Document And Entity Information

3 Months Ended

Mar. 31, 2013

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-Q

Document Period End Date

Mar. 31, 2013

Document Fiscal Year Focus

2013

Document Fiscal Period Focus

Q1

Amendment Flag

false

Entity Common Stock, Shares Outstanding

56,143,986

Consolidated Statements Of Operations (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Income Statement [Abstract]

Revenues

$ 1,023,961

$ 869,791

Cost of revenues

726,863

623,933

Marketing

129,175

129,928

Technology and development

91,975

82,801

General and administrative

44,126

35,064

Operating income (loss)

31,822

(1,935)

Other income (expense):

Interest expense

(6,740)

(4,974)

Interest and other income (expense)

977

(116)

Loss on extinguishment of debt

(25,129)

0

Income (loss) before income taxes

930

(7,025)

Benefit for income taxes

(1,759)

(2,441)

Net income (loss)

$ 2,689

$ (4,584)

Earnings (loss) per share:

Basic (in dollars per share)

$ 0.05

$ (0.08)

Diluted (in dollars per share)

$ 0.05

$ (0.08)

Weighted average common shares outstanding:

Basic (in shares)

55,972

55,456

Diluted (in shares)

60,146

55,456

Conslidated Statements of Comprehensive Income (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Statement of Other Comprehensive Income [Abstract]

Net income (loss)

$ 2,689

$ (4,584)

Other comprehensive income (loss):

Foreign currency translation adjustments

(2,289)

811

Change in unrealized gains on available-for-sale securities, net of tax of $(212) and $38, respectively

(339)

60

Total other comprehensive income (loss)

(2,628)

871

Comprehensive income (loss)

$ 61

$ (3,713)

Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Statement of Other Comprehensive Income [Abstract]

Change in unrealized gains on available for sale securities, tax

$ (212)

$ 38

Consolidated Statements Of Cash Flows (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Cash flows from operating activities:

Net income (loss)

$ 2,689

$ (4,584)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Additions to streaming content library

(591,941)

(764,893)

Change in streaming content liabilities

9,700

397,553

Amortization of streaming content library

485,740

339,736

Amortization of DVD content library

18,237

20,046

Depreciation and amortization of property, equipment and intangibles

12,051

11,331

Stock-based compensation expense

17,746

19,332

Excess tax benefits from stock-based compensation

(11,615)

(3,755)

Other non-cash items

1,750

(1,519)

Loss on extinguishment of debt

25,129

0

Deferred taxes

(6,748)

(10,843)

Changes in operating assets and liabilities:

Prepaid content

2,675

2,994

Other current assets

(8,402)

11,741

Accounts payable

17,104

(1,756)

Accrued expenses

(4,132)

1,783

Deferred revenue

9,406

1,806

Other non-current assets and liabilities

8,446

137

Net cash (used in) provided by operating activities

(12,165)

19,109

Cash flows from investing activities:

Acquisitions of DVD content library

(21,193)

(13,528)

Purchases of property and equipment

(12,203)

(4,766)

Other assets

4,050

1,334

Purchases of short-term investments

(235,623)

(299,467)

Proceeds from sale of short-term investments

81,228

172,335

Proceeds from maturities of short-term investments

4,420

8,275

Net cash used in investing activities

(179,321)

(135,817)

Cash flows from financing activities:

Proceeds from issuance of common stock

39,146

1,224

Proceeds from issuance of debt

500,000

0

Issuance costs

(9,414)

(388)

Redemption of debt

(219,362)

0

Excess tax benefits from stock-based compensation

11,615

3,755

Principal payments of lease financing obligations

(403)

(559)

Net cash provided by financing activities

321,582

4,032

Effect of exchange rate changes on cash and cash equivalents

(2,336)

615

Net increase (decrease) in cash and cash equivalents

127,760

(112,061)

Cash and cash equivalents, beginning of period

290,291

508,053

Cash and cash equivalents, end of period

$ 418,051

$ 395,992

Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

Current assets:

Cash and cash equivalents

$ 418,051

$ 290,291

Short-term investments

607,821

457,787

Current content library, net

1,391,505

1,368,162

Prepaid content

57,254

59,929

Other current assets

82,469

64,622

Total current assets

2,557,100

2,240,791

Non-current content library, net

1,576,674

1,506,008

Property and equipment, net

129,319

131,681

Other non-current assets

100,196

89,410

Total assets

4,363,289

3,967,890

Current liabilities:

Current content liabilities

1,355,010

1,366,847

Accounts payable

102,822

86,468

Accrued expenses

52,004

53,139

Deferred revenue

178,878

169,472

Total current liabilities

1,688,714

1,675,926

Non-current content liabilities

1,083,427

1,076,622

Long-term debt

500,000

200,000

Long-term debt due to related party

200,000

Other non-current liabilities

78,229

70,669

Total liabilities

3,550,370

3,223,217

Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock, $0.001 par value; 160,000,000 shares authorized at March 31, 2013 and December 31, 2012; 56,143,986 and 55,587,167 issued and outstanding at March 31, 2013 and December 31, 2012, respectively

56

Additional paid-in capital

369,801

301,616

Accumulated other comprehensive income

291

2,919

Retained earnings

442,771

440,082

Total stockholders’ equity

812,919

744,673

Total liabilities and stockholders’ equity

$ 4,363,289

$ 3,967,890

Consolidated Balance Sheets Consolidated Balance Sheets (Parenthetical) (USD $)

Mar. 31, 2013

Dec. 31, 2012

Statement of Financial Position [Abstract]

Common stock, par value

$ 0.001

Common stock, shares authorized

160,000,000

Common stock, shares issued

56,143,986

55,587,167

Common stock, shares outstanding

56,143,986

55,587,167

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, 2012 filed with the Securities and Exchange Commission (the “SEC”) on January 31, 2013. 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 for the streaming content library; the recognition and measurement of income tax assets and liabilities; and the valuation of stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.

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, 2012. 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. The Company’s revenues are derived from monthly membership fees.

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, 2012.

Reclassifications Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation in the Consolidated Statements of Operations. Payroll and related expenses of $6.0 million associated with corporate marketing personnel, previously classified in "Marketing" on the Consolidated Statements of Operations, have been reclassified as "General and administrative" for the period ended March 31, 2012. Historically these costs were substantially all recorded in the Domestic streaming segment and impacted segment contribution profit. Management and the Company's chief operating decision maker consider such employee costs to be global corporate costs rather than direct marketing costs and as such are not indicative of any given segment's performance. Accordingly, such costs have been reclassified as "General and administrative" expenses which are not a component of contribution profit. There was no impact to operating income (loss) in any period.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings (loss) 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 Senior Convertible Notes and incremental shares issuable upon the assumed exercise of stock options. The computation of earnings (loss) per share is as follows:



	Three Months Ended
	March 31, 2013		March 31, 2012
	(in thousands, except per share data)
Basic earnings (loss) per share:
Net income (loss)	$	2,689	$	(4,584	)
Shares used in computation:
Weighted-average common shares outstanding	55,972		55,456
Basic earnings (loss) per share	$	0.05	$	(0.08	)

Diluted earnings (loss) per share:
Net income (loss)	$	2,689	$	(4,584	)
Senior Convertible Notes interest expense, net of tax	49		—
Numerator for diluted earnings per share	$	2,738	$	(4,584	)
Shares used in computation:
Weighted-average common shares outstanding	55,972		55,456
Senior Convertible Notes shares	2,331		—
Employee stock options	1,843		—
Weighted-average number of shares	60,146		55,456
Diluted earnings (loss) per share	$	0.05	$	(0.08	)

For the three months ended March 31, 2013 and 2012, 0.4 million and 1.8 million incremental shares issuable upon the assumed exercise of stock options, respectively, are not included in the calculation of diluted earnings (loss) per share, as their inclusion would have been anti-dilutive.

For the three months ended March 31, 2012, 2.3 million shares issuable upon the assumed conversion of the Company's Senior Convertible Notes are not included in the calculation of diluted earnings (loss) per share, as their inclusion would have been anti-dilutive.

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 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 March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	310,813	$	—	$	—		$	310,813
Level 1 securities:
Money market funds	7,017		—		—			7,017
Level 2 securities:
Corporate debt securities	318,573		1,760		(291		)	320,042
Government and agency securities classified as cash equivalents	105,823		—		—			105,823
Government and agency securities classified as short-term investments	114,110		179		—			114,289
Asset and mortgage-backed securities	173,219		469		(198		)	173,490
Total (1)	$	1,029,555	$	2,408	$	(489	)	$	1,031,474



	As of December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	284,661	$	—	$	—		$	284,661
Level 1 securities:
Money market funds	10,500		—		—			10,500
Level 2 securities:
Corporate debt securities	150,322		1,605		(32		)	151,895
Government and agency securities	166,643		285		—			166,928
Asset and mortgage-backed securities	138,340		750		(125		)	138,965
Total (2)	$	750,466	$	2,640	$	(157	)	$	752,949


(1)	Includes $418.1 million that is included in cash and cash equivalents, $607.8 million included in short-term investments and $5.6 million of restricted cash that is included in other non-current assets related to workers compensation deposits.


(2)	Includes $290.3 million that is included in cash and cash equivalents, $457.8 million included in short-term investments and $4.8 million of restricted cash that is included in other non-current assets related to workers compensation deposits.

Fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. The hierarchy level assigned to each security in the Company’s available-for-sale portfolio and cash equivalents is based on its assessment of the transparency and reliability of the inputs used in the valuation of such instrument at the measurement date. The fair value of available-for-sale securities and cash equivalents included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. The fair value of available-for-sale securities included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. These values were obtained from an independent pricing service and were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. The Company's procedures include controls to ensure that appropriate fair values are recorded, such as comparing prices obtained from multiple independent sources. See Note 6 to the consolidated financial statements for further information regarding the fair value of the Company’s debt instruments.

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 March 31, 2013. There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the three months ended March 31, 2013 and 2012. In addition, there were no material gross realized gains or losses in the three months ended March 31, 2013 and 2012.

The estimated fair value of short-term investments by contractual maturity as of March 31, 2013 is as follows:



	(in thousands)
Due within one year	$	70,895
Due after one year and through 5 years	486,043
Due after 5 years and through 10 years	6,633
Due after 10 years	44,250
Total short-term investments	$	607,821

Balance Sheet Components

Content Library

Content library consisted of the following:



	As of
	March 31, 2013			December 31, 2012
	(in thousands)
Total content library, gross	$	5,376,681		$	5,001,524
Accumulated amortization	(2,408,502		)	(2,127,354		)
Total content library, net	2,968,179			2,874,170
Current content library, net	1,391,505			1,368,162
Non-current content library, net	$	1,576,674		$	1,506,008

Property and Equipment, Net

Property and equipment and accumulated depreciation consisted of the following:



		As of
		March 31, 2013			December 31, 2012
		(in thousands)
Computer equipment	3 years	$	88,192		$	84,193
Operations and other equipment	5 years	99,402			100,207
Software	3 years	38,740			39,073
Furniture and fixtures	3 years	18,669			18,208
Building	30 years	40,681			40,681
Leasehold improvements	Over life of lease	45,922			45,393
Capital work-in-progress		6,145			8,282
Property and equipment, gross		337,751			336,037
Less: Accumulated depreciation		(208,432		)	(204,356		)
Property and equipment, net		$	129,319		$	131,681

Long-term Debt

Senior Convertible Notes

As of March 31, 2013, the Company had $200.0 million aggregate principal amount of zero coupon Senior Convertible Notes due on December 1, 2018 (the “Convertible Notes”) outstanding. 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 is 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 to 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 March 31, 2013 and December 31, 2012, the Company was in compliance with these covenants.

The Company determined that the embedded conversion option in the Convertible Notes does not require separate accounting treatment as a derivative instrument because it is both indexed to the Company’s own stock and would be classified in Stockholders' equity if freestanding. Additionally, the Convertible Notes do not require or permit any portion of the obligation to be settled in cash and accordingly the liability and equity (conversion option) components are not required to be accounted for separately.

Subsequent to March 31, 2013, after all specified conditions were satisfied, the Company elected to cause the conversion of all outstanding Convertible Notes with an aggregate principal amount of $200.0 million in accordance with the terms of the Indenture governing such notes. Pursuant to this conversion, the Company issued 2.3 million shares of common stock to the holders of the Convertible Notes at a conversion ratio of 11.6553. The fair market value of one share of common stock on the date of conversion was $216.99 per share.

Senior Notes

In February 2013, the Company issued $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "5.375% Notes"). The 5.375% Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at a rate of 5.375% per annum on February 1 and August 1 of each year, commencing on August 1, 2013. The 5.375% Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the 5.375% Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest plus a make-whole payment equivalent to the present value of the remaining interest payments through maturity.

The 5.375% Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person.

The net proceeds to the Company were $490.6 million. Debt issuance costs of $9.4 million were recorded in "Other non-current assets" on the Consolidated Balance Sheets and are amortized over the term of the notes as "Interest expense" on the Consolidated Statements of Operations.

The Company used $224.5 million of the net proceeds of the 5.375% Notes to redeem the outstanding $200.0 million aggregate principal amount of 8.50% Senior Notes due 2017 (the “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.

Based on quoted market prices in less active markets (a Level 2 input for this financial instrument), the fair value of the 5.375% Notes as of March 31, 2013 was approximately $496.3 million.

Stockholders' Equity

Stockholders’ Equity

Subsequent to March 31, 2013, the Company issued 2.3 million shares of common stock in connection with the conversion of the Convertible Notes. See Note 6 to the consolidated financial statements for further details.

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 March 31, 2013, 3.8 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 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, 2012	4,049,037		4,572,952		$	71.33
Granted	(244,054	)	244,054		134.56
Exercised	—		(556,819	)	70.30
Balances as of March 31, 2013	3,804,983		4,260,187		75.09		6.72	$	502,450
Vested and exercisable at March 31, 2013			4,260,187		75.09		6.72	$	502,450

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the first quarter of 2013 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 March 31, 2013. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the three months ended March 31, 2013 and 2012 was $50.0 million and $11.7 million, respectively.

Cash received from option exercises for the three months ended March 31, 2013 and 2012 was $39.1 million and $1.2 million, respectively.

Stock-Based Compensation

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 on or after January 1, 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
	March 31, 2013		March 31, 2012
Dividend yield	—	%	—	%
Expected volatility	54	%	65	%
Risk-free interest rate	1.87	%	1.97	%
Suboptimal exercise factor	2.33 - 3.59		2.26 - 3.65

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 March 31, 2013 and 2012 was $72.71 and $55.65 per share, respectively.

Stock-based compensation expense related to stock option plans was $17.7 million and $19.3 million for the three months ended March 31, 2013 and 2012, respectively. The total income tax benefit recognized in the income statement related to stock option plans was $6.8 million and $6.7 million for the three months ended March 31, 2013 and 2012, respectively.

Accumulated Other Comprehensive Income Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income for the three months ended March 31, 2013:



	Foreign currency items			Change in unrealized gains on available for sale securities			Total
	(in thousands)
Accumulated other comprehensive income (loss), net of tax, as of December 31, 2012	$	1,381		$	1,538		$	2,919
Other comprehensive income before reclassifications	(2,289		)	(295		)	(2,584		)
Amounts reclassified from accumulated other comprehensive income	—			(44		)	(44		)
Net decrease in other comprehensive income	(2,289		)	(339		)	(2,628		)
Accumulated other comprehensive income (loss), net of tax, as of March 31, 2013	$	(908	)	$	1,199		$	291

All amounts reclassified from accumulated other comprehensive income were related to gains (losses) on available for sale securities. These reclassifications impacted "Interest and other income (expense)" on the Consolidated Statements of Operations.

Income Taxes

The effective tax rates (benefit) for the three months ended March 31, 2013 and 2012 were (189)% and (35)%, respectively. These rates differed from the federal statutory rate primarily due to the Federal and California R&D tax credits partially offset by state taxes and nondeductible expenses. The increase in the Company's effective tax rate (benefit) for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012 was primarily due to the reinstatement of the 2012 Federal R&D credit in January 2013.

On January 2, 2013, the American Taxpayer Relief Act of 2012 (H.R. 8) was signed into law which retroactively extended the Federal R&D credit from January 1, 2012 through December 31, 2013. As a result, the Company recognized the retroactive benefit of the 2012 Federal R&D credit of approximately $3.1 million as a discrete item in the first quarter of 2013, the period in which the legislation was enacted.

As of December 31, 2012, the Company had $43.3 million of gross unrecognized tax benefits. During the three months ended March 31, 2013, the Company had an increase in gross unrecognized tax benefits of approximately $8.6 million. The gross unrecognized tax benefits, if recognized by the Company, will result in a reduction of approximately $43.6 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 (benefit) for income taxes" on the Consolidated Statements of Operations. As of March 31, 2013, the total amount of gross interest and penalties accrued was $3.3 million, and is classified as “Other non-current liabilities” on the Consolidated Balance Sheets.

Deferred tax assets include $11.6 million and $11.0 million classified as “Other current assets” and $63.2 million and $56.9 million classified as “Other non-current assets” on the Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, 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 March 31, 2013 and December 31, 2012, 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 $11.3 million and $3.7 million, during the three months ended March 31, 2013 and 2012, 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 2011. The Company is also currently under examination by the state of California for the years 2006 and 2007. The years 1997 through 2005, as well as 2008 through 2011, 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

Streaming Content

The Company had $5.7 billion and $5.6 billion of obligations at March 31, 2013 and December 31, 2012, respectively, including agreements to 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 members.

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 below. 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 agreements to acquire and license streaming content that represent current or long-term liabilities as well as obligations not reflected on the Consolidated Balance Sheets is as follows:



	As of
	March 31, 2013		December 31, 2012
	(in thousands)
Less than one year	$	2,376,260	$	2,299,562
Due after one year and through 3 years	2,696,896		2,715,294
Due after 3 years and through 5 years	535,617		540,346
Due after 5 years	63,713		78,483
Total streaming content obligations	$	5,672,486	$	5,633,685

The Company has licenses with certain performing rights organizations (“PROs”), and is currently involved in negotiations with other PROs, that hold certain rights to music "publicly performed" in connection with streaming content into various territories. For the latter, the Company accrues for estimated royalties that are expected to be due to PROs and adjusts these accruals based on any changes in estimates. These amounts are included in the Company's streaming content obligations. If the Company is unable to reach mutually acceptable terms with the PROs, it could become involved in litigation and /or could be enjoined from delivering certain musical compositions, which could adversely impact the Company. Additionally, pending and ongoing litigation between certain PROs and other third parties in various territories could impact the Company's negotiations with PROs. The results of these negotiations are uncertain and 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 December 5, 2012, the Company and its Chief Executive Officer Reed Hastings each received a “Wells Notice” from the Staff of the SEC indicating its intent to recommend to the SEC that it institute a cease and desist proceeding and/or bring a civil injunctive action against the Company and Mr. Hastings for violations of Regulation Fair Disclosure, Section 13(a) of the Securities Exchange Act and Rules 13a-11 and 13a-15 thereunder. On April 2, 2013, the Company and Mr. Hastings each received notification that the SEC had concluded its investigation and did not intend to recommend any enforcement action.

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. Lead plaintiffs filed a consolidated complaint which alleged violations of the federal securities laws on June 26, 2012. 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 first amended 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 first amended consolidated complaint alleges, among other things, that the Company issued materially false and misleading statements primarily regarding the Company's streaming business 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 into In re Netflix, Inc. Shareholder Derivative Litigation, Case No. 1-12-cv-218399, and lead counsel was appointed. A consolidated complaint was filed 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 litigation on February 4, 2013. The demurrer and the motion to stay are pending. 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 consolidated financial statements with respect to these indemnification obligations.

Segment Information

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 revenues and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and direct marketing expenses.

The Domestic and International streaming segments derive revenues from monthly membership services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly membership services consisting solely of DVD-by-mail. Revenues and the related credit card fees are attributed to the operating segment based on the nature of the underlying membership (DVD or streaming) and the geographic region from which the membership originates. There are no internal revenue transactions between the Company’s reporting segments.

Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by the segment to obtain content and deliver it to the specific region. Marketing expenses are primarily comprised of advertising expenses which are generally included in the segment in which the expenditures are directly incurred.

As of March 31, 2013, the Company had $4.1 million in long-lived tangible assets located internationally and $125.2 million in long-lived tangible assets located in the United States. As of December 31, 2012 the Company had $4.0 million in long-lived tangible assets located internationally and $127.7 million in long-lived tangible assets located in the United States.

The following tables represent segment information for the quarter ended March 31, 2013:



	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	29,174		7,142			7,983		—
Revenues	$	638,649	$	142,019		$	243,293	$	1,023,961
Cost of revenues	436,506		165,024			125,333		726,863
Marketing	70,793		53,915			4,467		129,175
Contribution profit (loss)	$	131,350	$	(76,920	)	$	113,493	$	167,923
Other operating expenses								136,101
Operating income								31,822
Other income (expense)								(30,892		)
Benefit for income taxes								(1,759		)
Net income								$	2,689



	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,332,402	$	606,362	$	29,415	$	2,968,179
Amortization of content library	335,748		149,992		18,237		503,977

The following tables represent the Company’s segment information for the quarter ended March 31, 2012:



	As of/ Three months ended March 31, 2012
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	23,410		3,065			10,089		—
Revenues	$	506,665	$	43,425		$	319,701	$	869,791
Cost of revenues	360,776		91,411			171,746		623,933
Marketing	73,405		54,697			1,826		129,928
Contribution profit (loss)	$	72,484	$	(102,683	)	$	146,129	$	115,930
Other operating expenses								117,865
Operating loss								(1,935		)
Other income (expense)								(5,090		)
Benefit for income taxes								(2,441		)
Net loss								$	(4,584	)



	Three months ended March 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content library	$	254,525	$	85,211	$	20,046	$	359,782

The following tables represent the Company’s segment information as of December 31, 2012:



	As of December 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,317,070	$	527,235	$	29,865	$	2,874,170

(1)

A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with these services, the Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership would be canceled and cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies (Policies)

Use of Estimates

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 for the streaming content library; the recognition and measurement of income tax assets and liabilities; and the valuation of stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.

Segment Reporting

The Company is organized into three operating segments: Domestic streaming, International streaming and Domestic DVD. The Company’s revenues are derived from monthly membership fees.

Earnings (Loss) Per Share Earnings ((Loss) Per Share (Tables)

Computation Of Net Income (Loss) Per Share

The computation of earnings (loss) per share is as follows:



	Three Months Ended
	March 31, 2013		March 31, 2012
	(in thousands, except per share data)
Basic earnings (loss) per share:
Net income (loss)	$	2,689	$	(4,584	)
Shares used in computation:
Weighted-average common shares outstanding	55,972		55,456
Basic earnings (loss) per share	$	0.05	$	(0.08	)

Diluted earnings (loss) per share:
Net income (loss)	$	2,689	$	(4,584	)
Senior Convertible Notes interest expense, net of tax	49		—
Numerator for diluted earnings per share	$	2,738	$	(4,584	)
Shares used in computation:
Weighted-average common shares outstanding	55,972		55,456
Senior Convertible Notes shares	2,331		—
Employee stock options	1,843		—
Weighted-average number of shares	60,146		55,456
Diluted earnings (loss) per share	$	0.05	$	(0.08	)

Short-term Investments Short-term Investments (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 March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	310,813	$	—	$	—		$	310,813
Level 1 securities:
Money market funds	7,017		—		—			7,017
Level 2 securities:
Corporate debt securities	318,573		1,760		(291		)	320,042
Government and agency securities classified as cash equivalents	105,823		—		—			105,823
Government and agency securities classified as short-term investments	114,110		179		—			114,289
Asset and mortgage-backed securities	173,219		469		(198		)	173,490
Total (1)	$	1,029,555	$	2,408	$	(489	)	$	1,031,474



	As of December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	284,661	$	—	$	—		$	284,661
Level 1 securities:
Money market funds	10,500		—		—			10,500
Level 2 securities:
Corporate debt securities	150,322		1,605		(32		)	151,895
Government and agency securities	166,643		285		—			166,928
Asset and mortgage-backed securities	138,340		750		(125		)	138,965
Total (2)	$	750,466	$	2,640	$	(157	)	$	752,949


(1)	Includes $418.1 million that is included in cash and cash equivalents, $607.8 million included in short-term investments and $5.6 million of restricted cash that is included in other non-current assets related to workers compensation deposits.


(2)	Includes $290.3 million that is included in cash and cash equivalents, $457.8 million included in short-term investments and $4.8 million of restricted cash that is included in other non-current assets related to workers compensation deposits.

Estimated Fair Value Of Short-Term Investments By Contractual Maturity

The estimated fair value of short-term investments by contractual maturity as of March 31, 2013 is as follows:



	(in thousands)
Due within one year	$	70,895
Due after one year and through 5 years	486,043
Due after 5 years and through 10 years	6,633
Due after 10 years	44,250
Total short-term investments	$	607,821

Balance Sheet Components (Tables)

Components Of Content Library

Content library consisted of the following:



	As of
	March 31, 2013			December 31, 2012
	(in thousands)
Total content library, gross	$	5,376,681		$	5,001,524
Accumulated amortization	(2,408,502		)	(2,127,354		)
Total content library, net	2,968,179			2,874,170
Current content library, net	1,391,505			1,368,162
Non-current content library, net	$	1,576,674		$	1,506,008

Property And Equipment And Accumulated Depreciation

Property and equipment and accumulated depreciation consisted of the following:



		As of
		March 31, 2013			December 31, 2012
		(in thousands)
Computer equipment	3 years	$	88,192		$	84,193
Operations and other equipment	5 years	99,402			100,207
Software	3 years	38,740			39,073
Furniture and fixtures	3 years	18,669			18,208
Building	30 years	40,681			40,681
Leasehold improvements	Over life of lease	45,922			45,393
Capital work-in-progress		6,145			8,282
Property and equipment, gross		337,751			336,037
Less: Accumulated depreciation		(208,432		)	(204,356		)
Property and equipment, net		$	129,319		$	131,681

Stockholders' Equity (Tables)

Summary Of Activity Related To Stock Option Plans

A summary of the activities related to the Company’s stock option plans is as follows:



			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, 2012	4,049,037		4,572,952		$	71.33
Granted	(244,054	)	244,054		134.56
Exercised	—		(556,819	)	70.30
Balances as of March 31, 2013	3,804,983		4,260,187		75.09		6.72	$	502,450
Vested and exercisable at March 31, 2013			4,260,187		75.09		6.72	$	502,450

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
	March 31, 2013		March 31, 2012
Dividend yield	—	%	—	%
Expected volatility	54	%	65	%
Risk-free interest rate	1.87	%	1.97	%
Suboptimal exercise factor	2.33 - 3.59		2.26 - 3.65

Accumulated Other Comprehensive Income (Tables)

Schedule of Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income for the three months ended March 31, 2013:



	Foreign currency items			Change in unrealized gains on available for sale securities			Total
	(in thousands)
Accumulated other comprehensive income (loss), net of tax, as of December 31, 2012	$	1,381		$	1,538		$	2,919
Other comprehensive income before reclassifications	(2,289		)	(295		)	(2,584		)
Amounts reclassified from accumulated other comprehensive income	—			(44		)	(44		)
Net decrease in other comprehensive income	(2,289		)	(339		)	(2,628		)
Accumulated other comprehensive income (loss), net of tax, as of March 31, 2013	$	(908	)	$	1,199		$	291

Commitments and Contingencies (Tables)

Expected Timing Of Payments For Commitments

The expected timing of payments for these agreements to acquire and license streaming content that represent current or long-term liabilities as well as obligations not reflected on the Consolidated Balance Sheets is as follows:



	As of
	March 31, 2013		December 31, 2012
	(in thousands)
Less than one year	$	2,376,260	$	2,299,562
Due after one year and through 3 years	2,696,896		2,715,294
Due after 3 years and through 5 years	535,617		540,346
Due after 5 years	63,713		78,483
Total streaming content obligations	$	5,672,486	$	5,633,685

Segment Information (Tables)

Information On Reportable Segments And Reconciliation To Consolidated Net Income

The following tables represent segment information for the quarter ended March 31, 2013:



	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	29,174		7,142			7,983		—
Revenues	$	638,649	$	142,019		$	243,293	$	1,023,961
Cost of revenues	436,506		165,024			125,333		726,863
Marketing	70,793		53,915			4,467		129,175
Contribution profit (loss)	$	131,350	$	(76,920	)	$	113,493	$	167,923
Other operating expenses								136,101
Operating income								31,822
Other income (expense)								(30,892		)
Benefit for income taxes								(1,759		)
Net income								$	2,689



	As of/ Three months ended March 31, 2013
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,332,402	$	606,362	$	29,415	$	2,968,179
Amortization of content library	335,748		149,992		18,237		503,977

The following tables represent the Company’s segment information for the quarter ended March 31, 2012:



	As of/ Three months ended March 31, 2012
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total members at end of period (1)	23,410		3,065			10,089		—
Revenues	$	506,665	$	43,425		$	319,701	$	869,791
Cost of revenues	360,776		91,411			171,746		623,933
Marketing	73,405		54,697			1,826		129,928
Contribution profit (loss)	$	72,484	$	(102,683	)	$	146,129	$	115,930
Other operating expenses								117,865
Operating loss								(1,935		)
Other income (expense)								(5,090		)
Benefit for income taxes								(2,441		)
Net loss								$	(4,584	)



	Three months ended March 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Amortization of content library	$	254,525	$	85,211	$	20,046	$	359,782

The following tables represent the Company’s segment information as of December 31, 2012:



	As of December 31, 2012
	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Total content library, net	$	2,317,070	$	527,235	$	29,865	$	2,874,170

(1)

A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with these services, the Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership would be canceled and cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies (Details)

3 Months Ended

Mar. 31, 2013

segments

Organization And Summary Of Significant Accounting Policies [Abstract]

Number of Operating Segments

3

Reclassifications Schedule of Marketing and General and Administrative Expenses Reclassified (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

Mar. 31, 2012

Reclassification [Abstract]

Payroll and related expenses reclassified from Marketing to General and Administrative

$ 6.0

Earnings (Loss) Per Share (Computation Of Net Income (Loss) Per Share) (Details) (USD $)

In Thousands, except Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Net income (loss)

$ 2,689

$ (4,584)

Weighted-average common shares outstanding - Basic

55,972,000

55,456,000

Basic earnings (loss) per share (in dollars per share)

$ 0.05

$ (0.08)

Senior Convertible Notes interest expense, net of tax

49

0

Numerator for diluted earning per share

$ 2,738

$ (4,584)

Weighted-average number of shares - Diluted

60,146,000

55,456,000

Diluted earnings (loss) per share (in dollars per share)

$ 0.05

$ (0.08)

Senior Convertible Notes shares [Member]

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Senior Convertible Notes shares

2,331,000

0

Antidilutive shares excluded from calculation of diluted earnings (loss) per share

2,300,000

Employee stock options [Member]

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Employee stock options

1,843,000

0

Antidilutive shares excluded from calculation of diluted earnings (loss) per share

400,000

1,800,000

Short-term Investments (Available-For-Sale Securities Reported At Fair Value) (Details) (USD $)

Mar. 31, 2013

Dec. 31, 2012

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

$ 1,029,555,000 ¹

$ 750,466,000 ²

Gross Unrealized Gains

2,408,000 ¹

2,640,000 ²

Gross Unrealized Losses

(489,000)¹

(157,000)²

Estimated Fair Value

1,031,474,000 ¹

752,949,000 ²

Cash [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

310,813,000

284,661,000

Gross Unrealized Gains

0

Gross Unrealized Losses

0

Estimated Fair Value

310,813,000

284,661,000

Level 1 Securities [Member] |
Money market funds [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

7,017,000

10,500,000

Gross Unrealized Gains

0

Gross Unrealized Losses

0

Estimated Fair Value

7,017,000

10,500,000

Level 2 Securities [Member] |
Corporate debt securities [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

318,573,000

150,322,000

Gross Unrealized Gains

1,760,000

1,605,000

Gross Unrealized Losses

(291,000)

(32,000)

Estimated Fair Value

320,042,000

151,895,000

Level 2 Securities [Member] |
Government and agency securities classified as cash equivalents [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

105,823,000

Gross Unrealized Gains

0

Gross Unrealized Losses

0

Estimated Fair Value

105,823,000

Level 2 Securities [Member] |
Government and agency securities [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

114,110,000

166,643,000

Gross Unrealized Gains

179,000

285,000

Gross Unrealized Losses

0

Estimated Fair Value

114,289,000

166,928,000

Level 2 Securities [Member] |
Asset and mortgage-backed securities [Member]

Schedule of Available-for-sale Securities [Line Items]

Amortized Cost

173,219,000

138,340,000

Gross Unrealized Gains

469,000

750,000

Gross Unrealized Losses

(198,000)

(125,000)

Estimated Fair Value

173,490,000

138,965,000

Cash and Cash Equivalents [Member] |
Cash And Cash Equivalent [Member]

Schedule of Available-for-sale Securities [Line Items]

Estimated Fair Value

418,100,000

290,300,000

Short-term Investments [Member] |
Cash And Cash Equivalent [Member]

Schedule of Available-for-sale Securities [Line Items]

Estimated Fair Value

607,800,000

457,800,000

Restricted Cash [Member]

Schedule of Available-for-sale Securities [Line Items]

Restricted cash

$ 5,600,000

$ 4,800,000

[1] Includes $418.1 million that is included in cash and cash equivalents, $607.8 million included in short-term investments and $5.6 million of restricted cash that is included in other non-current assets related to workers compensation deposits.

[2] Includes $290.3 million that is included in cash and cash equivalents, $457.8 million included in short-term investments and $4.8 million of restricted cash that is included in other non-current assets related to workers compensation deposits.

Short-term Investments (Estimated Fair Value Of Short-Term Investments By Contractual Maturity) (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

Short-Term Investments And Fair Value Measurement [Abstract]

Due within one year

$ 70,895

Due after one year and through 5 years

486,043

Due after 5 years and through 10 years

6,633

Due after 10 years

44,250

Total short-term investments

$ 607,821

$ 457,787

Balance Sheet Components (Components of Content Library ) (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

Balance Sheet Related Disclosures [Abstract]

Total content library, gross

$ 5,376,681

$ 5,001,524

Accumulated amortization

(2,408,502)

(2,127,354)

Total content library, net

2,968,179

2,874,170

Current content library, net

1,391,505

1,368,162

Non-current content library, net

$ 1,576,674

$ 1,506,008

Balance Sheet Components (Property And Equipment And Accumulated Depreciation) (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Dec. 31, 2012

Property, Plant and Equipment [Line Items]

Property and equipment, gross

$ 337,751

$ 336,037

Less: Accumulated depreciation

(208,432)

(204,356)

Property and equipment, net

129,319

131,681

Computer equipment [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

88,192

84,193

Property and equipment, useful life (years)

3 years

Operations and other equipment [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

99,402

100,207

Property and equipment, useful life (years)

5 years

Software [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

38,740

39,073

Property and equipment, useful life (years)

3 years

Furniture and fixtures [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

18,669

18,208

Property and equipment, useful life (years)

3 years

Building [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

40,681

Property and equipment, useful life (years)

30 years

Leasehold improvements [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

45,922

45,393

Capital work-in-progress [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

$ 6,145

$ 8,282

Long-term Debt (Details) (USD $)

3 Months Ended

1 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Dec. 31, 2012

Mar. 31, 2013

Senior Convertible Note [Member]

Mar. 31, 2013

Senior Convertible Note [Member]

Minimum [Member]

Mar. 31, 2013

Senior Convertible Note [Member]

Maximum [Member]

Feb. 28, 2013

5.375% Senior Notes [Member]

Mar. 31, 2013

5.375% Senior Notes [Member]

Feb. 28, 2013

8.50% Senior Notes [Member]

Apr. 26, 2013

Subsequent Event [Member]

Apr. 26, 2013

Subsequent Event [Member]

Senior Convertible Note [Member]

Debt Instrument [Line Items]

Long-term debt outstanding

$ 500,000,000

$ 200,000,000

Interest rate

0.00%

5.375%

8.50%

Senior notes, maturity date

Dec. 01, 2018

Earliest conversion date

May 28, 2012

Weighted average price of common stock

$ 111.54

Trading days prior to conversion date required for conversion

50

65

Common stock, shares issued

56,143,986

55,587,167

2,300,000

Common stock conversion ratio

11.6553

Fair value at conversion

$ 216.99

Face amount

500,000,000

Redemption prices, percent of outstanding principal

101.00%

Proceeds from issuance of long-term debt

490,600,000

Debt issuance cost

9,400,000

Repayments

224,500,000

Make-whole premium

19,400,000

Interest payable

5,100,000

Loss on extinguishment of debt

25,129,000

0

25,100,000

Write off of unamortized deferred financing fees

4,200,000

Senior notes, fair value

$ 496,300,000

Stockholders' Equity (Narrative) (Details) (USD $)

In Millions, except Share data, unless otherwise specified

0 Months Ended

3 Months Ended

30 Months Ended

Jun. 30, 2004

Mar. 31, 2013

employee_groups

Mar. 31, 2012

Jan. 1, 2007

Dec. 31, 2012

Mar. 31, 2013

2011 Stock Plan [Member]

Apr. 26, 2013

Subsequent Event [Member]

Components of Stockholders' Equity [Line Items]

Common stock, shares issued

56,143,986

55,587,167

2,300,000

Shares reserved for future issuance

3,800,000

Total intrinsic value of options exercised

$ 50.0

$ 11.7

Cash received from option exercised

39.1

1.2

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

$ 72.71

$ 55.65

Stock-based compensation expense

17.7

19.3

Income tax benefit

$ 6.8

$ 6.7

Stockholders' Equity (Summary Of Activity Related To Stock Option Plans) (Details) (USD $)

In Thousands, except Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Stockholders' Equity Note [Abstract]

Shares Available for Grant, Beginning Balances

4,049,037

Options Outstanding, Number of Shares, Beginning Balances

4,572,952

Options Outstanding, Weighted-Average Exercise Price, Beginning Balances

$ 71.33

Shares Available for Grant, Granted

(244,054)

Options Outstanding, Number of Shares, Granted

244,054

Options Outstanding, Weighted-Average Exercise Price, Granted

$ 134.56

Shares Available for Grant, Exercised

0

Options Outstanding, Number of Shares, Exercised

(556,819)

Options Outstanding, Weighted-Average Exercise Price, Exercised

$ 70.30

Shares Available for Grant, Ending Balances

3,804,983

Options Outstanding, Number of Shares, Ending Balances

4,260,187

Options Outstanding, Weighted-Average Exercise Price, Ending Balances

$ 75.09

Weighted-Average Remaining Contractual Term, Ending Balances (in Years)

6 years 8 months 19 days

Aggregate Intrinsic Value, Ending Balances

$ 502,450

Options Outstanding, Number of Shares, Vested and exercisable

4,260,187

Options Outstanding, Weighted-Average Exercise Price, Vested and exercisable

$ 75.09

Weighted-Average Remaining Contractual Term, Vested and exercisable (in Years)

6 years 8 months 19 days

Aggregate Intrinsic Value, Vested and exercisable

$ 502,450

Stockholders' Equity (Summary Of Assumptions Used To Value Stock Option Grants Using Lattice-Binomial Model) (Details)

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Stockholders' Equity Note [Abstract]

Dividend yield

0.00%

Expected volatility

54.00%

65.00%

Risk-free interest rate

1.87%

1.97%

Suboptimal exercise factor, minimum

2.33

2.26

Suboptimal exercise factor, maximum

3.59

3.65

Accumulated Other Comprehensive Income (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Accumulated other comprehensive income (loss), net of tax, as of December 31, 2012

$ 2,919

Other comprehensive income before reclassifications

(2,584)

Amounts reclassified from accumulated other comprehensive income

(44)

Net decrease in other comprehensive income

(2,628)

Accumulated other comprehensive income (loss), net of tax, as of March 31, 2013

291

Foreign currency items [Member]

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Accumulated other comprehensive income (loss), net of tax, as of December 31, 2012

1,381

Other comprehensive income before reclassifications

(2,289)

Amounts reclassified from accumulated other comprehensive income

0

Net decrease in other comprehensive income

(2,289)

Accumulated other comprehensive income (loss), net of tax, as of March 31, 2013

(908)

Change in unrealized gains on available for sale securities [Member]

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Accumulated other comprehensive income (loss), net of tax, as of December 31, 2012

1,538

Other comprehensive income before reclassifications

(295)

Amounts reclassified from accumulated other comprehensive income

(44)

Net decrease in other comprehensive income

(339)

Accumulated other comprehensive income (loss), net of tax, as of March 31, 2013

$ 1,199

Income Taxes (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Effective tax rates

(189.00%)

(35.00%)

2012 Federal R&D credit recognized

$ 3.1

Unrecognized tax benefits

43.3

Increase in gross unrecognized tax benefits

8.6

Reduction in provision for income taxes due to impact of effective tax rate

43.6

Gross interest and penalties accrued

3.3

Deferred tax assets, other current assets

11.6

11.0

Deferred tax assets, other non-current assets

63.2

56.9

Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation

$ 11.3

$ 3.7

Commitments and Contingencies (Narrative) (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Total streaming content obligations

$ 5,672,486

$ 5,633,685

Commitments and Contingencies (Expected Timing Of Payments For Commitments) (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Less than one year

$ 2,376,260

$ 2,299,562

Due after one year and through 3 years

2,696,896

2,715,294

Due after 3 years and through 5 years

535,617

540,346

Due after 5 years

63,713

78,483

Total streaming content obligations

$ 5,672,486

$ 5,633,685

Commitments and Contingencies (Legal Proceedings) (Details) (Pending Litigation [Member])

Apr. 2, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

Feb. 29, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

Feb. 24, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

Feb. 13, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

Jan. 27, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

Jan. 13, 2012

United States District Court for the Northern District of California [Member]

lawsuits_filed

May 2, 2012

Superior Court of California, Santa Clara County [Member]

lawsuits_filed

Feb. 9, 2012

Superior Court of California, Santa Clara County [Member]

lawsuits_filed

Nov. 23, 2011

Superior Court of California, Santa Clara County [Member]

lawsuits_filed

Loss Contingencies [Line Items]

Loss Contingency, Pending Claims, Number

1

3

1

6

Segment Information (Information On Reportable Segments And Reconciliation To Consolidated Net Income) (Details) (USD $)

3 Months Ended

Mar. 31, 2013

segments

subscription

Mar. 31, 2012

subscription

Dec. 31, 2012

Segment Reporting Information [Line Items]

Number of Operating Segments

3

Total members at end of period

0 ¹

Revenues

$ 1,023,961,000

$ 869,791,000

Cost of revenues

726,863,000

623,933,000

Marketing

129,175,000

129,928,000

Contribution profit (loss)

167,923,000

115,930,000

Other operating expenses

136,101,000

117,865,000

Operating income (loss)

31,822,000

(1,935,000)

Other income (expense)

(30,892,000)

(5,090,000)

Benefit for income taxes

(1,759,000)

(2,441,000)

Net income (loss)

2,689,000

(4,584,000)

Total content library, net

2,968,179,000

2,874,170,000

Amortization of content library

503,977,000

359,782,000

Domestic Streaming [Member]

Segment Reporting Information [Line Items]

Total members at end of period

29,174,000 ¹

23,410,000 ¹

Revenues

638,649,000

506,665,000

Cost of revenues

436,506,000

360,776,000

Marketing

70,793,000

73,405,000

Contribution profit (loss)

131,350,000

72,484,000

Total content library, net

2,332,402,000

2,317,070,000

Amortization of content library

335,748,000

254,525,000

International Streaming [Member]

Segment Reporting Information [Line Items]

Total members at end of period

7,142,000 ¹

3,065,000 ¹

Revenues

142,019,000

43,425,000

Cost of revenues

165,024,000

91,411,000

Marketing

53,915,000

54,697,000

Contribution profit (loss)

(76,920,000)

(102,683,000)

Total content library, net

606,362,000

527,235,000

Amortization of content library

149,992,000

85,211,000

Domestic DVD [Member]

Segment Reporting Information [Line Items]

Total members at end of period

7,983,000 ¹

10,089,000 ¹

Revenues

243,293,000

319,701,000

Cost of revenues

125,333,000

171,746,000

Marketing

4,467,000

1,826,000

Contribution profit (loss)

113,493,000

146,129,000

Total content library, net

29,415,000

29,865,000

Amortization of content library

18,237,000

20,046,000

International [Member]

Segment Reporting Information [Line Items]

Long-Lived Assets

4,100,000

4,000,000

Domestic [Member]

Segment Reporting Information [Line Items]

Long-Lived Assets

$ 125,200,000

$ 127,700,000

[1] A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. In connection with these services, the Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership would be canceled and cease to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the monthly membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.