock Plan [Member]
 
 
 
 
 
 
 
 
Components of Stockholders' Equity [Line Items]
 
 
 
 
 
 
 
 
Common Stock, Capital Shares Reserved for Future Issuance
 
 
5.1 
 
5.1 
 
 
5.1 
Two Thousand And Two Stock Plan [Member]
 
 
 
 
 
 
 
 
Components of Stockholders' Equity [Line Items]
 
 
 
 
 
 
 
 
Common Stock, Capital Shares Reserved for Future Issuance
 
 
1.2 
 
1.2 
 
 
1.2 
Stockholders' Equity (Summary Of Activity Related To Stock Option Plans) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Y
Stockholders' Equity Note [Abstract]
 
Shares Available for Grant, Beginning Balances
7,013,508 
Shares Available for Grant, Granted
(753,972)
Shares Available for Grant, Exercised
0 
Shares Available for Grant, Canceled
48 
Shares Available for Grant, Expired
(1,160,721)
Shares Available for Grant, Ending Balances
5,098,863 
Options Outstanding, Number of Shares, Beginning Balances
2,957,754 
Options Outstanding, Number of Shares, Granted
753,972 
Options Outstanding, Number of Shares, Exercised
(135,651)
Options Outstanding, Number of Shares, Canceled
(48)
Options Outstanding, Number of Shares, Expired
0 
Options Outstanding, Number of Shares, Ending Balances
3,576,027 
Options Outstanding, Number of Shares, Vested and exercisable
3,576,027 
Options Outstanding, Weighted-Average Exercise Price, Beginning Balances
$ 66.59 
Options Outstanding, Weighted-Average Exercise Price, Granted
$ 88.81 
Options Outstanding, Weighted-Average Exercise Price, Exercised
$ 12.88 
Options Outstanding, Weighted-Average Exercise Price, Canceled
$ 35.95 
Options Outstanding, Weighted-Average Exercise Price, Expired
$ 0 
Options Outstanding, Weighted-Average Exercise Price, Ending Balances
$ 73.31 
Options Outstanding, Weighted-Average Exercise Price, Vested and exercisable
$ 73.31 
Weighted-Average Remaining Contractual Term, Ending Balances (in Years)
6.76 
Weighted-Average Remaining Contractual Term, Vested and exercisable (in Years)
6.76 
Aggregate Intrinsic Value, Ending Balances
$ 76,199 
Aggregate Intrinsic Value, Vested and exercisable
$ 76,199 
Stockholders' Equity (Summary Of Assumptions Used To Value Stock Option Grants Using Lattice-Binomial Model) (Details)
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Stockholders' Equity Note [Abstract]
 
 
 
 
Dividend yield
0.00% 
0.00% 
0.00% 
0.00% 
Expected volatility rate
61.00% 
51.00% 
 
 
Expected volatility rate, minimum
 
 
61.00% 
51.00% 
Expected volatility, maximum
 
 
65.00% 
52.00% 
Risk-free interest rate
2.01% 
3.35% 
 
 
Risk -free interest rate, minimum
 
 
1.97% 
3.35% 
Risk-free interest rate, maximum
 
 
2.01% 
3.42% 
Suboptimal exercise factor, minimum
2.26 
2.22 
2.26 
2.17 
Suboptimal exercise factor, maximum
3.65 
3.54 
3.65 
3.54 
Stockholders' Equity (Summary Of Stock-Based Compensation Expense) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Stock-based compensation expense before income taxes
$ 18,450 
$ 15,536 
$ 37,782 
$ 27,800 
Income tax benefit
(7,120)
(5,973)
(14,580)
(10,720)
Total stock-based compensation after income taxes
11,330 
9,563 
23,202 
17,080 
Fulfillment Expense [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Stock-based compensation expense before income taxes
90 
679 
157 
1,240 
Marketing [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Stock-based compensation expense before income taxes
817 
1,485 
2,221 
2,734 
Technology And Development [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Stock-based compensation expense before income taxes
10,440 
7,005 
21,040 
12,297 
General And Administrative [Member]
 
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
 
Stock-based compensation expense before income taxes
$ 7,103 
$ 6,367 
$ 14,364 
$ 11,529 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2012
Jun. 30, 2011
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
 
Effective tax rates
42.10% 
38.40% 
56.50% 
38.60% 
 
Unrecognized tax benefits
 
 
 
 
$ 28.1 
Increase in gross unrecognized tax benefits
 
 
1.4 
 
 
Reduction in provision for income taxes due to impact of effective tax rate
23.3 
 
23.3 
 
 
Gross interest and penalties accrued
2.7 
 
2.7 
 
 
Deferred Tax Assets, Net, Current
9.0 
 
9.0 
 
10.0 
Deferred Tax Assets, Net, Noncurrent
40.1 
 
40.1 
 
28.3 
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation
$ 0.3 
$ 18.3 
$ 4.1 
$ 33.4 
 
Commitments And Contingencies (Narrative) (Details) (USD $)
In Billions, unless otherwise specified
6 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Mar. 31, 2012
Content liabilities [Member]
Dec. 31, 2011
Content liabilities [Member]
Long-term Purchase Commitment [Line Items]
 
 
 
 
Long-term Purchase Commitment, Amount
$ 5.0 
$ 4.8 
 
 
Recorded Unconditional Purchase Obligation
 
 
$ 1.1 
$ 0.9 
Commitments And Contingencies (Expected Timing Of Payments For Commitments) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Less than one year
$ 2,053,397 
$ 1,874,417 1
$ 1,713,445 1
Due after one year and through 3 years
2,427,772 
2,374,734 
2,384,373 
Due after 3 years and through 5 years
482,281 
505,553 
650,480 
Due after 5 years
60,298 
74,155 
74,696 
Total streaming content obligations
$ 5,023,748 
$ 4,828,859 
$ 4,822,994 
Commitments And Contingencies Legal Proceedings (Details) (Pending or Threatened Litigation [Member])
Apr. 2, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 29, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 24, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Feb. 13, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Jan. 27, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
Jan. 13, 2012
United States District Court for the Northern District of California [Member]
lawsuits_filed
May 2, 2012
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Feb. 9, 2012
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Nov. 23, 2011
Superior Court of California, Santa Clara County [Member]
lawsuits_filed
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Loss Contingency, Pending Claims, Number
1 
1 
1 
1 
1 
3 
1 
1 
6 
Segment Information (Information On Reportable Segments And Reconciliation To Consolidated Net Income) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2012
Sep. 30, 2011
separate_subscription_plans
Jun. 30, 2011
Jun. 30, 2012
segments
Jun. 30, 2011
Jun. 30, 2012
segments
Sep. 30, 2011
segments
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Number of Operating Segments
 
 
 
3 
 
3 
2 
Number of Separate Subscription Plans
 
2 
 
 
 
 
 
Total unique subscribers at end of period
0 1
 
25,561,000 
0 1
25,561,000 
0 1
 
Revenues
$ 889,163 
 
$ 788,610 
$ 1,758,954 
$ 1,507,163 
 
 
Cost of revenues and marketing expenses
761,652 
 
584,961 
1,521,485 
1,127,371 
 
 
Contribution profit (loss)
127,511 
 
203,649 
237,469 
379,792 
 
 
Other operating expenses
111,357 
 
88,535 
223,250 
162,438 
 
 
Operating income
16,154 
 
115,114 
14,219 
217,354 
 
 
Other income (expense)
(5,499)
 
(4,290)
(10,589)
(8,290)
 
 
Provision for income taxes
4,491 
 
42,610 
2,050 
80,617 
 
 
Net income
6,164 
 
68,214 
1,580 
128,447 
 
 
Domestic [Member]
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Total unique subscribers at end of period
 
 
24,594,000 1
 
24,594,000 1
 
 
Revenues
 
 
769,714 
 
1,475,988 
 
 
Cost of revenues and marketing expenses
 
 
556,719 
 
1,076,108 
 
 
Contribution profit (loss)
 
 
212,995 
 
399,880 
 
 
International [Member]
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Total unique subscribers at end of period
 
 
967,000 
 
967,000 
 
 
Revenues
 
 
18,896 
 
31,175 
 
 
Cost of revenues and marketing expenses
 
 
28,242 
 
51,263 
 
 
Contribution profit (loss)
 
 
(9,346)
 
(20,088)
 
 
Domestic Streaming [Member]
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Number Of Subscriptions At End Of Period
23,938,000 1
 
 
23,938,000 1
 
23,938,000 1
 
Revenues
532,705 
 
 
1,039,370 
 
 
 
Cost of revenues and marketing expenses
449,533 
 
 
889,690 
 
 
 
Contribution profit (loss)
83,172 
 
 
149,680 
 
 
 
International Streaming [Member]
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Number Of Subscriptions At End Of Period
3,624,000 1
 
 
3,624,000 1
 
3,624,000 1
 
Revenues
64,973 
 
 
108,398 
 
 
 
Cost of revenues and marketing expenses
154,400 
 
 
300,508 
 
 
 
Contribution profit (loss)
(89,427)
 
 
(192,110)
 
 
 
Domestic Dvd [Member]
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
Number Of Subscriptions At End Of Period
9,240,000 1
 
 
9,240,000 1
 
9,240,000 1
 
Revenues
291,485 
 
 
611,186 
 
 
 
Cost of revenues and marketing expenses
157,719 
 
 
331,287 
 
 
 
Contribution profit (loss)
$ 133,766 
 
 
$ 279,899 
 
 
 
[1] A subscription is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with our subscription services, we offer free-trial memberships to new and certain rejoining members. A method of payment is required to be provided even during the free-trial period for the membership to be defined as a subscription and included in the above metrics. Total unique subscribers and total subscriptions include those subscribers who are on a free-trial. Paid unique subscribers and paid subscriptions exclude free trial memberships. A subscription would cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly subscription period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.For purposes of determining the number of unique subscribers, domestic subscribers who have elected both a DVD and a streaming subscription plan are considered a single unique subscriber.