Document And Entity Information

9 Months Ended

Sep. 30, 2015

Document And Entity Information [Abstract]

Entity Registrant Name

NETFLIX INC

Entity Central Index Key

0001065280

Current Fiscal Year End Date

--12-31

Entity Filer Category

Large Accelerated Filer

Document Type

10-Q

Document Period End Date

Sep. 30, 2015

Document Fiscal Year Focus

2015

Document Fiscal Period Focus

Q3

Amendment Flag

false

Entity Common Stock, Shares Outstanding

427,388,288

Consolidated Statements of Operations (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Income Statement [Abstract]

Revenues

$ 1,738,355

$ 1,409,432

$ 4,956,178

$ 4,019,928

Cost of revenues

1,173,958

954,394

3,342,111

2,738,428

Marketing

208,102

145,654

599,919

403,515

Technology and development

171,762

120,953

469,929

346,445

General and administrative

110,892

78,024

298,287

193,938

Operating income

73,641

110,407

245,932

337,602

Other income (expense):

Interest expense

(35,333)

(13,486)

(97,287)

(36,866)

Interest and other income (expense)

3,930

616

(27,491)

3,117

Income before income taxes

42,238

97,537

121,154

303,853

Provision for income taxes

12,806

38,242

41,691

120,425

Net income

$ 29,432

$ 59,295

$ 79,463

$ 183,428

Earnings per share:

Basic (in dollars per share)

$ 0.07

$ 0.14

$ 0.19

$ 0.44

Diluted (in dollars per share)

$ 0.07

$ 0.14

$ 0.18

$ 0.42

Weighted-average common shares outstanding:

Basic (in shares)

426,869

421,194

425,289

419,972

Diluted (in shares)

437,606

432,742

435,849

431,683

Consolidated Statements of Comprehensive Income (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Statement of Comprehensive Income [Abstract]

Net income

$ 29,432

$ 59,295

$ 79,463

$ 183,428

Other comprehensive income (loss):

Foreign currency translation adjustments

302

(4,354)

(33,628)

(1,975)

Change in unrealized gains on available-for-sale securities, net of tax of $(45), $(313), $113 and $28, respectively

(72)

(503)

184

45

Total other comprehensive income (loss)

230

(4,857)

(33,444)

(1,930)

Comprehensive income

$ 29,662

$ 54,438

$ 46,019

$ 181,498

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

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Statement of Comprehensive Income [Abstract]

Change in unrealized gains on available-for-sale securities, tax

$ (45)

$ (313)

$ 113

$ 28

Consolidated Statements of Cash Flows (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Cash flows from operating activities:

Net income

$ 29,432

$ 59,295

$ 79,463

$ 183,428

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

Additions to streaming content library

(1,308,943)

(1,202,484)

(4,194,545)

(2,765,197)

Change in streaming content liabilities

104,684

346,752

922,163

467,355

Amortization of streaming content library

871,403

686,154

2,443,521

1,925,926

Amortization of DVD content library

18,589

18,269

60,587

51,313

Depreciation and amortization of property, equipment and intangibles

16,047

14,357

46,795

39,716

Stock-based compensation expense

32,834

29,878

88,865

84,988

Excess tax benefits from stock-based compensation

(37,726)

(21,060)

(106,154)

(68,420)

Other non-cash items

10,866

3,360

23,854

8,807

Deferred taxes

(29,417)

(7,892)

(70,691)

(37,564)

Changes in operating assets and liabilities:

Other current assets

71,172

12,960

54,667

27,341

Accounts payable

6,762

13,003

2,584

32,729

Accrued expenses

10,883

(6,980)

88,429

51,586

Deferred revenue

27,985

11,626

55,153

37,189

Other non-current assets and liabilities

(20,540)

5,323

615

15,747

Net cash (used in) provided by operating activities

(195,969)

(37,439)

(504,694)

54,944

Cash flows from investing activities:

Acquisition of DVD content library

(14,467)

(15,530)

(57,159)

(51,425)

Purchases of property and equipment

(37,820)

(21,032)

(78,394)

(54,235)

Other assets

(3,760)

341

(4,174)

1,765

Purchases of short-term investments

(66,444)

(123,883)

(225,333)

(355,337)

Proceeds from sale of short-term investments

43,887

107,568

144,247

340,278

Proceeds from maturities of short-term investments

31,125

32,125

82,182

127,229

Net cash (used in) provided by investing activities

(47,479)

(20,411)

(138,631)

8,275

Cash flows from financing activities:

Proceeds from issuance of common stock

35,089

9,877

69,809

56,794

Proceeds from issuance of debt

0

1,500,000

400,000

Issuance costs

0

(17,629)

(7,080)

Excess tax benefits from stock-based compensation

37,726

21,060

106,154

68,420

Principal payments of lease financing obligations

(61)

(275)

(599)

(813)

Net cash provided by financing activities

72,754

30,662

1,657,735

517,321

Effect of exchange rate changes on cash and cash equivalents

(7,741)

(3,839)

(12,581)

(2,288)

Net (decrease) increase in cash and cash equivalents

(178,435)

(31,027)

1,001,829

578,252

Cash and cash equivalents, beginning of period

2,293,872

1,214,244

1,113,608

604,965

Cash and cash equivalents, end of period

2,115,437

1,183,217

2,115,437

1,183,217

Supplemental disclosure of non-cash investing activities:

(Decrease) increase in accounts payable related to purchases of property and equipment

$ (9,790)

$ (1,362)

$ 2,362

$ 4,431

Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

Current assets:

Cash and cash equivalents

$ 2,115,437

$ 1,113,608

Short-term investments

494,205

494,888

Current content library, net

2,695,184

2,125,702

Other current assets

264,887

206,271

Total current assets

5,569,713

3,940,469

Non-current content library, net

3,891,790

2,773,326

Property and equipment, net

181,268

149,875

Other non-current assets

273,496

192,981

Total assets

9,916,267

7,056,651

Current liabilities:

Current content liabilities

2,622,964

2,117,241

Accounts payable

209,365

201,581

Accrued expenses

179,350

69,746

Deferred revenue

329,739

274,586

Total current liabilities

3,341,418

2,663,154

Non-current content liabilities

1,966,854

1,575,832

Long-term debt

2,400,000

900,000

Other non-current liabilities

40,677

59,957

Total liabilities

7,748,949

5,198,943

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.001 par value; 4,990,000,000 and 160,000,000 shares authorized at September 30, 2015 and December 31, 2014, respectively; 427,388,288 and 422,910,887 issued and outstanding at September 30, 2015 and December 31, 2014, respectively

1,306,461

1,042,870

Accumulated other comprehensive loss

(37,890)

(4,446)

Retained earnings

898,747

819,284

Total stockholders’ equity

2,167,318

1,857,708

Total liabilities and stockholders’ equity

$ 9,916,267

$ 7,056,651

Consolidated Balance Sheets (Parenthetical) (USD $)

Sep. 30, 2015

Dec. 31, 2014

Statement of Financial Position [Abstract]

Common stock, par value (dollars per share)

$ 0.001

Common stock, shares authorized (shares)

4,990,000,000

160,000,000

Common stock, shares issued (shares)

427,388,288

422,910,887

Common stock, shares outstanding (shares)

427,388,288

422,910,887

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, 2014 filed with the Securities and Exchange Commission (the “SEC”) on January 29, 2015. 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 streaming content library amortization policy; 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. On a regular basis, the Company evaluates the assumptions, judgments and estimates. 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, 2014. Interim results are not necessarily indicative of the results for a full year.

The Company has three reportable segments: Domestic streaming, International streaming and Domestic DVD. The majority of the Company’s revenues are generated in the United States, and substantially all of the Company’s long-lived tangible assets are held in the United States. The Company’s revenues are derived from monthly membership fees.

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, 2014.

Prior to January 1, 2015, the functional currency of certain of the Company's European entities was the British pound. The Company changed the functional currency of these entities to the euro effective January 1, 2015 following the redomiciliation of the European headquarters and the launch of the Netflix service in several significant European countries. The change in functional currency was applied prospectively from January 1, 2015. Monetary assets and liabilities have been remeasured to the euro at current exchange rates. Non-monetary assets and liabilities have been remeasured to the euro using the exchange rate effective for the period in which the balance arose. As a result of this change of functional currency, the Company recorded a $21.8 million cumulative translation adjustment included in other comprehensive loss for the nine months ended September 30, 2015.

On July 14, 2015, the Company completed a seven-for-one stock split in the form of a stock dividend. References made to outstanding shares or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this seven-for-one stock split. The number of authorized shares as reflected on the Consolidated Balance Sheets was not affected by the stock split and accordingly has not been adjusted. See Notes 2 and 6 for additional information.

In the third quarter of 2015, the Company changed the amortization method of certain content given changes in estimated viewing patterns of this content. The effect of this change in estimate was a $12.8 million decrease in operating income and an $8.0 million decrease in net income for the three and nine month periods ended September 30, 2015. The effect on both basic earnings per share and diluted earnings per share was a decrease of $0.02, for the three and nine months ended September 30, 2015.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, but does not expect the impact to be material.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company will adopt ASU 2015-03 on January 1, 2016, at which time the Company will retrospectively reclassify approximately $30 million of debt issuance costs associated with the Company's long-term debt from other non-current assets to long-term debt.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. The Company has elected to early adopt the ASU in the third quarter of 2015 and will apply the guidance prospectively to all future arrangements. The impact of the adoption of the ASU was not material to the Company's consolidated financial statements.

Earnings Per Share

In June 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015 ("Stock Split").

Outstanding share and per-share amounts disclosed as of September 30, 2015 and for all other comparative periods provided have been retroactively adjusted to reflect the effects of the Stock Split.

Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share, as adjusted to reflect the effects of the Stock Split, are as follows:



	Three Months Ended				Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(in thousands, except per share data)
Basic earnings per share:
Net income	$	29,432	$	59,295	$	79,463	$	183,428
Shares used in computation:
Weighted-average common shares outstanding	426,869		421,194		425,289		419,972
Basic earnings per share	$	0.07	$	0.14	$	0.19	$	0.44

Diluted earnings per share:
Net income	$	29,432	$	59,295	$	79,463	$	183,428
Shares used in computation:
Weighted-average common shares outstanding	426,869		421,194		425,289		419,972
Employee stock options	10,737		11,548		10,560		11,711
Weighted-average number of shares	437,606		432,742		435,849		431,683
Diluted earnings per share	$	0.07	$	0.14	$	0.18	$	0.42

Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table summarizes the potential common shares excluded from the diluted calculation, as adjusted to reflect the effects of the Stock Split:



	Three Months Ended		Nine Months Ended
	September 30, 2015	September 30, 2014	September 30, 2015	September 30, 2014
	(in thousands)
Employee stock options	130	371	668	448

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 preservation of capital, liquidity and return. From time to time, the Company may sell certain securities but the objectives are generally not to generate profits on short-term differences in price. The following tables summarize, by major security type, the Company’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy and where they are classified on the Consolidated Balance Sheets:



	As of September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	2,008,627	$	—	$	—		$	2,008,627
Level 1 securities:
Money market funds	115,316		—		—			115,316
Level 2 securities:
Corporate debt securities	251,192		406		(467		)	251,131
Government securities	212,256		599		(9		)	212,846
Certificate of deposits	3,600		—		—			3,600
Agency securities	26,599		29		—			26,628
Total	$	2,617,590	$	1,034	$	(476	)	$	2,618,148



	As of December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	1,007,543	$	—	$	—		$	1,007,543
Level 1 securities:
Money market funds	111,759		—		—			111,759
Level 2 securities:
Corporate debt securities	295,500		432		(199		)	295,733
Government securities	168,749		120		(95		)	168,774
Asset and mortgage-backed securities	112		—		—			112
Certificate of deposits	3,600		—		—			3,600
Agency securities	26,665		5		(1		)	26,669
Total	$	1,613,928	$	557	$	(295	)	$	1,614,190



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
Cash and cash equivalents	$	2,115,437	$	1,113,608
Short-term investments	494,205		494,888
Other non-current assets (1)	8,506		5,694
Total	$	2,618,148	$	1,614,190

(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.

Fair value is a market-based measurement that is 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 debt instruments.

There were no investments in a material unrealized loss position as of September 30, 2015 or December 31, 2014. There were no material other-than-temporary impairments or credit losses related to available-for-sale securities in the three or nine months ended September 30, 2015 and 2014. In addition, there were no material gross realized gains or losses in the three or nine months ended September 30, 2015 and 2014.

The estimated fair value of short-term investments by contractual maturity as of September 30, 2015 is as follows:



	(in thousands)
Due within one year	$	155,330
Due after one year and through five years	338,875
Total short-term investments	$	494,205

Balance Sheet Components

Content Library

Content library consisted of the following:



	As of
	September 30, 2015			December 31, 2014
	(in thousands)
Total content library, gross	$	11,133,463		$	8,497,403
Accumulated amortization	(4,546,489		)	(3,598,375		)
Total content library, net	6,586,974			4,899,028
Current content library, net	2,695,184			2,125,702
Non-current content library, net	$	3,891,790		$	2,773,326

Content library includes costs capitalized for licensed streaming content, production of original content and DVD content.

Property and Equipment, Net

Property and equipment and accumulated depreciation consisted of the following:



	As of
	September 30, 2015			December 31, 2014			Estimated Useful Lives
	(in thousands)
Information technology assets	$	190,929		$	189,274		3 years
Furniture and fixtures	35,967			25,758			3 years
Building	40,681			40,681			30 years
Leasehold improvements	103,113			57,339			Over life of lease
DVD operations equipment	89,132			89,144			5 years
Capital work-in-progress	12,483			12,495
Property and equipment, gross	472,305			414,691
Less: Accumulated depreciation	(291,037		)	(264,816		)
Property and equipment, net	$	181,268		$	149,875

Leasehold improvements as of September 30, 2015 includes $44.3 million for the expansion of the Company's headquarters that were placed into service during the quarter ended September 30, 2015.

Long-term Debt

As of September 30, 2015, the Company had aggregate outstanding principal of $2.4 billion in long-term notes with varying maturities (the "Notes"). Each of the Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at fixed rates.

The following table provides a summary of the Company's long-term debt as of September 30, 2015 and December 31, 2014:



						Level 2 Fair Value (1) as of
	Principal Amount at Par		Issuance Date	Maturity	Interest Due Dates	September 30, 2015		December 31, 2014
	(in millions)					(in millions)
5.375% Senior Notes	$	500.0	February 2013	2021	February 1 and August 1	$	518.8	$	520.0
5.750% Senior Notes	400.0		February 2014	2024	March 1 and September 1	408.0		416.0
5.50% Senior Notes (2)	700.0		February 2015	2022	April 15 and October 15	707.0		—
5.875% Senior Notes (2)	800.0		February 2015	2025	April 15 and October 15	822.0		—

(1) Based on quoted market prices in less active markets.


(2)	The net proceeds to the Company for the 5.50% and 5.875% Senior Notes issued in the first quarter of 2015 were an aggregate $1,482.4 million. Debt issuance costs of $17.6 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.

Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of September 30, 2015 and December 31, 2014, the Company was in compliance with all related covenants.

Stockholders' Equity

Stockholders’ Equity

Stock Split

In March 2015, the Company's Board of Directors adopted an amendment to the Company's Certificate of Incorporation, to increase the number of shares of capital stock the Company is authorized to issue from 170,000,000 (160,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001 to 5,000,000,000 (4,990,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001. This amendment to the Company's certificate of incorporation was approved by the Company's stockholders at the 2015 Annual Meeting held on June 9, 2015.

On June 23, 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015. Outstanding share and per-share amounts disclosed as of September 30, 2015 and for all other comparative periods presented have been retroactively adjusted to reflect the effects of the Stock Split.

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 September 30, 2015, 17.5 million shares were reserved for future grants under the 2011 Stock Plan.

A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:



			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price (per share)		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Balances as of December 31, 2014	20,025,208		22,845,417		$	21.65
Granted	(2,565,445	)	2,565,445		75.55
Exercised			(4,477,401	)	15.45
Balances as of September 30, 2015	17,459,763		20,933,461		$	29.58	6.32	$	1,544,838
Vested and exercisable as of September 30, 2015			20,933,461		$	29.58	6.32	$	1,544,838

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 third quarter of 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the third quarter of 2015. This amount changes based on the fair market value of the Company’s common stock.

A summary of the amounts related to option exercises, is as follows:



	Three Months Ended				Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(in thousands)
Total intrinsic value of options exercised	$	118,259	$	60,337	$	313,880	$	208,057
Cash received from options exercised	$	35,089	$	9,877	$	69,809	$	56,794

Stock-based Compensation

The following table summarizes the assumptions used to value stock option grants using the lattice-binomial model and the valuation data, as adjusted for the Stock Split:



	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Dividend yield	—		%	—		%	—		%	—		%
Expected volatility	45		%	43		%	36% - 45%			43% - 48%
Risk-free interest rate	2.29		%	2.52		%	2.03% - 2.29%			2.52% - 2.83%
Suboptimal exercise factor	2.48			2.68 - 4.57			2.47 -2.48			2.66 - 4.57
Valuation data:
Weighted-average fair value (per share)	$	50.58		$	33.85		$	34.64		$	31.03
Total stock-based compensation expense (in thousands)	$	32,834		$	29,878		$	88,865		$	84,988
Total income tax benefit related to stock options (in thousands)	$	12,365		$	11,438		$	33,553		$	32,562

The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior and the employee groupings. Prior to January 1, 2015, the Company bifurcated its option grants into two employee groupings (executive and non-executive) to determine the suboptimal exercise factor. Beginning on January 1, 2015, the Company began aggregating employee groupings for its determination of the suboptimal exercise factor as the previous bifurcation into two groupings did not have a material impact on the fair value of the options granted.

Prior to January 1, 2015, the Company's computation of expected volatility was based on a blend of historical volatility of its common stock and implied volatility of tradable forward call options to purchase shares of its common stock, as low trade volume of its tradable forward call options prior to 2011 precluded sole reliance on implied volatility. Beginning on January 1, 2015, expected volatility is based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.

In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.

Accumulated Other Comprehensive Loss

The following table summarizes the changes in the accumulated balance of other comprehensive loss, net of tax, for the three and nine months ended September 30, 2015:



	Foreign currency			Change in unrealized gains on available-for-sale securities			Total
	(in thousands)
Balance as of June 30, 2015	$	(38,545	)	$	425		$	(38,120	)
Other comprehensive (loss) income before reclassifications	302			(59		)	243
Amounts reclassified from accumulated other comprehensive loss	—			(13		)	(13		)
Net increase (decrease) in other comprehensive (loss) income	302			(72		)	230
Balance as of September 30, 2015	$	(38,243	)	$	353		$	(37,890	)



	Foreign currency			Change in unrealized gains on available-for-sale securities			Total
	(in thousands)
Balance as of December 31, 2014	$	(4,615	)	$	169		$	(4,446	)
Other comprehensive (loss) income before reclassifications	(33,628		)	374			(33,254		)
Amounts reclassified from accumulated other comprehensive loss	—			(190		)	(190		)
Net increase (decrease) in other comprehensive (loss) income	(33,628		)	184			(33,444		)
Balance as of September 30, 2015	$	(38,243	)	$	353		$	(37,890	)

As discussed in Note 1, other comprehensive loss for the nine months ended September 30, 2015 includes the impact of the change in functional currency for certain of the Company's European entities.

All amounts reclassified from accumulated other comprehensive loss were related to realized gains 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 for the three months ended September 30, 2015 and 2014 were 30% and 39%, respectively. The effective tax rates for the nine months ended September 30, 2015 and 2014 were 34% and 40%, respectively. The effective tax rates for the three and nine months ended September 30, 2015 and 2014 differed from the federal statutory rate primarily due to state taxes, foreign taxes and non-deductible expenses, partially offset by the California R&D credit.

The decrease in the Company's effective tax rates for the three and nine months ended September 30, 2015 as compared to the three and nine months ended September 30, 2014 was primarily attributable to lower tax reserves on uncertain tax positions following an IRS Appeals settlement in the fourth quarter of 2014.

Gross unrecognized tax benefits were $41.1 million and $34.8 million as of September 30, 2015 and December 31, 2014, respectively. The gross unrecognized tax benefits, if recognized by the Company, will result in a reduction of approximately $33.7 million to the provision for income taxes thereby favorably impacting the Company’s effective tax rate. The Company’s unrecognized tax benefits are primarily classified as “Accrued expenses” on the Consolidated Balance Sheets as of September 30, 2015. 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 September 30, 2015, the total amount of gross interest and penalties accrued was $0.5 million, and is primarily classified as “Accrued expenses” on the Consolidated Balance Sheets.

Deferred tax assets include $20.2 million and $13.4 million classified as “Other current assets” and $170.7 million and $106.9 million classified as “Other non-current assets” on the Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014, 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 September 30, 2015 and December 31, 2014, it was considered more likely than not that all deferred tax assets would be realized.

Income tax benefits attributable to the exercise of employee stock options are recorded in additional paid-in-capital. These benefits amounted to $37.7 million and $21.0 million, during the three months ended September 30, 2015 and 2014, respectively and $105.6 million and $68.1 million, during the nine months ended September 30, 2015 and 2014, respectively.

The Company files U.S. federal, state and foreign tax returns. The Company is currently under examination by the IRS for the years 2010 through 2013. During the third quarter ending September 30, 2015, the Company reached a tentative settlement with the IRS and expects to reach a final settlement within the next twelve months, at which time the tax reserves on the related uncertain tax position will be adjusted. The Company has reclassified the tax reserves related to these years from "Other non-current liabilities" to "Accrued expenses" on the Consolidated Balance Sheets. The year 2014 remains subject to examination by the IRS.

The Company is also currently under examination by the state of California for the years 2006 and 2007. The state of California has completed its Field Exam and has issued a Notice of Proposed Assessment primarily related to the Company's R&D Credits claimed in those years. The Company has filed a protest against the proposed assessment. During the third quarter ending September 30, 2015, the Company has reached a tentative settlement with the Franchise Tax Board for tax years 1997 - 2007 and expects to reach a final settlement within the next twelve months, at which time the tax reserves on the related uncertain tax position will be adjusted. The Company has reclassified the tax reserves related to these years from "Other non-current liabilities" to Accrued expenses" on the Consolidated Balance Sheets. The years 2008 through 2013 remain subject to examination by the state of California.

The Company has no significant foreign jurisdiction audits underway. The years 2011 through 2014 remain subject to examination by foreign jurisdictions. Given the potential outcome of the current examinations, as well as the impact of the current 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

As of September 30, 2015, the Company had $10.4 billion of obligations comprised of $2.6 billion included in "Current content liabilities" and $2.0 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $5.8 billion of obligations that are not reflected on the Consolidated Balance Sheets.

As of December 31, 2014, the Company had $9.5 billion of obligations comprised of $2.1 billion included in "Current content liabilities" and $1.6 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $5.8 billion of obligations that are not reflected on the Consolidated Balance Sheets.

The expected timing of payments for these streaming content obligations is as follows:



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
Less than one year	$	4,535,209	$	3,747,648
Due after one year and through three years	4,888,130		4,495,103
Due after three years and through five years	908,111		1,164,308
Due after five years	46,768		44,053
Total streaming content obligations	$	10,378,218	$	9,451,112

A streaming content obligation is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is generally recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. However, the unknown obligations are expected to be significant and the expected timing of payments could range from less than one year to more than five years.

The Company has entered into certain licenses with collective management organizations ("CMOs"), and is currently involved in negotiations with other CMOs, that hold certain rights to music and other entertainment works "publicly performed" in connection with streaming content into various territories. Accruals for estimated license fees are recorded and then adjusted based on any change in estimates. These amounts are included in the streaming content obligations. The results of these negotiations are uncertain and may be materially different from management's estimates.

Legal Proceedings

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

On January 13, 2012, the first of three purported shareholder class action lawsuits was filed in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. Two additional purported shareholder class action lawsuits were filed in the same court on January 27, 2012 and February 29, 2012 alleging substantially similar claims. These lawsuits were consolidated into In re Netflix, Inc., Securities Litigation, Case No. 3:12-cv-00225-SC, and the Court selected lead plaintiffs. On June 26, 2012, lead plaintiffs filed a consolidated complaint which alleged violations of the federal securities laws. The Court dismissed the consolidated complaint with leave to amend on February 13, 2013. Lead plaintiffs filed a first amended consolidated complaint on March 22, 2013. The Court dismissed the first amended consolidated complaint with prejudice on August 20, 2013, and judgment was entered on September 27, 2013. Lead plaintiffs filed a motion to alter or amend the judgment and requested leave to file a second amended complaint on October 25, 2013. On January 17, 2014, the Court denied that motion. On February 18, 2014, lead plaintiffs appealed that decision to the United States Court of Appeals for the Ninth Circuit. Management has determined a potential loss is reasonably possible however, based on its current knowledge, management does not believe that the amount of such possible loss or a range of potential loss is reasonably estimable

On November 23, 2011, the first of six purported shareholder derivative suits was filed in the Superior Court of California, Santa Clara County, against the Company and certain of its officers and directors. Five additional purported shareholder derivative suits were subsequently filed: two in the Superior Court of California, Santa Clara County on February 9, 2012 and May 2, 2012; and three in the United States District Court for the Northern District of California on February 13, 2012, February 24, 2012 and April 2, 2012. The purported shareholder derivative suits filed in the Northern District of California have been voluntarily dismissed. On July 5, 2012, the purported shareholder derivative suits filed in Santa Clara County were consolidated into In re Netflix, Inc. Shareholder Derivative Litigation, Case No. 1-12-cv-218399, and lead counsel was appointed. A consolidated complaint was filed on December 4, 2012, with plaintiffs seeking compensatory damages and other relief. The consolidated complaint alleges, among other things, that certain of the Company's current and former officers and directors breached their fiduciary duties, issued false and misleading statements primarily regarding the Company's streaming business, violated accounting rules concerning segment reporting, violated provisions of the California Corporations Code, and wasted corporate assets. The consolidated complaint further alleges that the defendants caused the Company to buy back stock at artificially inflated prices to the detriment of the Company and its shareholders while contemporaneously selling personally held Company stock. The Company filed a demurrer to the consolidated complaint and a motion to stay the derivative litigation in favor of the related federal securities class action on February 4, 2013. On June 21, 2013, the Court granted the motion to stay the derivative litigation pending resolution of the related federal securities class action. Management has determined a potential loss is reasonably possible however, based on its current knowledge, management does not believe that the amount of such possible loss or a range of potential loss is reasonably estimable.

The Company is involved in other litigation matters not listed above but does not consider the matters to be material either individually or in the aggregate at this time. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold.

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 reportable segments: Domestic streaming, International streaming and Domestic DVD. Segment information is presented in the same manner that the Company’s chief operating decision maker ("CODM") reviews the operating results in assessing performance and allocating resources. The Company’s CODM reviews revenues and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses directly incurred by the segment. The Company has aggregated the results of the International operating segments into one reportable segment because these operating segments share similar long-term economic and other qualitative characteristics.

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

Cost of revenues are primarily attributed to the operating segment based on the amounts directly incurred by the segment to obtain content and deliver it to the specific region. Content rights increasingly include multiple geographies as the Company aspires to obtain global content rights to support global expansion. The Company allocates this content between the International and Domestic segments based on estimated fair market value. Marketing expenses are primarily comprised of advertising expenses which are generally included in the segment in which the expenditures are directly incurred.

The Company's long-lived tangible assets were located as follows:



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
United States	$	168,569	$	138,704
International	12,699		11,171

The following tables represent segment information for the periods ended September 30, 2015:



	As of/ Three Months Ended September 30, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	43,181		25,987			5,060		—
Revenues	$	1,063,961	$	516,870		$	157,524	$	1,738,355
Cost of revenues	644,914		451,251			77,793		1,173,958
Marketing	74,835		133,267			—		208,102
Contribution profit (loss)	$	344,212	$	(67,648	)	$	79,731	$	356,295
Other operating expenses								282,654
Operating income								73,641
Other income (expense)								(31,403		)
Provision for income taxes								12,806
Net income								$	29,432



	As of/ Nine Months Ended September 30, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	43,181		25,987			5,060		—
Revenues	$	3,074,406	$	1,387,030		$	494,742	$	4,956,178
Cost of revenues	1,840,134		1,249,495			252,482		3,342,111
Marketing	237,813		362,106			—		599,919
Contribution profit (loss)	$	996,459	$	(224,571	)	$	242,260	$	1,014,148
Other operating expenses								768,216
Operating income								245,932
Other income (expense)								(124,778		)
Provision for income taxes								41,691
Net income								$	79,463

The following tables represent segment information for the periods ended September 30, 2014:



	As of/ Three Months Ended September 30, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	37,219		15,843			5,986		—
Revenues	$	877,150	$	345,685		$	186,597	$	1,409,432
Cost of revenues	565,251		291,942			97,201		954,394
Marketing	61,045		84,609			—		145,654
Contribution profit (loss)	$	250,854	$	(30,866	)	$	89,396	$	309,384
Other operating expenses								198,977
Operating income								110,407
Other income (expense)								(12,870		)
Provision for income taxes								38,242
Net income								$	59,295



	As of/ Nine Months Ended September 30, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	37,219		15,843			5,986		—
Revenues	$	2,513,992	$	920,264		$	585,672	$	4,019,928
Cost of revenues	1,628,568		803,906			305,954		2,738,428
Marketing	206,030		197,485			—		403,515
Contribution profit (loss)	$	679,394	$	(81,127	)	$	279,718	$	877,985
Other operating expenses								540,383
Operating income								337,602
Other income (expense)								(33,749		)
Provision for income taxes								120,425
Net income								$	183,428

The following table represents the amortization of the content library:



	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Three months ended September 30,
2015	$	493,025	$	378,378	$	18,589	$	889,992
2014	433,266		252,888		18,269		704,423
Nine months ended September 30,
2015	1,387,242		1,056,279		60,587		2,504,108
2014	1,229,477		696,449		51,313		1,977,239

The following table represents total content library, net:



	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
As of September 30, 2015	$	4,367,750	$	2,193,785	$	25,439	$	6,586,974
As of December 31, 2014	3,476,226		1,392,701		30,101		4,899,028

(1)

A membership (also referred to as a subscription or member) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a membership in the above metrics, a method of payment is required to be provided even during the free-trial period. Total memberships therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

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 streaming content library amortization policy; 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. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, but does not expect the impact to be material.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company will adopt ASU 2015-03 on January 1, 2016, at which time the Company will retrospectively reclassify approximately $30 million of debt issuance costs associated with the Company's long-term debt from other non-current assets to long-term debt.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. The Company has elected to early adopt the ASU in the third quarter of 2015 and will apply the guidance prospectively to all future arrangements. The impact of the adoption of the ASU was not material to the Company's consolidated financial statements.

Earnings Per Share (Tables)

Computation of Earnings per Share

The computation of earnings per share, as adjusted to reflect the effects of the Stock Split, are as follows:



	Three Months Ended				Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(in thousands, except per share data)
Basic earnings per share:
Net income	$	29,432	$	59,295	$	79,463	$	183,428
Shares used in computation:
Weighted-average common shares outstanding	426,869		421,194		425,289		419,972
Basic earnings per share	$	0.07	$	0.14	$	0.19	$	0.44

Diluted earnings per share:
Net income	$	29,432	$	59,295	$	79,463	$	183,428
Shares used in computation:
Weighted-average common shares outstanding	426,869		421,194		425,289		419,972
Employee stock options	10,737		11,548		10,560		11,711
Weighted-average number of shares	437,606		432,742		435,849		431,683
Diluted earnings per share	$	0.07	$	0.14	$	0.18	$	0.42

Summary of Potential Common Shares Excluded from Diluted Calculation

The following table summarizes the potential common shares excluded from the diluted calculation, as adjusted to reflect the effects of the Stock Split:



	Three Months Ended		Nine Months Ended
	September 30, 2015	September 30, 2014	September 30, 2015	September 30, 2014
	(in thousands)
Employee stock options	130	371	668	448

Short-term Investments (Tables)

Available-For-Sale Securities Reported at Fair Value

The following tables summarize, by major security type, the Company’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy and where they are classified on the Consolidated Balance Sheets:



	As of September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	2,008,627	$	—	$	—		$	2,008,627
Level 1 securities:
Money market funds	115,316		—		—			115,316
Level 2 securities:
Corporate debt securities	251,192		406		(467		)	251,131
Government securities	212,256		599		(9		)	212,846
Certificate of deposits	3,600		—		—			3,600
Agency securities	26,599		29		—			26,628
Total	$	2,617,590	$	1,034	$	(476	)	$	2,618,148



	As of December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	1,007,543	$	—	$	—		$	1,007,543
Level 1 securities:
Money market funds	111,759		—		—			111,759
Level 2 securities:
Corporate debt securities	295,500		432		(199		)	295,733
Government securities	168,749		120		(95		)	168,774
Asset and mortgage-backed securities	112		—		—			112
Certificate of deposits	3,600		—		—			3,600
Agency securities	26,665		5		(1		)	26,669
Total	$	1,613,928	$	557	$	(295	)	$	1,614,190



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
Cash and cash equivalents	$	2,115,437	$	1,113,608
Short-term investments	494,205		494,888
Other non-current assets (1)	8,506		5,694
Total	$	2,618,148	$	1,614,190

(1) Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.

Estimated Fair Value of Short-Term Investments by Contractual Maturity

The estimated fair value of short-term investments by contractual maturity as of September 30, 2015 is as follows:



	(in thousands)
Due within one year	$	155,330
Due after one year and through five years	338,875
Total short-term investments	$	494,205

Balance Sheet Components (Tables)

Content Library

Content library consisted of the following:



	As of
	September 30, 2015			December 31, 2014
	(in thousands)
Total content library, gross	$	11,133,463		$	8,497,403
Accumulated amortization	(4,546,489		)	(3,598,375		)
Total content library, net	6,586,974			4,899,028
Current content library, net	2,695,184			2,125,702
Non-current content library, net	$	3,891,790		$	2,773,326

Property and Equipment, Net

Property and equipment and accumulated depreciation consisted of the following:



	As of
	September 30, 2015			December 31, 2014			Estimated Useful Lives
	(in thousands)
Information technology assets	$	190,929		$	189,274		3 years
Furniture and fixtures	35,967			25,758			3 years
Building	40,681			40,681			30 years
Leasehold improvements	103,113			57,339			Over life of lease
DVD operations equipment	89,132			89,144			5 years
Capital work-in-progress	12,483			12,495
Property and equipment, gross	472,305			414,691
Less: Accumulated depreciation	(291,037		)	(264,816		)
Property and equipment, net	$	181,268		$	149,875

Long-term Debt (Tables)

Summary of Long-term Debt

The following table provides a summary of the Company's long-term debt as of September 30, 2015 and December 31, 2014:



						Level 2 Fair Value (1) as of
	Principal Amount at Par		Issuance Date	Maturity	Interest Due Dates	September 30, 2015		December 31, 2014
	(in millions)					(in millions)
5.375% Senior Notes	$	500.0	February 2013	2021	February 1 and August 1	$	518.8	$	520.0
5.750% Senior Notes	400.0		February 2014	2024	March 1 and September 1	408.0		416.0
5.50% Senior Notes (2)	700.0		February 2015	2022	April 15 and October 15	707.0		—
5.875% Senior Notes (2)	800.0		February 2015	2025	April 15 and October 15	822.0		—

(1) Based on quoted market prices in less active markets.


(2)	The net proceeds to the Company for the 5.50% and 5.875% Senior Notes issued in the first quarter of 2015 were an aggregate $1,482.4 million. Debt issuance costs of $17.6 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.

Stockholders' Equity (Tables)

Summary of Activity Related to Stock Option Plans

A summary of the activities related to the Company’s stock option plans, as adjusted for the Stock Split, is as follows:



			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price (per share)		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Balances as of December 31, 2014	20,025,208		22,845,417		$	21.65
Granted	(2,565,445	)	2,565,445		75.55
Exercised			(4,477,401	)	15.45
Balances as of September 30, 2015	17,459,763		20,933,461		$	29.58	6.32	$	1,544,838
Vested and exercisable as of September 30, 2015			20,933,461		$	29.58	6.32	$	1,544,838

Summary of Amounts Related to Option Exercises

A summary of the amounts related to option exercises, is as follows:



	Three Months Ended				Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(in thousands)
Total intrinsic value of options exercised	$	118,259	$	60,337	$	313,880	$	208,057
Cash received from options exercised	$	35,089	$	9,877	$	69,809	$	56,794

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 and the valuation data, as adjusted for the Stock Split:



	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Dividend yield	—		%	—		%	—		%	—		%
Expected volatility	45		%	43		%	36% - 45%			43% - 48%
Risk-free interest rate	2.29		%	2.52		%	2.03% - 2.29%			2.52% - 2.83%
Suboptimal exercise factor	2.48			2.68 - 4.57			2.47 -2.48			2.66 - 4.57
Valuation data:
Weighted-average fair value (per share)	$	50.58		$	33.85		$	34.64		$	31.03
Total stock-based compensation expense (in thousands)	$	32,834		$	29,878		$	88,865		$	84,988
Total income tax benefit related to stock options (in thousands)	$	12,365		$	11,438		$	33,553		$	32,562

Accumulated Other Comprehensive Loss (Tables)

Schedule of Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in the accumulated balance of other comprehensive loss, net of tax, for the three and nine months ended September 30, 2015:



	Foreign currency			Change in unrealized gains on available-for-sale securities			Total
	(in thousands)
Balance as of June 30, 2015	$	(38,545	)	$	425		$	(38,120	)
Other comprehensive (loss) income before reclassifications	302			(59		)	243
Amounts reclassified from accumulated other comprehensive loss	—			(13		)	(13		)
Net increase (decrease) in other comprehensive (loss) income	302			(72		)	230
Balance as of September 30, 2015	$	(38,243	)	$	353		$	(37,890	)



	Foreign currency			Change in unrealized gains on available-for-sale securities			Total
	(in thousands)
Balance as of December 31, 2014	$	(4,615	)	$	169		$	(4,446	)
Other comprehensive (loss) income before reclassifications	(33,628		)	374			(33,254		)
Amounts reclassified from accumulated other comprehensive loss	—			(190		)	(190		)
Net increase (decrease) in other comprehensive (loss) income	(33,628		)	184			(33,444		)
Balance as of September 30, 2015	$	(38,243	)	$	353		$	(37,890	)

Commitments and Contingencies (Tables)

Expected Timing of Payments for Commitments

The expected timing of payments for these streaming content obligations is as follows:



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
Less than one year	$	4,535,209	$	3,747,648
Due after one year and through three years	4,888,130		4,495,103
Due after three years and through five years	908,111		1,164,308
Due after five years	46,768		44,053
Total streaming content obligations	$	10,378,218	$	9,451,112

Segment Information (Tables)

Long-lived Assets by Geographic Areas

The Company's long-lived tangible assets were located as follows:



	As of
	September 30, 2015		December 31, 2014
	(in thousands)
United States	$	168,569	$	138,704
International	12,699		11,171

Information on Reportable Segments And Reconciliation To Consolidated Net Income

The following tables represent segment information for the periods ended September 30, 2015:



	As of/ Three Months Ended September 30, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	43,181		25,987			5,060		—
Revenues	$	1,063,961	$	516,870		$	157,524	$	1,738,355
Cost of revenues	644,914		451,251			77,793		1,173,958
Marketing	74,835		133,267			—		208,102
Contribution profit (loss)	$	344,212	$	(67,648	)	$	79,731	$	356,295
Other operating expenses								282,654
Operating income								73,641
Other income (expense)								(31,403		)
Provision for income taxes								12,806
Net income								$	29,432



	As of/ Nine Months Ended September 30, 2015
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	43,181		25,987			5,060		—
Revenues	$	3,074,406	$	1,387,030		$	494,742	$	4,956,178
Cost of revenues	1,840,134		1,249,495			252,482		3,342,111
Marketing	237,813		362,106			—		599,919
Contribution profit (loss)	$	996,459	$	(224,571	)	$	242,260	$	1,014,148
Other operating expenses								768,216
Operating income								245,932
Other income (expense)								(124,778		)
Provision for income taxes								41,691
Net income								$	79,463

The following tables represent segment information for the periods ended September 30, 2014:



	As of/ Three Months Ended September 30, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	37,219		15,843			5,986		—
Revenues	$	877,150	$	345,685		$	186,597	$	1,409,432
Cost of revenues	565,251		291,942			97,201		954,394
Marketing	61,045		84,609			—		145,654
Contribution profit (loss)	$	250,854	$	(30,866	)	$	89,396	$	309,384
Other operating expenses								198,977
Operating income								110,407
Other income (expense)								(12,870		)
Provision for income taxes								38,242
Net income								$	59,295



	As of/ Nine Months Ended September 30, 2014
	Domestic Streaming		International Streaming			Domestic DVD		Consolidated
	(in thousands)
Total memberships at end of period (1)	37,219		15,843			5,986		—
Revenues	$	2,513,992	$	920,264		$	585,672	$	4,019,928
Cost of revenues	1,628,568		803,906			305,954		2,738,428
Marketing	206,030		197,485			—		403,515
Contribution profit (loss)	$	679,394	$	(81,127	)	$	279,718	$	877,985
Other operating expenses								540,383
Operating income								337,602
Other income (expense)								(33,749		)
Provision for income taxes								120,425
Net income								$	183,428

The following table represents the amortization of the content library:



	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
Three months ended September 30,
2015	$	493,025	$	378,378	$	18,589	$	889,992
2014	433,266		252,888		18,269		704,423
Nine months ended September 30,
2015	1,387,242		1,056,279		60,587		2,504,108
2014	1,229,477		696,449		51,313		1,977,239

The following table represents total content library, net:



	Domestic Streaming		International Streaming		Domestic DVD		Consolidated
	(in thousands)
As of September 30, 2015	$	4,367,750	$	2,193,785	$	25,439	$	6,586,974
As of December 31, 2014	3,476,226		1,392,701		30,101		4,899,028

(1)

A membership (also referred to as a subscription or member) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a membership in the above metrics, a method of payment is required to be provided even during the free-trial period. Total memberships therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.

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

0 Months Ended

1 Months Ended

3 Months Ended

9 Months Ended

Jul. 14, 2015

Jun. 23, 2015

Jun. 30, 2015

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

segment

Sep. 30, 2014

Change in Accounting Estimate [Line Items]

Number of reportable segments

3

Other comprehensive loss reflected in cumulative translation adjustment

$ 21,800,000

Stock split

7

Decrease in operating income

(73,641,000)

(110,407,000)

(245,932,000)

(337,602,000)

Decrease in net income

(29,432,000)

(59,295,000)

(79,463,000)

(183,428,000)

Service Life [Member]

Change in Accounting Estimate [Line Items]

Decrease in operating income

12,800,000

Decrease in net income

8,000,000

Decrease in basic and diluted earnings per share (in dollars per share)

$ 0.02

Accounting Standards Update 2015-03 [Member]

Change in Accounting Estimate [Line Items]

Amount of debt issuance costs to be retrospectively reclassified

$ 30,000,000

Earnings Per Share - Narrative (Details)

0 Months Ended

1 Months Ended

Jul. 14, 2015

Jun. 23, 2015

Jun. 30, 2015

Earnings Per Share [Abstract]

Stock split declared

7

Earnings Per Share - Computation of Net Income Per Share (Details) (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Basic earnings per share:

Net income

$ 29,432

$ 59,295

$ 79,463

$ 183,428

Weighted-average common shares outstanding (in shares)

426,869

421,194

425,289

419,972

Basic earnings per share (in dollars per share)

$ 0.07

$ 0.14

$ 0.19

$ 0.44

Diluted earnings per share:

Net income

$ 29,432

$ 59,295

$ 79,463

$ 183,428

Shares used in computation:

Weighted-average common shares outstanding (in shares)

426,869

421,194

425,289

419,972

Employee stock options (in shares)

10,737

11,548

10,560

11,711

Weighted-average number of shares (in shares)

437,606

432,742

435,849

431,683

Diluted earnings per share (in dollars per share)

$ 0.07

$ 0.14

$ 0.18

$ 0.42

Earnings Per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) (Employee stock options [Member])

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Employee stock options [Member]

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

Employee stock options

130

371

668

448

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

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

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

Level 2 securities, Gross Unrealized Gains

$ 1,034

$ 557

Level 2 securities, Gross Unrealized Losses

(476)

(295)

Total, Amortized Cost

2,617,590

1,613,928

Total, Estimated Fair Value

2,618,148

1,614,190

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

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

Cash and money market funds, Amortized Cost

115,316

111,759

Cash and money market funds, Estimated Fair Value

115,316

111,759

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

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

Level 2 securities, Amortized Cost

251,192

295,500

Level 2 securities, Gross Unrealized Gains

406

432

Level 2 securities, Gross Unrealized Losses

(467)

(199)

Level 2 securities, Estimated Fair Value

251,131

295,733

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

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

Level 2 securities, Amortized Cost

212,256

168,749

Level 2 securities, Gross Unrealized Gains

599

120

Level 2 securities, Gross Unrealized Losses

(9)

(95)

Level 2 securities, Estimated Fair Value

212,846

168,774

Level 2 Securities [Member] |
Asset-backed Securities [Member]

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

Level 2 securities, Amortized Cost

112

Level 2 securities, Gross Unrealized Gains

0

Level 2 securities, Gross Unrealized Losses

0

Level 2 securities, Estimated Fair Value

112

Level 2 Securities [Member] |
Certificates of deposits [Member]

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

Level 2 securities, Amortized Cost

3,600

Level 2 securities, Gross Unrealized Gains

0

Level 2 securities, Gross Unrealized Losses

0

Level 2 securities, Estimated Fair Value

3,600

Level 2 Securities [Member] |
Agency securities [Member]

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

Level 2 securities, Amortized Cost

26,599

26,665

Level 2 securities, Gross Unrealized Gains

29

5

Level 2 securities, Gross Unrealized Losses

0

(1)

Level 2 securities, Estimated Fair Value

26,628

26,669

Cash [Member]

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

Cash and money market funds, Amortized Cost

2,008,627

1,007,543

Cash and money market funds, Estimated Fair Value

$ 2,008,627

$ 1,007,543

Short-term Investments - Assets Classified on Consolidated Balance Sheets (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

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

Total

$ 2,618,148

$ 1,614,190

Fair Value, Measurements, Recurring [Member]

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

Total

2,618,148

1,614,190

Cash and cash equivalents [Member] |
Fair Value, Measurements, Recurring [Member]

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

Total

2,115,437

1,113,608

Short-term investments [Member] |
Fair Value, Measurements, Recurring [Member]

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

Total

494,205

494,888

Other non-current assets [Member] |
Fair Value, Measurements, Recurring [Member]

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

Total

$ 8,506 ¹

$ 5,694 ¹

[1] Primarily restricted cash that is related to workers compensation deposits and letter of credit agreements.

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

In Thousands, unless otherwise specified

Sep. 30, 2015

Short-Term Investments And Fair Value Measurement [Abstract]

Due within one year

$ 155,330

Due after one year and through five years

338,875

Total short-term investments

$ 494,205

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

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

Balance Sheet Components Disclosure [Abstract]

Total content library, gross

$ 11,133,463

$ 8,497,403

Accumulated amortization

(4,546,489)

(3,598,375)

Total content library, net

6,586,974

4,899,028

Current content library, net

2,695,184

2,125,702

Non-current content library, net

$ 3,891,790

$ 2,773,326

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

In Thousands, unless otherwise specified

9 Months Ended

12 Months Ended

Sep. 30, 2015

Dec. 31, 2014

Property, Plant and Equipment [Line Items]

Property and equipment, gross

$ 472,305

$ 414,691

Less: Accumulated depreciation

(291,037)

(264,816)

Property and equipment, net

181,268

149,875

Information technology assets [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

190,929

189,274

Estimated Useful Lives

3 years

Furniture and fixtures [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

35,967

25,758

Estimated Useful Lives

3 years

Building [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

40,681

Estimated Useful Lives

30 years

Leasehold improvements [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

103,113

57,339

Leasehold improvements [Member] |
Company's headquarters [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

44,300

DVD operations equipment [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

89,132

89,144

Estimated Useful Lives

5 years

Capital work-in-progress [Member]

Property, Plant and Equipment [Line Items]

Property and equipment, gross

$ 12,483

$ 12,495

Long-term Debt - Narrative (Details) (USD $)

In Thousands, unless otherwise specified

9 Months Ended

Sep. 30, 2015

Dec. 31, 2014

Sep. 30, 2015

Senior Notes [Member]

Debt Instrument [Line Items]

Aggregate outstanding principle

$ 2,400,000

$ 900,000

Redemption prices, percent of outstanding principal

101.00%

Long-term Debt - Summary of Long-term Debt (Details) (Senior Notes [Member], USD $)

1 Months Ended

Feb. 28, 2015

Sep. 30, 2015

5.375% Senior Notes [Member]

Dec. 31, 2014

5.375% Senior Notes [Member]

Sep. 30, 2015

5.750% Senior Notes [Member]

Dec. 31, 2014

5.750% Senior Notes [Member]

Sep. 30, 2015

5.50% Senior Notes [Member]

Feb. 28, 2015

5.50% Senior Notes [Member]

Dec. 31, 2014

5.50% Senior Notes [Member]

Sep. 30, 2015

5.875% Senior Notes [Member]

Feb. 28, 2015

5.875% Senior Notes [Member]

Dec. 31, 2014

5.875% Senior Notes [Member]

Debt Instrument [Line Items]

Principal Amount at Par

$ 500,000,000

$ 400,000,000

$ 700,000,000 ¹

$ 800,000,000 ¹

Fair Value

518,800,000 ²

520,000,000 ²

408,000,000 ²

416,000,000 ²

707,000,000 ¹ ²

0 ¹ ²

822,000,000 ¹ ²

0 ¹ ²

Interest rate

5.375%

5.75%

5.50% ¹

5.50%

5.875% ¹

5.875%

Net proceeds

1,482,400,000

Debt issuance costs, net

$ 17,600,000

[1] The net proceeds to the Company for the 5.50% and 5.875% Senior Notes issued in the first quarter of 2015 were an aggregate $1,482.4 million. Debt issuance costs of $17.6 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.

[2] Based on quoted market prices in less active markets

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

0 Months Ended

1 Months Ended

Jul. 14, 2015

Jun. 23, 2015

Dec. 31, 2014

employee_group

Jun. 30, 2015

Sep. 30, 2015

Mar. 31, 2015

Feb. 28, 2015

Dec. 31, 2014

Components of Stockholders' Equity [Line Items]

Number of shares of capital stock authorized

5,000,000,000

170,000,000

Number of common shares authorized

4,990,000,000

160,000,000

Number of preferred shares authorized

10,000,000

Common stock, par value (dollars per share)

$ 0.001

Preferred stock, par value (dollars per share)

$ 0.001

Stock split declared

7

Number of employee groups

2

2011 Stock Plan [Member]

Components of Stockholders' Equity [Line Items]

Shares reserved for future issuance

17,500,000

Stockholders' Equity - Summary of Activity Related to Stock Option Plans (Details) (USD $)

In Thousands, except Share data, unless otherwise specified

9 Months Ended

Sep. 30, 2015

Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]

Shares Available for Grant, Beginning Balance

20,025,208

Options Outstanding, Number of Shares, Beginning Balance

22,845,417

Shares Available for Grant, Granted

(2,565,445)

Options Outstanding, Number of Shares, Granted

2,565,445

Options Outstanding, Number of Shares, Exercised

(4,477,401)

Shares Available for Grant, Ending Balance

17,459,763

Options Outstanding, Number of Shares, Ending Balance

20,933,461

Options Outstanding, Number of Shares, Vested and exercisable

20,933,461

Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]

Options Outstanding, Weighted-Average Exercise Price, Beginning Balance

$ 21.65

Options Outstanding, Weighted-Average Exercise Price, Granted

$ 75.55

Options Outstanding, Weighted-Average Exercise Price, Exercised

$ 15.45

Options Outstanding, Weighted-Average Exercise Price, Ending Balance

$ 29.58

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

$ 29.58

Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]

Weighted-Average Remaining Contractual Term, Ending Balance

6 years 3 months 26 days

Weighted-Average Remaining Contractual Term, Vested and exercisable

6 years 3 months 26 days

Aggregate Intrinsic Value, Ending Balance

$ 1,544,838

Aggregate Intrinsic Value, Vested and exercisable

$ 1,544,838

Stockholders' Equity - Summary of Amounts Related to Option Exercises (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Equity [Abstract]

Total intrinsic value of options exercised

$ 118,259

$ 60,337

$ 313,880

$ 208,057

Cash received from options exercised

$ 35,089

$ 9,877

$ 69,809

$ 56,794

Stockholders' Equity - Summary of Assumptions Used to Value Stock Option Grants Using Lattice-Binomial Model (Details) (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]

Dividend yield

0.00%

Expected volatility

45.00%

43.00%

Expected volatility, minimum

36.00%

43.00%

Expected volatility, maximum

45.00%

48.00%

Risk-free interest rate

2.29%

2.52%

Risk-free interest rate, minimum

2.03%

2.52%

Risk-free interest rate, maximum

2.29%

2.83%

Suboptimal exercise factor

2.48

Suboptimal exercise factor, minimum

2.68

2.47

2.66

Suboptimal exercise factor, maximum

4.57

2.48

4.57

Weighted-average fair value (in dollars per share)

$ 50.58

$ 33.85

$ 34.64

$ 31.03

Total stock-based compensation expense (in thousands)

$ 32,834

$ 29,878

$ 88,865

$ 84,988

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

$ 12,365

$ 11,438

$ 33,553

$ 32,562

Accumulated Other Comprehensive Loss (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Beginning balance

$ (38,120)

$ (4,446)

Other comprehensive (loss) income before reclassifications

243

(33,254)

Amounts reclassified from accumulated other comprehensive income

(13)

(190)

Net increase (decrease) in other comprehensive (loss) income

230

(33,444)

Ending balance

(37,890)

Foreign currency [Member]

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Beginning balance

(38,545)

(4,615)

Other comprehensive (loss) income before reclassifications

302

(33,628)

Amounts reclassified from accumulated other comprehensive income

0

Net increase (decrease) in other comprehensive (loss) income

302

(33,628)

Ending balance

(38,243)

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

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Beginning balance

425

169

Other comprehensive (loss) income before reclassifications

(59)

374

Amounts reclassified from accumulated other comprehensive income

(13)

(190)

Net increase (decrease) in other comprehensive (loss) income

(72)

184

Ending balance

$ 353

Income Taxes (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Effective tax rates

30.00%

39.00%

34.00%

40.00%

Gross unrecognized tax benefits

$ 41.1

$ 34.8

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

33.7

Gross interest and penalties accrued

0.5

Deferred tax assets classified as other current assets

20.2

13.4

Deferred tax assets classified as other non-current assets

170.7

106.9

Income tax benefits attributable to the exercise of employee stock options recorded directly to Additional paid-in-capital

$ 37.7

$ 21.0

$ 105.6

$ 68.1

Commitments and Contingencies - Streaming Content - Narrative (Details) (USD $)

Sep. 30, 2015

Dec. 31, 2014

Contractual Obligation [Line Items]

Streaming obligations included in current content liabilities

$ 10,378,218,000

$ 9,451,112,000

Streaming obligations not reflected on Consolidated Balance Sheets

5,800,000,000

Current Content Liabilities [Member]

Contractual Obligation [Line Items]

Streaming obligations included in non-current content liabilities

2,600,000,000

2,100,000,000

Non-current Content Liabilities [Member]

Contractual Obligation [Line Items]

Streaming obligations included in non-current content liabilities

$ 2,000,000,000

$ 1,600,000,000

Commitments and Contingencies - Expected Timing of Payments for Commitments (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Less than one year

$ 4,535,209

$ 3,747,648

Due after one year and through three years

4,888,130

4,495,103

Due after three years and through five years

908,111

1,164,308

Due after five years

46,768

44,053

Total streaming content obligations

$ 10,378,218

$ 9,451,112

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

Apr. 2, 2012

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

lawsuit_filed

Feb. 29, 2012

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

lawsuit_filed

Feb. 24, 2012

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

lawsuit_filed

Feb. 13, 2012

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

lawsuit_filed

Jan. 27, 2012

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

lawsuit_filed

Jan. 13, 2012

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

lawsuit_filed

May 2, 2012

Superior Court of California, Santa Clara County [Member]

lawsuit_filed

Feb. 9, 2012

Superior Court of California, Santa Clara County [Member]

lawsuit_filed

Nov. 23, 2011

Superior Court of California, Santa Clara County [Member]

lawsuit_filed

Loss Contingencies [Line Items]

Shareholder suits

1

6

Segment Information - Narrative (Details)

9 Months Ended

Sep. 30, 2015

segment

Segment Reporting Information [Line Items]

Number of reportable segments

3

International Streaming [Member]

Segment Reporting Information [Line Items]

Number of reportable segments

1

Segment Information - Long-lived Assets by Geographical Areas (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2015

Dec. 31, 2014

United States [Member]

Revenues from External Customers and Long-Lived Assets [Line Items]

Long-lived tangible assets

$ 168,569

$ 138,704

International [Member]

Revenues from External Customers and Long-Lived Assets [Line Items]

Long-lived tangible assets

$ 12,699

$ 11,171

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

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2015

subscription

Sep. 30, 2014

subscription

Sep. 30, 2015

subscription

Sep. 30, 2014

subscription

Dec. 31, 2014

Segment Reporting Information [Line Items]

Total memberships at end of period

0 ¹

Revenues

$ 1,738,355

$ 1,409,432

$ 4,956,178

$ 4,019,928

Cost of revenues

1,173,958

954,394

3,342,111

2,738,428

Marketing

208,102

145,654

599,919

403,515

Contribution profit (loss)

356,295

309,384

1,014,148

877,985

Other operating expenses

282,654

198,977

768,216

540,383

Operating income

73,641

110,407

245,932

337,602

Other income (expense)

(31,403)

(12,870)

(124,778)

(33,749)

Provision for income taxes

12,806

38,242

41,691

120,425

Net income

29,432

59,295

79,463

183,428

Amortization of content library

889,992

704,423

2,504,108

1,977,239

Total content library, net

6,586,974

4,899,028

Domestic Streaming [Member]

Segment Reporting Information [Line Items]

Total memberships at end of period

43,181,000 ¹

37,219,000 ¹

43,181,000 ¹

37,219,000 ¹

Revenues

1,063,961

877,150

3,074,406

2,513,992

Cost of revenues

644,914

565,251

1,840,134

1,628,568

Marketing

74,835

61,045

237,813

206,030

Contribution profit (loss)

344,212

250,854

996,459

679,394

Amortization of content library

493,025

433,266

1,387,242

1,229,477

Total content library, net

4,367,750

3,476,226

International Streaming [Member]

Segment Reporting Information [Line Items]

Total memberships at end of period

25,987,000 ¹

15,843,000 ¹

25,987,000 ¹

15,843,000 ¹

Revenues

516,870

345,685

1,387,030

920,264

Cost of revenues

451,251

291,942

1,249,495

803,906

Marketing

133,267

84,609

362,106

197,485

Contribution profit (loss)

(67,648)

(30,866)

(224,571)

(81,127)

Amortization of content library

378,378

252,888

1,056,279

696,449

Total content library, net

2,193,785

1,392,701

Domestic DVD [Member]

Segment Reporting Information [Line Items]

Total memberships at end of period

5,060,000 ¹

5,986,000 ¹

5,060,000 ¹

5,986,000 ¹

Revenues

157,524

186,597

494,742

585,672

Cost of revenues

77,793

97,201

252,482

305,954

Marketing

0

Contribution profit (loss)

79,731

89,396

242,260

279,718

Amortization of content library

18,589

18,269

60,587

51,313

Total content library, net

$ 25,439

$ 30,101

[1] A membership (also referred to as a subscription or member) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a membership in the above metrics, a method of payment is required to be provided even during the free-trial period. Total memberships therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately.