x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 77-0467272 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Title of each class | Name of Exchange on which registered | |
Common stock, $0.001 par value | NASDAQ Stock Market LLC | |
(NASDAQ Global Select Market) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | o | |
Emerging growth company | o |
Page | ||
PART I | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | ||
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
PART III | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
PART IV | ||
Item 15. |
Item 1. | Business |
Item 1A. | Risk Factors |
• | the need to adapt our content and user interfaces for specific cultural and language differences; |
• | difficulties and costs associated with staffing and managing foreign operations; |
• | political or social unrest and economic instability; |
• | compliance with laws such as the Foreign Corrupt Practices Act, UK Bribery Act and other anti-corruption laws, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials; |
• | difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions; |
• | regulatory requirements or government action against our service, whether in response to enforcement of actual or purported legal and regulatory requirements or otherwise, that results in disruption or non-availability of our service or particular content in the applicable jurisdiction; |
• | foreign intellectual property laws, or changes to such laws, which may be less favorable than U.S. law and, among other issues, may impact the economics of creating or distributing content, anti-piracy efforts, or our ability to protect or exploit intellectual property rights; |
• | adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain; |
• | fluctuations in currency exchange rates, which we do not use foreign exchange contracts or derivatives to hedge against and which will impact revenues and expenses of our international operations and expose us to foreign currency exchange rate risk; |
• | profit repatriation and other restrictions on the transfer of funds; |
• | differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as payment cards; |
• | new and different sources of competition; |
• | censorship requirements that cause us to remove or edit popular content, leading to consumer disappointment or dissatisfaction with our service; |
• | low usage and/or penetration of internet-connected consumer electronic devices; |
• | different and more stringent user protection, data protection, privacy and other laws, including data localization requirements; |
• | availability of reliable broadband connectivity and wide area networks in targeted areas for expansion; |
• | integration and operational challenges as well as potential unknown liabilities in connection with companies we may acquire or control; |
• | differing, and often more lenient, laws and consumer understanding/attitudes regarding the illegality of piracy; and |
• | implementation of regulations designed to stimulate the local production of film and TV series in order to promote and preserve local culture and economic activity, including local content quotas, investment obligations, and levies to support local film funds. |
• | make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our Notes and our other obligations; |
• | limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes; |
• | increase our cost of borrowing; |
• | limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes; |
• | require us to use a substantial portion of our cash flow from operations to make debt service payments and pay our other obligations when due; |
• | limit our flexibility to plan for, or react to, changes in our business and industry; |
• | place us at a competitive disadvantage compared to our less leveraged competitors; and |
• | increase our vulnerability to the impact of adverse economic and industry conditions, including changes in interest rates. |
• | authorize our board of directors, without stockholder approval, to issue up to 10,000,000 shares of undesignated preferred stock; |
• | provide for a classified board of directors; |
• | prohibit our stockholders from acting by written consent; |
• | establish advance notice requirements for proposing matters to be approved by stockholders at stockholder meetings; and |
• | prohibit stockholders from calling a special meeting of stockholders. |
• | variations in our operating results, including our membership acquisition and retention, revenues, operating income, net income and free cash flow; |
• | variations between our actual operating results and the expectations of securities analysts, investors and the financial community; |
• | announcements of developments affecting our business, systems or expansion plans by us or others; |
• | competition, including the introduction of new competitors, their pricing strategies and services; |
• | market volatility in general; |
• | the level of demand for our stock, including the amount of short interest in our stock; and |
• | the operating results of our competitors. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Item 6. | Selected Financial Data |
Year ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Revenues | $ | 15,794,341 | $ | 11,692,713 | $ | 8,830,669 | $ | 6,779,511 | $ | 5,504,656 | ||||||||||
Operating income | 1,605,226 | 838,679 | 379,793 | 305,826 | 402,648 | |||||||||||||||
Net income | 1,211,242 | 558,929 | 186,678 | 122,641 | 266,799 | |||||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 2.78 | $ | 1.29 | $ | 0.44 | $ | 0.29 | $ | 0.63 | ||||||||||
Diluted | $ | 2.68 | $ | 1.25 | $ | 0.43 | $ | 0.28 | $ | 0.62 | ||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||||
Basic | 435,374 | 431,885 | 428,822 | 425,889 | 420,544 | |||||||||||||||
Diluted | 451,244 | 446,814 | 438,652 | 436,456 | 431,894 |
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (2,680,479 | ) | $ | (1,785,948 | ) | $ | (1,473,984 | ) | $ | (749,439 | ) | $ | 16,483 | ||||||
Free cash flow (1) | (3,019,599 | ) | (2,019,659 | ) | (1,659,755 | ) | (920,557 | ) | (126,699 | ) |
(1) | Free cash flow is defined as net cash provided by (used in) operating and investing activities, excluding the non-operational cash flows from purchases, maturities and sales of short-term investments. See Liquidity and Capital Resources in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a reconciliation of "free cash flow" to "net cash (used in) provided by operating activities." |
As of December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash, cash equivalents and short-term investments | $ | 3,794,483 | $ | 2,822,795 | $ | 1,733,782 | $ | 2,310,715 | $ | 1,608,496 | ||||||||||
Total content assets, net | 20,112,140 | 14,681,989 | 11,000,808 | 7,218,815 | 4,939,460 | |||||||||||||||
Total assets | 25,974,400 | 19,012,742 | 13,586,610 | 10,202,871 | 7,042,500 | |||||||||||||||
Long-term debt | 10,360,058 | 6,499,432 | 3,364,311 | 2,371,362 | 885,849 | |||||||||||||||
Non-current content liabilities | 3,759,026 | 3,329,796 | 2,894,654 | 2,026,360 | 1,575,832 | |||||||||||||||
Total content liabilities | 8,445,045 | 7,502,837 | 6,527,365 | 4,815,383 | 3,693,073 | |||||||||||||||
Total stockholders’ equity | 5,238,765 | 3,581,956 | 2,679,800 | 2,223,426 | 1,857,708 |
As of / Year Ended December 31, | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
(in thousands) | |||||||||||||||
Global streaming paid memberships at end of period | 139,259 | 110,644 | 89,090 | 70,839 | 54,476 | ||||||||||
Global streaming paid net membership additions | 28,615 | 21,554 | 18,251 | 16,363 | 13,042 | ||||||||||
Global streaming free trials at end of period | 9,196 | 6,938 | 4,706 | 3,923 | 2,915 |
A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or other promotional offering by the Company to certain new and rejoining members. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations generally become effective at the end of the prepaid membership period. Involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. 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. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
As of/ Year Ended December 31, | Change | |||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||
(in thousands, except revenue per membership and percentages) | ||||||||||||||||||
Global Streaming Memberships: | ||||||||||||||||||
Paid memberships at end of period | 139,259 | 110,644 | 89,090 | 26 | % | 24 | % | |||||||||||
Paid net membership additions | 28,615 | 21,554 | 18,251 | 33 | % | 18 | % | |||||||||||
Average monthly revenue per paying membership | $ | 10.31 | $ | 9.43 | $ | 8.61 | 9 | % | 10 | % | ||||||||
Free trials at end of period | 9,196 | 6,938 | 4,706 | 33 | % | 47 | % | |||||||||||
Financial Results: | ||||||||||||||||||
Revenues | $ | 15,794,341 | $ | 11,692,713 | $ | 8,830,669 | 35 | % | 32 | % | ||||||||
Operating income | $ | 1,605,226 | $ | 838,679 | $ | 379,793 | 91 | % | 121 | % | ||||||||
Operating margin | 10 | % | 7 | % | 4 | % | 43 | % | 75 | % | ||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | 117 | % | 199 | % |
• | We define contribution profit (loss) as revenues less cost of revenues and marketing expenses incurred by the segment. This represents each segment's performance before global corporate costs. As markets within our International streaming segment become profitable, we increasingly focus on our global operating profit margin target as a measure of profitability. |
• | For the Domestic and International streaming segments, amortization of the streaming content assets makes up the majority of cost of revenues. Increasingly, we obtain multi-territory or global rights for our streaming content and allocate these rights between Domestic and International streaming segments based on estimated fair market value. |
• | For the Domestic and International streaming segments, marketing expenses consist primarily of advertising expenses and certain payments made to our marketing partners, including consumer electronics manufacturers, MVPDs, mobile operators and ISPs. Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll and related expenses for personnel that support the Company's marketing activities. Marketing expenses are incurred by our Domestic and International streaming segments in order to build consumer awareness of the streaming offerings, and in particular our original content. |
As of/ Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except revenue per membership and percentages) | ||||||||||||||||||||||||||
Memberships: | ||||||||||||||||||||||||||
Paid memberships at end of period | 58,486 | 52,810 | 47,905 | 5,676 | 11 | % | 4,905 | 10 | % | |||||||||||||||||
Paid net membership additions | 5,676 | 4,905 | 4,504 | 771 | 16 | % | 401 | 9 | % | |||||||||||||||||
Average monthly revenue per paying membership | $ | 11.40 | $ | 10.18 | $ | 9.21 | $ | 1.22 | 12 | % | $ | 0.97 | 11 | % | ||||||||||||
Free trials at end of period | 2,065 | 1,940 | 1,526 | 125 | 6 | % | 414 | 27 | % | |||||||||||||||||
Contribution profit: | ||||||||||||||||||||||||||
Revenues | $ | 7,646,647 | $ | 6,153,025 | $ | 5,077,307 | $ | 1,493,622 | 24 | % | $ | 1,075,718 | 21 | % | ||||||||||||
Cost of revenues | 4,038,394 | 3,470,859 | 2,951,973 | 567,535 | 16 | % | 518,886 | 18 | % | |||||||||||||||||
Marketing | 1,025,351 | 603,746 | 412,928 | 421,605 | 70 | % | 190,818 | 46 | % | |||||||||||||||||
Contribution profit | 2,582,902 | 2,078,420 | 1,712,406 | 504,482 | 24 | % | 366,014 | 21 | % | |||||||||||||||||
Contribution margin | 34 | % | 34 | % | 34 | % |
As of /Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except revenue per membership and percentages) | ||||||||||||||||||||||||||
Memberships: | ||||||||||||||||||||||||||
Paid memberships at end of period | 80,773 | 57,834 | 41,185 | 22,939 | 40 | % | 16,649 | 40 | % | |||||||||||||||||
Paid net membership additions | 22,939 | 16,649 | 13,747 | 6,290 | 38 | % | 2,902 | 21 | % | |||||||||||||||||
Average monthly revenue per paying membership | $ | 9.43 | $ | 8.66 | $ | 7.81 | $ | 0.77 | 9 | % | $ | 0.85 | 11 | % | ||||||||||||
Free trials at end of period | 7,131 | 4,998 | 3,180 | 2,133 | 43 | % | 1,818 | 57 | % | |||||||||||||||||
Contribution profit (loss): | ||||||||||||||||||||||||||
Revenues | $ | 7,782,105 | $ | 5,089,191 | $ | 3,211,095 | $ | 2,692,914 | 53 | % | $ | 1,878,096 | 58 | % | ||||||||||||
Cost of revenues | 5,776,047 | 4,359,616 | 3,042,747 | 1,416,431 | 32 | % | 1,316,869 | 43 | % | |||||||||||||||||
Marketing | 1,344,118 | 832,535 | 684,591 | 511,583 | 61 | % | 147,944 | 22 | % | |||||||||||||||||
Contribution profit (loss) | 661,940 | (102,960 | ) | (516,243 | ) | 764,900 | 743 | % | 413,283 | 80 | % | |||||||||||||||
Contribution margin | 9 | % | (2 | )% | (16 | )% |
As of/ Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except revenue per membership and percentages) | ||||||||||||||||||||||||||
Memberships: | ||||||||||||||||||||||||||
Paid memberships at end of period | 2,706 | 3,330 | 4,029 | (624 | ) | (19 | )% | (699 | ) | (17 | )% | |||||||||||||||
Average monthly revenue per paying membership | $10.19 | $10.17 | $10.22 | $0.02 | — | % | $(0.05) | — | % | |||||||||||||||||
Free trials at end of period | 25 | 53 | 85 | (28 | ) | (53 | )% | (32 | ) | (38 | )% | |||||||||||||||
Contribution profit: | ||||||||||||||||||||||||||
Revenues | $ | 365,589 | $ | 450,497 | $ | 542,267 | $ | (84,908 | ) | (19 | )% | $ | (91,770 | ) | (17 | )% | ||||||||||
Cost of revenues | 153,097 | 202,525 | 262,742 | (49,428 | ) | (24 | )% | (60,217 | ) | (23 | )% | |||||||||||||||
Contribution profit | 212,492 | 247,972 | 279,525 | (35,480 | ) | (14 | )% | (31,553 | ) | (11 | )% | |||||||||||||||
Contribution margin | 58 | % | 55 | % | 52 | % |
Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
Technology and development | $ | 1,221,814 | $ | 953,710 | $ | 780,232 | $ | 268,104 | 28 | % | $ | 173,478 | 22 | % | ||||||||||||
As a percentage of revenues | 8 | % | 8 | % | 9 | % |
Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
General and administrative | $ | 630,294 | $ | 431,043 | $ | 315,663 | $ | 199,251 | 46 | % | $ | 115,380 | 37 | % | ||||||||||||
As a percentage of revenues | 4 | % | 4 | % | 4 | % |
Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
Interest expense | $ | (420,493 | ) | $ | (238,204 | ) | $ | (150,114 | ) | $ | 182,289 | 77 | % | $ | 88,090 | 59 | % | |||||||||
As a percentage of revenues | (3 | )% | (2 | )% | (2 | )% |
Year Ended December 31, | Change | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | ||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||
Interest and other income (expense) | $ | 41,725 | $ | (115,154 | ) | $ | 30,828 | $ | 156,879 | 136 | % | $ | (145,982 | ) | (474 | )% |
Year Ended December 31, | Change | ||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||
Provision for (benefit from) income taxes | $ | 15,216 | $ | (73,608 | ) | $ | 73,829 | $ | 88,824 | (121 | )% | (147,437 | ) | (200 | )% | ||||||||||
Effective tax rate | 1 | % | (15 | )% | 28 | % |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Cash, cash equivalents and restricted cash | $ | 3,812,041 | $ | 2,822,795 | |||
Long-term debt | 10,360,058 | 6,499,432 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Net cash used in operating activities | $ | (2,680,479 | ) | $ | (1,785,948 | ) | $ | (1,473,984 | ) | ||
Net cash provided by (used in) investing activities | (339,120 | ) | 34,329 | 49,765 | |||||||
Net cash provided by financing activities | 4,048,527 | 3,076,990 | 1,091,630 | ||||||||
Non-GAAP free cash flow reconciliation: | |||||||||||
Net cash used in operating activities | (2,680,479 | ) | (1,785,948 | ) | (1,473,984 | ) | |||||
Acquisition of DVD content assets | (38,586 | ) | (53,720 | ) | (77,177 | ) | |||||
Purchases of property and equipment | (173,946 | ) | (173,302 | ) | (107,653 | ) | |||||
Other assets | (126,588 | ) | (6,689 | ) | (941 | ) | |||||
Non-GAAP free cash flow | $ | (3,019,599 | ) | $ | (2,019,659 | ) | $ | (1,659,755 | ) |
Payments due by Period | ||||||||||||||||||||
Contractual obligations (in thousands): | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Streaming content obligations (1) | $ | 19,285,875 | $ | 8,611,398 | $ | 8,841,561 | $ | 1,684,582 | $ | 148,334 | ||||||||||
Debt (2) | 14,873,195 | 538,384 | 1,550,581 | 1,646,101 | 11,138,129 | |||||||||||||||
Lease obligations (3) | 1,708,368 | 172,470 | 284,541 | 307,727 | 943,630 | |||||||||||||||
Other purchase obligations (4) | 696,148 | 391,025 | 241,743 | 58,212 | 5,168 | |||||||||||||||
Total | $ | 36,563,586 | $ | 9,713,277 | $ | 10,918,426 | $ | 3,696,622 | $ | 12,235,261 |
(1) | As of December 31, 2018, streaming content obligations were comprised of $4.7 billion included in "Current content liabilities" and $3.8 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $10.8 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition. |
(2) | Long-term debt obligations include our Notes consisting of principal and interest payments. See Note 4 Long-term Debt in the accompanying notes to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further details. |
(3) | Lease obligations include lease financing obligations of $11 million related to certain of our Los Gatos, California corporate offices for which we are the deemed owner for accounting purposes, commitments of $1,157 million for our office space in Los Gatos, California and in Los Angeles, California and other commitments of $540 million for corporate and production facilities under non-cancelable operating leases. These leases have expiration dates varying through approximately 2034. Total lease obligations as of December 31, 2018 increased $971 million from $737 million |
(4) | Other purchase obligations include all other non-cancelable contractual obligations. These contracts are primarily related to streaming delivery and cloud computing costs, as well as other miscellaneous open purchase orders for which we have not received the related services or goods. |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures |
(b) | Management’s Annual Report on Internal Control Over Financial Reporting |
(c) | Changes in Internal Control Over Financial Reporting |
/s/ Ernst & Young LLP | |
San Jose, California | |
January 29, 2019 |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accounting Fees and Services |
Item 15. | Exhibits, Financial Statement Schedules |
(a) | The following documents are filed as part of this Annual Report on Form 10-K: |
(1) | Financial Statements: |
(2) | Financial Statement Schedules: |
(3) | Exhibits: |
Item 16. | Form 10-K Summary |
Page | |
/s/ Ernst & Young LLP | |
We have served as the Company's auditor since 2012. | |
San Jose, California | |
January 29, 2019 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Revenues | $ | 15,794,341 | $ | 11,692,713 | $ | 8,830,669 | ||||||
Cost of revenues | 9,967,538 | 8,033,000 | 6,257,462 | |||||||||
Marketing | 2,369,469 | 1,436,281 | 1,097,519 | |||||||||
Technology and development | 1,221,814 | 953,710 | 780,232 | |||||||||
General and administrative | 630,294 | 431,043 | 315,663 | |||||||||
Operating income | 1,605,226 | 838,679 | 379,793 | |||||||||
Other income (expense): | ||||||||||||
Interest expense | (420,493 | ) | (238,204 | ) | (150,114 | ) | ||||||
Interest and other income (expense) | 41,725 | (115,154 | ) | 30,828 | ||||||||
Income before income taxes | 1,226,458 | 485,321 | 260,507 | |||||||||
Provision for (benefit from) income taxes | 15,216 | (73,608 | ) | 73,829 | ||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | ||||||
Earnings per share: | ||||||||||||
Basic | $ | 2.78 | $ | 1.29 | $ | 0.44 | ||||||
Diluted | $ | 2.68 | $ | 1.25 | $ | 0.43 | ||||||
Weighted-average common shares outstanding: | ||||||||||||
Basic | 435,374 | 431,885 | 428,822 | |||||||||
Diluted | 451,244 | 446,814 | 438,652 |
Year ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | |||||
Other comprehensive income (loss): | |||||||||||
Foreign currency translation adjustments | 975 | 27,409 | (5,464 | ) | |||||||
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $0, $378, and $126, respectively | — | 599 | 207 | ||||||||
Total other comprehensive income (loss) | 975 | 28,008 | (5,257 | ) | |||||||
Comprehensive income | $ | 1,212,217 | $ | 586,937 | $ | 181,421 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||
Additions to streaming content assets | (13,043,437 | ) | (9,805,763 | ) | (8,653,286 | ) | ||||||
Change in streaming content liabilities | 999,880 | 900,006 | 1,772,650 | |||||||||
Amortization of streaming content assets | 7,532,088 | 6,197,817 | 4,788,498 | |||||||||
Amortization of DVD content assets | 41,212 | 60,657 | 78,952 | |||||||||
Depreciation and amortization of property, equipment and intangibles | 83,157 | 71,911 | 57,528 | |||||||||
Stock-based compensation expense | 320,657 | 182,209 | 173,675 | |||||||||
Excess tax benefits from stock-based compensation | — | — | (65,121 | ) | ||||||||
Other non-cash items | 40,428 | 57,207 | 40,909 | |||||||||
Foreign currency remeasurement loss (gain) on long-term debt | (73,953 | ) | 140,790 | — | ||||||||
Deferred taxes | (85,520 | ) | (208,688 | ) | (46,847 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||||
Other current assets | (200,192 | ) | (234,090 | ) | 46,970 | |||||||
Accounts payable | 199,198 | 74,559 | 32,247 | |||||||||
Accrued expenses | 150,422 | 114,337 | 68,706 | |||||||||
Deferred revenue | 142,277 | 177,974 | 96,751 | |||||||||
Other non-current assets and liabilities | 2,062 | (73,803 | ) | (52,294 | ) | |||||||
Net cash used in operating activities | (2,680,479 | ) | (1,785,948 | ) | (1,473,984 | ) | ||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property and equipment | (173,946 | ) | (173,302 | ) | (107,653 | ) | ||||||
Acquisition of DVD content assets | (38,586 | ) | (53,720 | ) | (77,177 | ) | ||||||
Other assets | (126,588 | ) | (6,689 | ) | (941 | ) | ||||||
Purchases of short-term investments | — | (74,819 | ) | (187,193 | ) | |||||||
Proceeds from sale of short-term investments | — | 320,154 | 282,484 | |||||||||
Proceeds from maturities of short-term investments | — | 22,705 | 140,245 | |||||||||
Net cash provided by (used in) investing activities | (339,120 | ) | 34,329 | 49,765 | ||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of debt | 3,961,852 | 3,020,510 | 1,000,000 | |||||||||
Issuance costs | (35,871 | ) | (32,153 | ) | (10,700 | ) | ||||||
Proceeds from issuance of common stock | 124,502 | 88,378 | 36,979 | |||||||||
Excess tax benefits from stock-based compensation | — | — | 65,121 | |||||||||
Other financing activities | (1,956 | ) | 255 | 230 | ||||||||
Net cash provided by financing activities | 4,048,527 | 3,076,990 | 1,091,630 | |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (39,682 | ) | 29,848 | (9,165 | ) | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 989,246 | 1,355,219 | (341,754 | ) | ||||||||
Cash, cash equivalents and restricted cash, beginning of year | 2,822,795 | 1,467,576 | 1,809,330 | |||||||||
Cash, cash equivalents and restricted cash, end of year | $ | 3,812,041 | $ | 2,822,795 | $ | 1,467,576 | ||||||
Supplemental disclosure: | ||||||||||||
Income taxes paid | $ | 131,069 | $ | 113,591 | $ | 26,806 | ||||||
Interest paid | 375,831 | 213,313 | 138,566 | |||||||||
Increase (decrease) in investing activities included in liabilities | 2,560 | (32,643 | ) | 27,504 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,794,483 | $ | 2,822,795 | ||||
Current content assets, net | 5,151,186 | 4,310,934 | ||||||
Other current assets | 748,466 | 536,245 | ||||||
Total current assets | 9,694,135 | 7,669,974 | ||||||
Non-current content assets, net | 14,960,954 | 10,371,055 | ||||||
Property and equipment, net | 418,281 | 319,404 | ||||||
Other non-current assets | 901,030 | 652,309 | ||||||
Total assets | $ | 25,974,400 | $ | 19,012,742 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current content liabilities | $ | 4,686,019 | $ | 4,173,041 | ||||
Accounts payable | 562,985 | 359,555 | ||||||
Accrued expenses | 477,417 | 315,094 | ||||||
Deferred revenue | 760,899 | 618,622 | ||||||
Total current liabilities | 6,487,320 | 5,466,312 | ||||||
Non-current content liabilities | 3,759,026 | 3,329,796 | ||||||
Long-term debt | 10,360,058 | 6,499,432 | ||||||
Other non-current liabilities | 129,231 | 135,246 | ||||||
Total liabilities | 20,735,635 | 15,430,786 | ||||||
Commitments and contingencies (Note 5) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2018 and 2017; no shares issued and outstanding at December 31, 2018 and 2017 | — | — | ||||||
Common stock, $0.001 par value; 4,990,000,000 shares authorized at December 31, 2018 and December 31, 2017, respectively; 436,598,597 and 433,392,686 issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 2,315,988 | 1,871,396 | ||||||
Accumulated other comprehensive loss | (19,582 | ) | (20,557 | ) | ||||
Retained earnings | 2,942,359 | 1,731,117 | ||||||
Total stockholders’ equity | 5,238,765 | 3,581,956 | ||||||
Total liabilities and stockholders’ equity | $ | 25,974,400 | $ | 19,012,742 |
Common Stock and Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||
Shares | Amount | |||||||||||||||||
Balances as of December 31, 2015 | 427,940,440 | $ | 1,324,809 | $ | (43,308 | ) | $ | 941,925 | $ | 2,223,426 | ||||||||
Net income | — | — | — | 186,678 | 186,678 | |||||||||||||
Other comprehensive loss | — | — | (5,257 | ) | — | (5,257 | ) | |||||||||||
Issuance of common stock upon exercise of options | 2,113,772 | 36,979 | — | — | 36,979 | |||||||||||||
Stock-based compensation expense | — | 173,675 | — | — | 173,675 | |||||||||||||
Excess stock option income tax benefits | — | 64,299 | — | — | 64,299 | |||||||||||||
Balances as of December 31, 2016 | 430,054,212 | $ | 1,599,762 | $ | (48,565 | ) | $ | 1,128,603 | $ | 2,679,800 | ||||||||
Net income | — | — | — | 558,929 | 558,929 | |||||||||||||
Other comprehensive income | — | — | 28,008 | — | 28,008 | |||||||||||||
Issuance of common stock upon exercise of options | 3,338,474 | 89,425 | — | — | 89,425 | |||||||||||||
Stock-based compensation expense | — | 182,209 | — | — | 182,209 | |||||||||||||
Cumulative Effect Adjustment of ASU 2016-09 | — | — | — | 43,585 | 43,585 | |||||||||||||
Balances as of December 31, 2017 | 433,392,686 | $ | 1,871,396 | $ | (20,557 | ) | $ | 1,731,117 | $ | 3,581,956 | ||||||||
Net income | — | — | — | 1,211,242 | 1,211,242 | |||||||||||||
Other comprehensive income | — | — | 975 | — | 975 | |||||||||||||
Issuance of common stock upon exercise of options | 3,205,911 | 123,935 | — | — | 123,935 | |||||||||||||
Stock-based compensation expense | — | 320,657 | — | — | 320,657 | |||||||||||||
Balances as of December 31, 2018 | 436,598,597 | $ | 2,315,988 | $ | (19,582 | ) | $ | 2,942,359 | $ | 5,238,765 |
1. | Organization and Summary of Significant Accounting Policies |
Year ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands, except per share data) | |||||||||||
Basic earnings per share: | |||||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | |||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 435,374 | 431,885 | 428,822 | ||||||||
Basic earnings per share | $ | 2.78 | $ | 1.29 | $ | 0.44 | |||||
Diluted earnings per share: | |||||||||||
Net income | $ | 1,211,242 | $ | 558,929 | $ | 186,678 | |||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 435,374 | 431,885 | 428,822 | ||||||||
Employee stock options | 15,870 | 14,929 | 9,830 | ||||||||
Weighted-average number of shares | 451,244 | 446,814 | 438,652 | ||||||||
Diluted earnings per share | $ | 2.68 | $ | 1.25 | $ | 0.43 |
Year ended December 31, | ||||||||
2018 | 2017 | 2016 | ||||||
(in thousands) | ||||||||
Employee stock options | 330 | 189 | 1,545 |
2. | Cash, Cash Equivalents and Restricted Cash |
As of December 31, 2018 | |||||||||||
Cash and cash equivalents | Non-current Assets | Total | |||||||||
(in thousands) | |||||||||||
Cash | $ | 2,572,685 | $ | 16,260 | $ | 2,588,945 | |||||
Level 1 securities: | |||||||||||
Money market funds | 1,221,798 | 1,298 | 1,223,096 | ||||||||
$ | 3,794,483 | $ | 17,558 | $ | 3,812,041 |
As of December 31, 2017 | |||||||||||
Cash and cash equivalents | Non-current Assets | Total | |||||||||
(in thousands) | |||||||||||
Cash | $ | 2,072,296 | $ | 4,367 | $ | 2,076,663 | |||||
Level 1 securities: | |||||||||||
Money market funds | 449,734 | 1,276 | 451,010 | ||||||||
Level 2 securities: | |||||||||||
Time Deposits | 300,765 | — | 300,765 | ||||||||
$ | 2,822,795 | $ | 5,643 | $ | 2,828,438 |
3. | Balance Sheet Components |
As of December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Licensed content, net | $ | 14,081,463 | $ | 11,771,778 | |||
Produced content, net | |||||||
Released, less amortization | 2,403,896 | 1,427,256 | |||||
In production | 3,305,126 | 1,311,137 | |||||
In development and pre-production | 311,842 | 158,517 | |||||
6,020,864 | 2,896,910 | ||||||
DVD, net | 9,813 | 13,301 | |||||
Total | $ | 20,112,140 | $ | 14,681,989 | |||
Current content assets, net | $ | 5,151,186 | $ | 4,310,934 | |||
Non-current content assets, net | $ | 14,960,954 | $ | 10,371,055 |
As of December 31, | Estimated Useful Lives (in Years) | |||||||||
2018 | 2017 | |||||||||
(in thousands) | ||||||||||
Leasehold improvements | $ | 282,028 | $ | 229,848 | Over life of lease | |||||
Information technology | 224,296 | 223,850 | 3 years | |||||||
Furniture and fixtures | 63,667 | 49,217 | 3-15 years | |||||||
Buildings | 73,468 | 40,681 | 30 years | |||||||
Corporate aircraft | 62,560 | 30,039 | 8 years | |||||||
DVD operations equipment | 53,416 | 59,316 | 5 years | |||||||
Machinery and equipment | 1,692 | — | 3 years | |||||||
Land | 6,125 | — | ||||||||
Capital work-in-progress | 19,548 | 8,267 | ||||||||
Property and equipment, gross | 786,800 | 641,218 | ||||||||
Less: Accumulated depreciation | (368,519 | ) | (321,814 | ) | ||||||
Property and equipment, net | $ | 418,281 | $ | 319,404 |
4. | Long-term Debt |
Level 2 Fair Value as of | ||||||||||||||||
Principal Amount at Par | Issuance Date | Maturity | Interest Due Dates | December 31, 2018 | December 31, 2017 | |||||||||||
(in millions) | (in millions) | |||||||||||||||
5.375% Senior Notes | 500 | February 2013 | February 2021 | February and August | $ | 509 | $ | 530 | ||||||||
5.50% Senior Notes | 700 | February 2015 | February 2022 | April and October | 706 | 739 | ||||||||||
5.750% Senior Notes | 400 | February 2014 | March 2024 | March and September | 407 | 427 | ||||||||||
5.875% Senior Notes | 800 | February 2015 | February 2025 | April and October | 812 | 856 | ||||||||||
4.375% Senior Notes | 1,000 | October 2016 | November 2026 | May and November | 915 | 983 | ||||||||||
3.625% Senior Notes (1) | 1,489 | May 2017 | May 2027 | May and November | 1,446 | 1,575 | ||||||||||
4.875% Senior Notes | 1,600 | October 2017 | April 2028 | April and October | 1,464 | 1,571 | ||||||||||
5.875% Senior Notes | 1,900 | April 2018 | November 2028 | May and November | 1,851 | — | ||||||||||
4.625% Senior Notes (2) | 1,260 | October 2018 | May 2029 | May and November | 1,241 | — | ||||||||||
6.375% Senior Notes | 800 | October 2018 | May 2029 | May and November | 797 | — | ||||||||||
10,449 |
As of | |||||||
December 31, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Less than one year | $ | 538,384 | $ | 311,339 | |||
Due after one year and through three years | 1,550,581 | 627,444 | |||||
Due after three years and through five years | 1,646,101 | 1,761,465 | |||||
Due after five years | 11,138,129 | 6,348,580 | |||||
Total debt obligations | $ | 14,873,195 | $ | 9,048,828 |
5. | Commitments and Contingencies |
As of December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Less than one year | $ | 8,611,398 | $ | 7,446,947 | |||
Due after one year and through 3 years | 8,841,561 | 8,210,159 | |||||
Due after 3 years and through 5 years | 1,684,582 | 1,894,001 | |||||
Due after 5 years | 148,334 | 143,535 | |||||
Total streaming content obligations | $ | 19,285,875 | $ | 17,694,642 |
Year Ending December 31, | Future Minimum Payments | ||
(in thousands) | |||
2019 | $ | 172,470 | |
2020 | 139,366 | ||
2021 | 145,175 | ||
2022 | 156,527 | ||
2023 | 151,200 | ||
Thereafter | 943,630 | ||
Total minimum payments | $ | 1,708,368 |
6. | Guarantees—Indemnification Obligations |
7. | Stockholders’ Equity |
Shares Available for Grant | Options Outstanding | Weighted- Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in Thousands) | ||||||||||||
Number of Shares | Weighted- Average Exercise Price (per Share) | ||||||||||||||
Balances as of December 31, 2015 | 16,845,316 | 20,995,756 | $ | 32.39 | |||||||||||
Granted | (3,555,363 | ) | 3,555,363 | 102.03 | |||||||||||
Exercised | — | (2,113,772 | ) | 17.48 | |||||||||||
Balances as of December 31, 2016 | 13,289,953 | 22,437,347 | $ | 44.83 | |||||||||||
Granted | (2,550,038 | ) | 2,550,038 | 159.56 | |||||||||||
Exercised | — | (3,338,474 | ) | 26.79 | |||||||||||
Expired | — | (1,561 | ) | $ | 3.25 | ||||||||||
Balances as of December 31, 2017 | 10,739,915 | 21,647,350 | $ | 61.13 | |||||||||||
Granted | (2,039,974 | ) | 2,039,974 | 311.66 | |||||||||||
Exercised | — | (3,205,911 | ) | 38.66 | |||||||||||
Expired | — | (2,135 | ) | 4.60 | |||||||||||
Balances as of December 31, 2018 | 8,699,941 | 20,479,278 | $ | 89.61 | 5.71 | $ | 3,748,339 | ||||||||
Vested and exercisable at December 31, 2018 | 20,479,278 | $ | 89.61 | 5.71 | $ | 3,748,339 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Dividend yield | — | % | — | % | — | % | ||||||
Expected volatility | 40% - 42% | 34% - 37% | 40% - 50% | |||||||||
Risk-free interest rate | 2.61% - 3.09% | 2.24% - 2.45% | 1.57% - 2.04% | |||||||||
Suboptimal exercise factor | 2.80 - 3.01 | 2.48 - 2.63 | 2.48 | |||||||||
Valuation data: | ||||||||||||
Weighted-average fair value (per share) | $ | 157.19 | $ | 71.45 | $ | 48.85 | ||||||
Total stock-based compensation expense (in thousands) | 320,657 | 182,209 | 173,675 | |||||||||
Total income tax impact on provision (in thousands) | 67,575 | 61,842 | 65,173 |
8. | Accumulated Other Comprehensive Loss |
Foreign currency | Change in unrealized gains on available-for-sale securities | Total | |||||||||
(in thousands) | |||||||||||
Balances as of December 31, 2016 | $ | (47,966 | ) | $ | (599 | ) | $ | (48,565 | ) | ||
Other comprehensive income before reclassifications | 27,409 | 728 | 28,137 | ||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | — | (129 | ) | (129 | ) | ||||||
Net decrease in other comprehensive loss | 27,409 | 599 | 28,008 | ||||||||
Balances as of December 31, 2017 | $ | (20,557 | ) | $ | — | $ | (20,557 | ) | |||
Other comprehensive income before reclassifications | 975 | — | 975 | ||||||||
Net decrease in other comprehensive loss | 975 | — | 975 | ||||||||
Balances as of December 31, 2018 | $ | (19,582 | ) | $ | — | $ | (19,582 | ) |
9. | Income Taxes |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
United States | $ | 845,402 | $ | 144,100 | $ | 188,078 | |||||
Foreign | 381,056 | 341,221 | 72,429 | ||||||||
Income before income taxes | $ | 1,226,458 | $ | 485,321 | $ | 260,507 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Current tax provision: | |||||||||||
Federal | $ | (22,176 | ) | $ | 54,245 | $ | 54,315 | ||||
State | (10,234 | ) | (7,601 | ) | 5,790 | ||||||
Foreign | 133,146 | 88,436 | 60,571 | ||||||||
Total current | 100,736 | 135,080 | 120,676 | ||||||||
Deferred tax provision: | |||||||||||
Federal | (37,396 | ) | (153,963 | ) | (24,383 | ) | |||||
State | (52,391 | ) | (52,695 | ) | (14,080 | ) | |||||
Foreign | 4,267 | (2,030 | ) | (8,384 | ) | ||||||
Total deferred | (85,520 | ) | (208,688 | ) | (46,847 | ) | |||||
Provision for (benefit from) income taxes | $ | 15,216 | $ | (73,608 | ) | $ | 73,829 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Expected tax expense at U.S. Federal statutory rates | $ | 257,556 | $ | 169,860 | $ | 91,179 | |||||
State income taxes, net of Federal income tax effect | 33,611 | 6,404 | 7,261 | ||||||||
Foreign earnings at other than U.S. rates | 63,519 | (87,514 | ) | 14,639 | |||||||
Federal and California R&D tax credits | (140,749 | ) | (79,868 | ) | (41,144 | ) | |||||
Excess tax benefits on stock-based compensation | (191,323 | ) | (157,888 | ) | — | ||||||
Impact of the Tax Cuts and Jobs Act of 2017 | |||||||||||
Rate Change / Transition Tax | (71,516 | ) | 79,077 | — | |||||||
U.S. Minimum Tax on Foreign Entities | 43,099 | — | — | ||||||||
Nondeductible Officers Compensation | 14,377 | 28 | 28 | ||||||||
Other | 6,642 | (3,707 | ) | 1,866 | |||||||
Provision for (benefit from) income taxes | $ | 15,216 | $ | (73,608 | ) | $ | 73,829 | ||||
Effective Tax Rate | 1 | % | (15 | )% | 28 | % |
As of December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Deferred tax assets: | |||||||
Stock-based compensation | $ | 190,451 | $ | 149,367 | |||
Depreciation and amortization | (151,678 | ) | (70,382 | ) | |||
Federal and California tax R&D credits | 369,023 | 260,686 | |||||
Foreign tax credits | 218,026 | 102,242 | |||||
Accruals and reserves | 36,396 | 34,170 | |||||
Other | 27,203 | 51,614 | |||||
Gross deferred tax assets | 689,421 | 527,697 | |||||
Valuation allowance | (124,996 | ) | (49,431 | ) | |||
Net deferred tax assets | $ | 564,425 | $ | 478,266 |
Balances as of December 31, 2016 | $ | 19,739 | |
Decreases related to tax positions taken during prior periods | (3,226 | ) | |
Increases related to tax positions taken during the current period | 26,389 | ||
Balances as of December 31, 2017 | 42,902 | ||
Increases related to tax positions taken during prior periods | 4,486 | ||
Decreases related to tax positions taken during prior periods | (17,922 | ) | |
Increases related to tax positions taken during the current period | 18,068 | ||
Balances as of December 31, 2018 | $ | 47,534 |
10. | Employee Benefit Plan |
11. | Segment Information |
As of December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
United States | $ | 381,947 | $ | 289,875 | |||
International | 36,334 | 29,529 |
As of/Year ended December 31, 2018 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total paid memberships at end of period (1) | 58,486 | 80,773 | 2,706 | ||||||||||||
Total paid net membership additions (1) | 5,676 | 22,939 | (624 | ) | |||||||||||
Total free trials at end of period | 2,065 | 7,131 | 25 | ||||||||||||
Revenues | $ | 7,646,647 | $ | 7,782,105 | $ | 365,589 | $ | 15,794,341 | |||||||
Cost of revenues | 4,038,394 | 5,776,047 | 153,097 | 9,967,538 | |||||||||||
Marketing | 1,025,351 | 1,344,118 | — | 2,369,469 | |||||||||||
Contribution profit | $ | 2,582,902 | $ | 661,940 | $ | 212,492 | 3,457,334 | ||||||||
Other operating expenses | 1,852,108 | ||||||||||||||
Operating income | 1,605,226 | ||||||||||||||
Other income (expense) | (378,768 | ) | |||||||||||||
Provision for income taxes | 15,216 | ||||||||||||||
Net income | $ | 1,211,242 |
Year Ended December 31, 2018 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Amortization of content assets | $ | 3,115,170 | $ | 4,416,918 | $ | 41,212 | $ | 7,573,300 |
As of/Year ended December 31, 2017 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total paid memberships at end of period (1) | 52,810 | 57,834 | 3,330 | ||||||||||||
Total paid net membership additions (1) | 4,905 | 16,649 | (699 | ) | |||||||||||
Total free trials at end of period | 1,940 | 4,998 | 53 | ||||||||||||
Revenues | $ | 6,153,025 | $ | 5,089,191 | $ | 450,497 | $ | 11,692,713 | |||||||
Cost of revenues | 3,470,859 | 4,359,616 | 202,525 | 8,033,000 | |||||||||||
Marketing | 603,746 | 832,535 | — | 1,436,281 | |||||||||||
Contribution profit (loss) | $ | 2,078,420 | $ | (102,960 | ) | $ | 247,972 | 2,223,432 | |||||||
Other operating expenses | 1,384,753 | ||||||||||||||
Operating income | 838,679 | ||||||||||||||
Other income (expense) | (353,358 | ) | |||||||||||||
Benefit from income taxes | (73,608 | ) | |||||||||||||
Net income | $ | 558,929 |
Year Ended December 31, 2017 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Amortization of content assets | $ | 2,756,947 | $ | 3,440,870 | $ | 60,657 | $ | 6,258,474 |
As of/Year ended December 31, 2016 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total paid memberships at end of period (1) | 47,905 | 41,185 | 4,029 | ||||||||||||
Total paid net membership additions (1) | 4,504 | 13,747 | (758 | ) | |||||||||||
Total free trials at end of period | 1,526 | 3,180 | 85 | ||||||||||||
Revenues | $ | 5,077,307 | $ | 3,211,095 | $ | 542,267 | $ | 8,830,669 | |||||||
Cost of revenues | 2,951,973 | 3,042,747 | 262,742 | 6,257,462 | |||||||||||
Marketing | 412,928 | 684,591 | — | 1,097,519 | |||||||||||
Contribution profit (loss) | $ | 1,712,406 | $ | (516,243 | ) | $ | 279,525 | 1,475,688 | |||||||
Other operating expenses | 1,095,895 | ||||||||||||||
Operating income | 379,793 | ||||||||||||||
Other income (expense) | (119,286 | ) | |||||||||||||
Provision for income taxes | 73,829 | ||||||||||||||
Net income | $ | 186,678 |
Year Ended December 31, 2016 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Amortization of content assets | $ | 2,337,950 | $ | 2,450,548 | $ | 78,952 | $ | 4,867,450 |
(1) | A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or other promotional offering by the Company to certain new and rejoining members. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations generally become effective at the end of the prepaid membership period. Involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. 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. |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | December 31, 2016 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 1,957,736 | $ | 2,105,204 | $ | 2,290,188 | $ | 2,477,541 | $ | 8,830,669 | |||||||||
Cost of revenues | 1,369,540 | 1,473,098 | 1,532,844 | 1,654,419 | 6,029,901 | ||||||||||||||
Marketing | 208,010 | 216,029 | 282,043 | 284,996 | 991,078 | ||||||||||||||
Technology and development | 203,508 | 207,300 | 216,099 | 225,191 | 852,098 | ||||||||||||||
General and administrative | 127,225 | 138,407 | 153,166 | 159,001 | 577,799 | ||||||||||||||
Operating income | $ | 49,453 | $ | 70,370 | $ | 106,036 | $ | 153,934 | $ | 379,793 | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 49,041 | 52,299 | 60,924 | 65,297 | 227,561 | ||||||||||||||
Marketing | 23,455 | 24,561 | 28,974 | 29,451 | 106,441 | ||||||||||||||
Technology and development | (16,898 | ) | (17,096 | ) | (18,593 | ) | (19,279 | ) | (71,866 | ) | |||||||||
General and administrative | (55,598 | ) | (59,764 | ) | (71,305 | ) | (75,469 | ) | (262,136 | ) | |||||||||
Operating income | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
As Revised | |||||||||||||||||||
Revenues | $ | 1,957,736 | $ | 2,105,204 | $ | 2,290,188 | $ | 2,477,541 | $ | 8,830,669 | |||||||||
Cost of revenues | 1,418,581 | 1,525,397 | 1,593,768 | 1,719,716 | 6,257,462 | ||||||||||||||
Marketing | 231,465 | 240,590 | 311,017 | 314,447 | 1,097,519 | ||||||||||||||
Technology and development | 186,610 | 190,204 | 197,506 | 205,912 | 780,232 | ||||||||||||||
General and administrative | 71,627 | 78,643 | 81,861 | 83,532 | 315,663 | ||||||||||||||
Operating income | $ | 49,453 | $ | 70,370 | $ | 106,036 | $ | 153,934 | $ | 379,793 |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | December 31, 2017 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 2,636,635 | $ | 2,785,464 | $ | 2,984,859 | $ | 3,285,755 | $ | 11,692,713 | |||||||||
Cost of revenues | 1,657,024 | 1,902,308 | 1,992,980 | 2,107,354 | 7,659,666 | ||||||||||||||
Marketing | 271,270 | 274,323 | 312,490 | 419,939 | 1,278,022 | ||||||||||||||
Technology and development | 257,108 | 267,083 | 255,236 | 273,351 | 1,052,778 | ||||||||||||||
General and administrative | 194,291 | 213,943 | 215,526 | 239,808 | 863,568 | ||||||||||||||
Operating income | $ | 256,942 | $ | 127,807 | $ | 208,627 | $ | 245,303 | $ | 838,679 | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 83,707 | 89,388 | 93,259 | 106,980 | 373,334 | ||||||||||||||
Marketing | 34,878 | 36,837 | 39,956 | 46,588 | 158,259 | ||||||||||||||
Technology and development | (23,237 | ) | (24,599 | ) | (25,013 | ) | (26,219 | ) | (99,068 | ) | |||||||||
General and administrative | (95,348 | ) | (101,626 | ) | (108,202 | ) | (127,349 | ) | (432,525 | ) | |||||||||
Operating income | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
As Revised | |||||||||||||||||||
Revenues | $ | 2,636,635 | $ | 2,785,464 | $ | 2,984,859 | $ | 3,285,755 | $ | 11,692,713 | |||||||||
Cost of revenues | 1,740,731 | 1,991,696 | 2,086,239 | 2,214,334 | 8,033,000 | ||||||||||||||
Marketing | 306,148 | 311,160 | 352,446 | 466,527 | 1,436,281 | ||||||||||||||
Technology and development | 233,871 | 242,484 | 230,223 | 247,132 | 953,710 | ||||||||||||||
General and administrative | 98,943 | 112,317 | 107,324 | 112,459 | 431,043 | ||||||||||||||
Operating income | $ | 256,942 | $ | 127,807 | $ | 208,627 | $ | 245,303 | $ | 838,679 |
Three Months Ended (unaudited) | |||||||||||
March 31, 2018 | June 30, 2018 | September 30, 2018 | |||||||||
(in thousands) | |||||||||||
As Previously Reported | |||||||||||
Revenues | $ | 3,700,856 | $ | 3,907,270 | $ | 3,999,374 | |||||
Cost of revenues | 2,196,075 | 2,289,867 | 2,412,346 | ||||||||
Marketing | 479,222 | 526,780 | 435,269 | ||||||||
Technology and development | 300,730 | 317,213 | 327,026 | ||||||||
General and administrative | 278,251 | 311,197 | 344,065 | ||||||||
Operating income | $ | 446,578 | $ | 462,213 | $ | 480,668 | |||||
Reclassifications | |||||||||||
Revenues | $ | — | $ | — | $ | — | |||||
Cost of revenues | 104,504 | 112,564 | 118,782 | ||||||||
Marketing | 57,555 | 65,227 | 75,061 | ||||||||
Technology and development | (18,420 | ) | (18,118 | ) | (18,406 | ) | |||||
General and administrative | (143,639 | ) | (159,673 | ) | (175,437 | ) | |||||
Operating income | $ | — | $ | — | $ | — | |||||
As Revised | |||||||||||
Revenues | $ | 3,700,856 | $ | 3,907,270 | $ | 3,999,374 | |||||
Cost of revenues | 2,300,579 | 2,402,431 | 2,531,128 | ||||||||
Marketing | 536,777 | 592,007 | 510,330 | ||||||||
Technology and development | 282,310 | 299,095 | 308,620 | ||||||||
General and administrative | 134,612 | 151,524 | 168,628 | ||||||||
Operating income | $ | 446,578 | $ | 462,213 | $ | 480,668 |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | December 31, 2016 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 1,161,241 | $ | 1,208,271 | $ | 1,304,333 | $ | 1,403,462 | $ | 5,077,307 | |||||||||
Cost of revenues | 666,546 | 707,106 | 720,658 | 761,479 | 2,855,789 | ||||||||||||||
Marketing | 81,942 | 86,806 | 108,495 | 105,589 | 382,832 | ||||||||||||||
Contribution profit | $ | 412,753 | $ | 414,359 | $ | 475,180 | $ | 536,394 | $ | 1,838,686 | |||||||||
Contribution margin | 35.5 | % | 34.3 | % | 36.4 | % | 38.2 | % | 36.2 | % | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 21,210 | 22,293 | 25,562 | 27,119 | 96,184 | ||||||||||||||
Marketing | 6,632 | 6,945 | 8,192 | 8,327 | 30,096 | ||||||||||||||
Contribution profit | $ | (27,842 | ) | $ | (29,238 | ) | $ | (33,754 | ) | $ | (35,446 | ) | $ | (126,280 | ) | ||||
As Revised | |||||||||||||||||||
Revenues | $ | 1,161,241 | $ | 1,208,271 | $ | 1,304,333 | $ | 1,403,462 | $ | 5,077,307 | |||||||||
Cost of revenues | 687,756 | 729,399 | 746,220 | 788,598 | 2,951,973 | ||||||||||||||
Marketing | 88,574 | 93,751 | 116,687 | 113,916 | 412,928 | ||||||||||||||
Contribution profit | $ | 384,911 | $ | 385,121 | $ | 441,426 | $ | 500,948 | $ | 1,712,406 | |||||||||
Contribution margin | 33.1 | % | 31.9 | % | 33.8 | % | 35.7 | % | 33.7 | % |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | December 31, 2017 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 1,470,042 | $ | 1,505,499 | $ | 1,547,210 | $ | 1,630,274 | $ | 6,153,025 | |||||||||
Cost of revenues | 749,488 | 831,962 | 864,408 | 873,372 | 3,319,230 | ||||||||||||||
Marketing | 115,038 | 113,608 | 128,901 | 195,784 | 553,331 | ||||||||||||||
Contribution profit | $ | 605,516 | $ | 559,929 | $ | 553,901 | $ | 561,118 | $ | 2,280,464 | |||||||||
Contribution margin | 41.2 | % | 37.2 | % | 35.8 | % | 34.4 | % | 37.1 | % | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 34,466 | 36,568 | 37,867 | 42,728 | 151,629 | ||||||||||||||
Marketing | 11,215 | 11,295 | 12,632 | 15,273 | 50,415 | ||||||||||||||
Contribution profit | $ | (45,681 | ) | $ | (47,863 | ) | $ | (50,499 | ) | $ | (58,001 | ) | $ | (202,044 | ) | ||||
As Revised | |||||||||||||||||||
Revenues | $ | 1,470,042 | $ | 1,505,499 | $ | 1,547,210 | $ | 1,630,274 | $ | 6,153,025 | |||||||||
Cost of revenues | 783,954 | 868,530 | 902,275 | 916,100 | 3,470,859 | ||||||||||||||
Marketing | 126,253 | 124,903 | 141,533 | 211,057 | 603,746 | ||||||||||||||
Contribution profit | $ | 559,835 | $ | 512,066 | $ | 503,402 | $ | 503,117 | $ | 2,078,420 | |||||||||
Contribution margin | 38.1 | % | 34.0 | % | 32.5 | % | 30.9 | % | 33.8 | % |
Three Months Ended (unaudited) | |||||||||||
March 31, 2018 | June 30, 2018 | September 30, 2018 | |||||||||
(in thousands) | |||||||||||
As Previously Reported | |||||||||||
Revenues | $ | 1,820,019 | $ | 1,893,222 | $ | 1,937,314 | |||||
Cost of revenues | 894,873 | 925,703 | 991,823 | ||||||||
Marketing | 228,022 | 227,961 | 183,521 | ||||||||
Contribution profit | $ | 697,124 | $ | 739,558 | $ | 761,970 | |||||
Contribution margin | 38.3 | % | 39.1 | % | 39.3 | % | |||||
Reclassifications | |||||||||||
Revenues | $ | — | $ | — | $ | — | |||||
Cost of revenues | 41,607 | 44,292 | 46,650 | ||||||||
Marketing | 22,697 | 23,337 | 27,074 | ||||||||
Contribution profit | $ | (64,304 | ) | $ | (67,629 | ) | $ | (73,724 | ) | ||
As Revised | |||||||||||
Revenues | $ | 1,820,019 | $ | 1,893,222 | $ | 1,937,314 | |||||
Cost of revenues | 936,480 | 969,995 | 1,038,473 | ||||||||
Marketing | 250,719 | 251,298 | 210,595 | ||||||||
Contribution profit | $ | 632,820 | $ | 671,929 | $ | 688,246 | |||||
Contribution margin | 34.8 | % | 35.5 | % | 35.5 | % |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | December 31, 2016 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 651,748 | $ | 758,201 | $ | 853,480 | $ | 947,666 | $ | 3,211,095 | |||||||||
Cost of revenues | 629,899 | 698,162 | 748,515 | 834,794 | 2,911,370 | ||||||||||||||
Marketing | 126,068 | 129,223 | 173,548 | 179,407 | 608,246 | ||||||||||||||
Contribution profit (loss) | $ | (104,219 | ) | $ | (69,184 | ) | $ | (68,583 | ) | $ | (66,535 | ) | $ | (308,521 | ) | ||||
Contribution margin | (16.0 | )% | (9.1 | )% | (8.0 | )% | (7.0 | )% | (9.6 | )% | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 27,831 | 30,006 | 35,362 | 38,178 | 131,377 | ||||||||||||||
Marketing | 16,823 | 17,616 | 20,782 | 21,124 | 76,345 | ||||||||||||||
Contribution profit (loss) | $ | (44,654 | ) | $ | (47,622 | ) | $ | (56,144 | ) | $ | (59,302 | ) | $ | (207,722 | ) | ||||
As Revised | |||||||||||||||||||
Revenues | $ | 651,748 | $ | 758,201 | $ | 853,480 | $ | 947,666 | $ | 3,211,095 | |||||||||
Cost of revenues | 657,730 | 728,168 | 783,877 | 872,972 | 3,042,747 | ||||||||||||||
Marketing | 142,891 | 146,839 | 194,330 | 200,531 | 684,591 | ||||||||||||||
Contribution profit (loss) | $ | (148,873 | ) | $ | (116,806 | ) | $ | (124,727 | ) | $ | (125,837 | ) | $ | (516,243 | ) | ||||
Contribution margin | (22.8 | )% | (15.4 | )% | (14.6 | )% | (13.3 | )% | (16.1 | )% |
Three Months Ended (unaudited) | Twelve Months Ended | ||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | December 31, 2017 | |||||||||||||||
(in thousands) | |||||||||||||||||||
As Previously Reported | |||||||||||||||||||
Revenues | $ | 1,046,199 | $ | 1,165,228 | $ | 1,327,435 | $ | 1,550,329 | $ | 5,089,191 | |||||||||
Cost of revenues | 847,317 | 1,017,612 | 1,081,485 | 1,191,497 | 4,137,911 | ||||||||||||||
Marketing | 156,232 | 160,715 | 183,589 | 224,155 | 724,691 | ||||||||||||||
Contribution profit (loss) | $ | 42,650 | $ | (13,099 | ) | $ | 62,361 | $ | 134,677 | $ | 226,589 | ||||||||
Contribution margin | 4.1 | % | (1.1 | )% | 4.7 | % | 8.7 | % | 4.5 | % | |||||||||
Reclassifications | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of revenues | 49,241 | 52,820 | 55,392 | 64,252 | 221,705 | ||||||||||||||
Marketing | 23,663 | 25,542 | 27,324 | 31,315 | 107,844 | ||||||||||||||
Contribution profit (loss) | $ | (72,904 | ) | $ | (78,362 | ) | $ | (82,716 | ) | $ | (95,567 | ) | $ | (329,549 | ) | ||||
As Revised | |||||||||||||||||||
Revenues | $ | 1,046,199 | $ | 1,165,228 | $ | 1,327,435 | $ | 1,550,329 | $ | 5,089,191 | |||||||||
Cost of revenues | 896,558 | 1,070,432 | 1,136,877 | 1,255,749 | 4,359,616 | ||||||||||||||
Marketing | 179,895 | 186,257 | 210,913 | 255,470 | 832,535 | ||||||||||||||
Contribution profit (loss) | $ | (30,254 | ) | $ | (91,461 | ) | $ | (20,355 | ) | $ | 39,110 | $ | (102,960 | ) | |||||
Contribution margin | (2.9 | )% | (7.8 | )% | (1.5 | )% | 2.5 | % | (2.0 | )% |
Three Months Ended (unaudited) | |||||||||||
March 31, 2018 | June 30, 2018 | September 30, 2018 | |||||||||
(in thousands) | |||||||||||
As Previously Reported | |||||||||||
Revenues | $ | 1,782,086 | $ | 1,921,144 | $ | 1,973,283 | |||||
Cost of revenues | 1,258,809 | 1,324,240 | 1,383,422 | ||||||||
Marketing | 251,200 | 298,819 | 251,748 | ||||||||
Contribution profit | $ | 272,077 | $ | 298,085 | $ | 338,113 | |||||
Contribution margin | 15.3 | % | 15.5 | % | 17.1 | % | |||||
Reclassifications | |||||||||||
Revenues | $ | — | $ | — | $ | — | |||||
Cost of revenues | 62,897 | 68,272 | 72,132 | ||||||||
Marketing | 34,858 | 41,890 | 47,987 | ||||||||
Contribution profit | $ | (97,755 | ) | $ | (110,162 | ) | $ | (120,119 | ) | ||
As Revised | |||||||||||
Revenues | $ | 1,782,086 | $ | 1,921,144 | $ | 1,973,283 | |||||
Cost of revenues | 1,321,706 | 1,392,512 | 1,455,554 | ||||||||
Marketing | 286,058 | 340,709 | 299,735 | ||||||||
Contribution profit | $ | 174,322 | $ | 187,923 | $ | 217,994 | |||||
Contribution margin | 9.8 | % | 9.8 | % | 11.0 | % |
December 31 | September 30 | June 30 | March 31 | ||||||||||||
(in thousands, except for per share data) | |||||||||||||||
2018 | |||||||||||||||
Total revenues | $ | 4,186,841 | $ | 3,999,374 | $ | 3,907,270 | $ | 3,700,856 | |||||||
Gross profit | 1,453,441 | 1,468,246 | 1,504,839 | 1,400,277 | |||||||||||
Net income | 133,934 | 402,835 | 384,349 | 290,124 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.31 | $ | 0.92 | $ | 0.88 | $ | 0.67 | |||||||
Diluted | 0.30 | 0.89 | 0.85 | 0.64 | |||||||||||
2017 | |||||||||||||||
Total revenues | $ | 3,285,755 | $ | 2,984,859 | $ | 2,785,464 | $ | 2,636,635 | |||||||
Gross profit | 1,071,421 | 898,620 | 793,768 | 895,904 | |||||||||||
Net income | 185,517 | 129,590 | 65,600 | 178,222 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.43 | $ | 0.30 | $ | 0.15 | $ | 0.41 | |||||||
Diluted | 0.41 | 0.29 | 0.15 | 0.40 |
Exhibit Number | Exhibit Description | Incorporated by Reference | Filed Herewith | |||||||||
Form | File No. | Exhibit | Filing Date | |||||||||
10-Q | 001-35727 | 3.1 | July 17, 2015 | |||||||||
8-K | 000-49802 | 3.1 | March 20, 2009 | |||||||||
10-Q | 000-49802 | 3.3 | August 2, 2004 | |||||||||
S-1/A | 333-83878 | 4.1 | April 16, 2002 | |||||||||
8-K | 001-35727 | 4.1 | February 1, 2013 | |||||||||
8-K | 001-35727 | 4.1 | February 19, 2014 | |||||||||
8-K | 001-35727 | 4.1 | February 5, 2015 | |||||||||
8-K | 001-35727 | 4.2 | February 5, 2015 | |||||||||
8-K | 001-35727 | 4.1 | October 27, 2016 | |||||||||
10-Q | 001-35727 | 4.7 | April 20, 2017 | |||||||||
8-K | 001-35727 | 4.1 | May 3, 2017 | |||||||||
8-K | 001-35727 | 4.1 | October 26, 2017 | |||||||||
8-K | 001-35727 | 4.1 | April 26, 2018 | |||||||||
8-K | 001-35727 | 4.1 | October 26, 2018 | |||||||||
8-K | 001-35727 | 4.3 | October 26, 2018 | |||||||||
S-1/A | 333-83878 | 10.1 | March 20, 2002 | |||||||||
Def 14A | 000-49802 | A | March 31, 2006 | |||||||||
Def 14A | 000-49802 | A | April 20, 2011 | |||||||||
8-K | 001-35727 | Item 5.02 | January 24, 2018 | |||||||||
10-K | 000-49802 | 10.7 | February 1, 2013 |
Exhibit Number | Exhibit Description | Incorporated by Reference | Filed Herewith | |||||||||
Form | File No. | Exhibit | Filing Date | |||||||||
8-K | 001-35727 | 10.1 | February 19, 2014 | |||||||||
Def 14A | 001-35727 | A | April 28, 2014 | |||||||||
8-K | 001-35727 | 10.1 | February 5, 2015 | |||||||||
8-K | 001-35727 | 10.2 | February 5, 2015 | |||||||||
8-K | 001-35727 | 10.1 | October 27, 2016 | |||||||||
8-K | 001-35727 | 10.2 | October 27, 2016 | |||||||||
8-K | 001-35727 | 10.1 | April 27, 2017 | |||||||||
8-K | 001-35727 | 10.1 | May 3, 2017 | |||||||||
10-Q | 001-35727 | 10.14 | July 19, 2017 | |||||||||
10-Q | 001-35727 | 10.15 | October 18, 2017 | |||||||||
8-K | 001-35727 | 10.1 | October 26, 2017 | |||||||||
8-K | 001-35727 | 10.1 | October 26, 2018 | |||||||||
8-K | 001-35727 | 10.2 | October 26, 2018 | |||||||||
X | ||||||||||||
X | ||||||||||||
24 | Power of Attorney (see signature page) |
Exhibit Number | Exhibit Description | Incorporated by Reference | Filed Herewith | |||||||||
Form | File No. | Exhibit | Filing Date | |||||||||
X | ||||||||||||
X | ||||||||||||
X | ||||||||||||
101 | The following financial information from Netflix, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on January 29, 2019, formatted in XBRL includes: (i) Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016, (ii) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016, (iii) Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016, (iv) Consolidated Balance Sheets as of December 31, 2018 and 2017, (v) Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2018, 2017 and 2016 and (vi) the Notes to Consolidated Financial Statements. | X |
Netflix, Inc. | |||||
Dated: | January 29, 2019 | By: | /S/ REED HASTINGS | ||
Reed Hastings Chief Executive Officer (principal executive officer) | |||||
Dated: | January 29, 2019 | By: | /S/ SPENCER NEUMANN | ||
Spencer Neumann Chief Financial Officer (principal financial and accounting officer) |
Signature | Title | Date | ||
/S/ REED HASTINGS | President, Chief Executive Officer and Director (principal executive officer) | January 29, 2019 | ||
Reed Hastings | ||||
/S/ SPENCER NEUMANN | Chief Financial Officer (principal financial and accounting officer) | January 29, 2019 | ||
Spencer Neumann | ||||
/S/ RICHARD BARTON | Director | January 29, 2019 | ||
Richard Barton | ||||
/S/ TIMOTHY M. HALEY | Director | January 29, 2019 | ||
Timothy M. Haley | ||||
/S/ JAY C. HOAG | Director | January 29, 2019 | ||
Jay C. Hoag | ||||
/S/ ANN MATHER | Director | January 29, 2019 | ||
Ann Mather | ||||
/S/ SUSAN RICE | Director | January 29, 2019 | ||
Susan Rice | ||||
/S/ MATHIAS DÖPFNER | Director | January 29, 2019 | ||
Mathias Döpfner | ||||
/S/ LESLIE J. KILGORE | Director | January 29, 2019 | ||
Leslie J. Kilgore | ||||
/S/ BRAD SMITH | Director | January 29, 2019 | ||
Brad Smith | ||||
/S/ ANNE SWEENEY | Director | January 29, 2019 | ||
Anne Sweeney | ||||
/S/ RODOLPHE BELMER | Director | January 29, 2019 | ||
Rodolphe Belmer |
Legal Name | Jurisdiction | Percent Owned | |||
Netflix Entretenimento Brasil LTDA | Brazil | 100 | % | ||
Netflix International B.V. | The Netherlands | 100 | % | ||
Netflix Studios, LLC | United States | 100 | % | ||
Netflix Global, LLC | United States | 100 | % | ||
Netflix Global Holdings C.V. | United States | 100 | % |
(1) | Registration Statement (Form S-8 No. 333-89024) pertaining to Netflix.com, Inc. 1997 Stock Plan, as amended, Netflix, Inc. 2002 Stock Plan, Netflix, Inc. 2002 Employee Stock Purchase Plan, and Netflix.com, Inc. Stand-Alone Stock Option Agreements, |
(2) | Registration Statement (Form S-8 No. 333-104250) pertaining to Netflix, Inc. 2002 Stock Plan and Netflix, Inc. 2002 Employee Stock Purchase Plan, |
(3) | Registration Statement (Form S-8 No. 333-113198) pertaining to Netflix, Inc. 2002 Stock Plan and Netflix, Inc. 2002 Employee Stock Purchase Plan |
(4) | Registration Statement (Form S-8 No. 333-123501) pertaining to Netflix, Inc. 2002 Stock Plan and Netflix, Inc. 2002 Employee Stock Purchase Plan, |
(5) | Registration Statement (Form S-8 No. 333-136403) pertaining to Netflix, Inc. Amended and Restated 2002 Stock Plan and Netflix, Inc. 2002 Employee Stock Purchase Plan |
(6) | Registration Statement (Form S-8 No. 333-145147) pertaining to Netflix, Inc. 2002 Employee Stock Purchase Plan, |
(7) | Registration Statement (Form S-8 No. 333-160946) pertaining to Netflix, Inc. 2002 Employee Stock Purchase Plan, |
(8) | Registration Statement (Form S-8 No. 333-177561) pertaining to Netflix, Inc. 2011 Stock Plan, |
San Jose, California January 29, 2019 |
1. | I have reviewed this Annual Report on Form 10-K of Netflix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: January 29, 2019 | By: | /S/ REED HASTINGS | |||
Reed Hastings | |||||
Chief Executive Officer |
1. | I have reviewed this Annual Report on Form 10-K of Netflix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: January 29, 2019 | By: | /S/ SPENCER NEUMANN | ||
Spencer Neumann | ||||
Chief Financial Officer |
Dated: January 29, 2019 | By: | /S/ REED HASTINGS | ||
Reed Hastings | ||||
Chief Executive Officer |
Dated: January 29, 2019 | By: | /S/ SPENCER NEUMANN | ||
Spencer Neumann | ||||
Chief Financial Officer |
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Document And Entity Information - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Jun. 30, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | NETFLIX INC | |
Entity Central Index Key | 0001065280 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | FY | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 436,598,597 | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Public Float | $ 148,681,810,838 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Statement [Abstract] | |||
Revenues | $ 15,794,341 | $ 11,692,713 | $ 8,830,669 |
Cost of revenues | 9,967,538 | 8,033,000 | 6,257,462 |
Marketing | 2,369,469 | 1,436,281 | 1,097,519 |
Technology and development | 1,221,814 | 953,710 | 780,232 |
General and administrative | 630,294 | 431,043 | 315,663 |
Operating income | 1,605,226 | 838,679 | 379,793 |
Other income (expense): | |||
Interest expense | (420,493) | (238,204) | (150,114) |
Interest and other income (expense) | 41,725 | (115,154) | 30,828 |
Income before income taxes | 1,226,458 | 485,321 | 260,507 |
Provision for (benefit from) income taxes | 15,216 | (73,608) | 73,829 |
Net income | $ 1,211,242 | $ 558,929 | $ 186,678 |
Earnings per share: | |||
Basic (in USD per share) | $ 2.78 | $ 1.29 | $ 0.44 |
Diluted (in USD per share) | $ 2.68 | $ 1.25 | $ 0.43 |
Weighted-average common shares outstanding: | |||
Basic (in shares) | 435,374 | 431,885 | 428,822 |
Diluted (in shares) | 451,244 | 446,814 | 438,652 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 1,211,242 | $ 558,929 | $ 186,678 |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | 975 | 27,409 | (5,464) |
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $0, $378, and $126, respectively | 0 | 599 | 207 |
Total other comprehensive income (loss) | 975 | 28,008 | (5,257) |
Comprehensive income | $ 1,212,217 | $ 586,937 | $ 181,421 |
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Change in unrealized gains (losses) on available for sale securities, tax | $ 0 | $ 378 | $ 126 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 4,990,000,000 | 4,990,000,000 |
Common stock, shares issued | 436,598,597 | 433,392,696 |
Common stock, shares outstanding | 436,598,597 | 433,392,686 |
Organization and Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies Description of Business Netflix, Inc. (the “Company”) was incorporated on August 29, 1997 and began operations on April 14, 1998. The Company is the world’s leading internet entertainment service with over 139 million paid memberships in over 190 countries enjoying TV series, documentaries and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments. Additionally, over two million members in the U.S. subscribe to the Company's legacy DVD-by-mail service. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. Reclassification Certain prior period amounts in the Consolidated Statements of Operations and Segment Information presented in Note 11 have been reclassified to conform to the current period presentation. Specifically, certain expenses for personnel that support global content and marketing that were previously classified in General and administrative expenses were reclassified to Cost of revenues and Marketing, respectively. In addition, expenses for personnel that support global streaming delivery that were previously classified in Technology and development were also reclassified to Cost of revenues. There is no change to consolidated operating income, net income or cash flows or DVD segment results as a result of this change in classification. See Note 12 for further detail. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the streaming content asset amortization policy and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates. Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company adopted ASU 2014-09 in the first quarter of 2018 using the modified retrospective approach. Because the Company's primary source of revenues is from monthly membership fees which are recognized ratably over each monthly membership period, the impact on its consolidated financial statements is not material. In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The Company adopted ASU 2016-18 in the first quarter of 2018 and the impact on its consolidated financial statements is not material as the Company's restricted cash balances are immaterial. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the “Act”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. In the first quarter of 2018, the Company elected to treat any potential GILTI inclusions as a period cost. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. The Company adopted the rule in the fourth quarter of 2018 and the impact on its consolidated financial statements was not material. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019 utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019. While the Company is continuing to assess the potential impacts of ASU 2016-02, the Company estimates that the adoption of ASU 2016-02 will result in the recognition of right-of-use assets and lease liabilities for operating leases of approximately $700 million on its Consolidated Balance Sheets, with no material impact to its Consolidated Statements of Operations. Cash Equivalents and Short-term Investments The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. The Company also classifies amounts in transit from payment processors for customer credit card and debit card transactions as cash equivalents. In July 2017, the Company sold all short-term investments. The Company classified short-term investments, which consisted of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments were reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” within Stockholders’ equity in the Consolidated Balance Sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in “Interest and other income (expense)” in the Consolidated Statements of Operations. The Company used the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments. Short-term investments were reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviewed factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, the Company’s intent to sell, or whether it would be more likely than not that the Company would be required to sell the investments before the recovery of their amortized cost basis. Streaming Content The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV series and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash used in operating activities" on the Consolidated Statements of Cash Flows. For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets. For productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs. Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or 10 years, beginning with the month of first availability. The amortization is on an accelerated basis, as the Company typically expects more upfront viewing, for instance due to additional merchandising and marketing efforts, and film amortization is more accelerated than TV series amortization. The Company reviews factors impacting the amortization of the content assets on an ongoing basis. The Company's estimates related to these factors require considerable management judgment. The Company's business model is subscription based as opposed to a model generating revenues at a specific title level. Therefore, content assets, both licensed and produced, are reviewed in aggregate at the operating segment level when an event or change in circumstances indicates a change in the expected usefulness of the content asset. To date, the Company has not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost, net realizable value or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. Property and Equipment Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the respective assets, generally up to 30 years, or the expected lease term for leasehold improvements, if applicable. Leased buildings are capitalized and included in property and equipment when the Company was involved in the construction funding and did not meet the “sale-leaseback” criteria. Revenue Recognition The Company's primary source of revenues are from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. Deferred revenue consists of membership fees billed that have not been recognized and gift and other prepaid memberships that have not been redeemed. The Company is the principal in all its relationships where partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet service providers (“ISPs”), provide access to the service as the Company retains control over service delivery to its members. Typically, payments made to the partners, such as for marketing, are expensed, but in the case where the price that the member pays is established by the partners and there is no standalone price for the Netflix service (for instance, in a bundle), these payments are recognized as a reduction of revenues. Marketing Marketing expenses consist primarily of advertising expenses and certain payments made to the Company’s partners, including CE manufacturers, MVPDs, mobile operators and ISPs. Advertising expenses include promotional activities such as digital and television advertising. Advertising costs are expensed as incurred. Advertising expenses were $1,808 million, $1,091 million and $842 million for the years ended December 31, 2018, 2017 and 2016, respectively. Marketing expenses also include payroll and related expenses for personnel that support the Company's marketing activities. Research and Development Research and development expenses consist of payroll and related costs incurred in making improvements to our service offerings. Research and development expenses were $1,210 million, $981 million and $768 million for the years ended December 31, 2018, 2017 and 2016, respectively. Income Taxes The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain. The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. See Note 9 to the consolidated financial statements for further information regarding income taxes. Foreign Currency The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive loss" in Stockholders’ equity on the Consolidated Balance Sheets. The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense). Foreign currency transactions resulted in a loss of $1 million and $128 million for the years ended December 31, 2018 and 2017, respectively, and a gain of $23 million for the year ended December 31, 2016. Earnings Per Share Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:
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:
Stock-Based Compensation The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures. See Note 7 to the consolidated financial statements for further information regarding stock-based compensation. |
Cash, Cash Equivalents and Restricted Cash |
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Short-Term Investments And Fair Value Measurement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The following table summarizes the Company's cash, cash equivalents and restricted cash as of December 31, 2018 and 2017:
Non-current assets include restricted cash related to workers compensation deposits and letter of credit agreements. Balances as of December 31, 2018 are included in cash, cash equivalents, and restricted cash on the Consolidated Statements of Cash Flows. Foreign time deposits of $301 million, classified as Level 2 securities, were included in Cash and cash equivalents on the Company's Balance Sheet as of December 31, 2017. In July 2017, the Company sold all short-term investments. There were no material gross realized gains or losses in the years ended December 31, 2018, 2017 and 2016, respectively. See Note 4 to the consolidated financial statements for further information regarding the fair value of the Company’s senior notes. |
Balance Sheet Components |
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Balance Sheet Components Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components | Balance Sheet Components Content Assets Content assets consisted of the following:
On average, over 90% of a licensed or produced streaming content asset is expected to be amortized within four years after its month of first availability. As of December 31, 2018, over 30% of the $20.1 billion unamortized cost is expected to be amortized within one year and 33% and 82% of the $2.4 billion unamortized cost of the produced content that has been released is expected to be amortized within one year and three years, respectively. As of December 31, 2018, the amount of accrued participations and residuals was not material. Property and Equipment, Net Property and equipment and accumulated depreciation consisted of the following:
Deferred Revenue Deferred revenue consists of membership fees billed that have not been recognized, as well as gift and other prepaid memberships that have not been fully redeemed. As of December 31, 2018, total deferred revenue was $761 million, the vast majority of which was related to membership fees billed that are expected to be recognized as revenue within the next month. The remaining deferred revenue balance, which is related to gift cards and other prepaid memberships, will be recognized as revenue over the period of service after redemption, which is expected to occur over the next 12 months. The $142 million increase in deferred revenue as compared to the year ended December 31, 2017 is a result of the increase in membership fees billed due to increased memberships and average monthly revenue per paying memberships. |
Long-term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Long-term Debt As of December 31, 2018, the Company had aggregate outstanding long-term notes of $10,360 million, net of $89 million of issuance costs, 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. A portion of the outstanding long-term notes is denominated in foreign currency (comprised of €2,400 million) and is remeasured into U.S. dollars at each balance sheet date (with remeasurement gain totaling $74 million for the year ended December 31, 2018). The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2018 and December 31, 2017:
(1) Debt is denominated in euro with a €1,300 million principal amount. Total proceeds were $1,421 million. (2) Debt is denominated in euro with a €1,100 million principal amount. Total proceeds were $1,262 million. The expected timing of principal and interest payments for these Notes are as follows:
Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of December 31, 2018 and December 31, 2017, the Company was in compliance with all related covenants. Revolving Credit Facility In July 2017, the Company entered into a $500 million unsecured revolving credit facility (“Revolving Credit Agreement”), with an uncommitted incremental facility to increase the amount of the revolving credit facility by up to an additional $250 million, subject to certain terms and conditions. Revolving loans may be borrowed, repaid and reborrowed until July 27, 2022, at which time all amounts borrowed must be repaid. The Company may use the proceeds of future borrowings under the Revolving Credit Agreement for working capital and general corporate purposes. As of December 31, 2018, no amounts have been borrowed under the Revolving Credit Agreement. The borrowings under the Revolving Credit Agreement bear interest, at the Company’s option, of either (i) a floating rate equal to a base rate (the “Alternate Base Rate”) or (ii) a rate equal to an adjusted London interbank offered rate (the “Adjusted LIBO Rate”), plus a margin of 0.75%. The Alternate Base Rate is defined as the greatest of (A) the rate of interest published by the Wall Street Journal, from time to time, as the prime rate, (B) the federal funds rate, plus 0.500% and (C) the Adjusted LIBO Rate for a one-month interest period, plus 1.00%. The Adjusted LIBO Rate is defined as the London interbank offered rate for deposits in U.S. dollars, for the relevant interest period, adjusted for statutory reserve requirements, but in no event shall the Adjusted LIBO Rate be less than 0.00% per annum. The Company is also obligated to pay a commitment fee on the undrawn amounts of the Revolving Credit Agreement at a rate of 0.10%. The Revolving Credit Agreement requires the Company to comply with certain covenants, including covenants that limit or restrict the ability of the Company’s subsidiaries to incur debt and limit or restrict the ability of the Company and its subsidiaries to grant liens and enter into sale and leaseback transactions; and, in the case of the Company or a guarantor, merge, consolidate, liquidate, dissolve or sell, transfer, lease or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole. As of December 31, 2018, the Company was in compliance with all related covenants. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Streaming Content At December 31, 2018, the Company had $19.3 billion of obligations comprised of $4.7 billion included in "Current content liabilities" and $3.8 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $10.8 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition. At December 31, 2017, the Company had $17.7 billion of obligations comprised of $4.2 billion included in "Current content liabilities" and $3.3 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $10.2 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition. The expected timing of payments for these streaming content obligations is as follows:
Content obligations include amounts related to the acquisition, licensing and production of streaming content. Obligations that are in non-U.S. dollar currencies are translated to the U.S. dollar at period end rates. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements as well as other production related commitments. An obligation for the acquisition and licensing of content is incurred at the time the Company enters into an agreement to obtain future titles. Once a title becomes available, a content liability is recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. Traditional film output deals, or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of such license agreements. The Company does not include any estimated obligation for these future titles beyond the known minimum amount. However, the unknown obligations are expected to be significant. Lease obligations The Company leases facilities under non-cancelable operating leases with various expiration dates through 2034. Several lease agreements contain rent escalation clauses or rent holidays. For purposes of recognizing minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation for intended use. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the Consolidated Statements of Operations. The Company has the option to extend or renew most of its leases which may increase the future minimum lease commitments. Because the terms of the Company’s facilities lease agreements for its original Los Gatos, California headquarters site required the Company’s involvement in the construction funding of the buildings, the Company is the “deemed owner” (for accounting purposes only) of these buildings. Accordingly, the Company recorded an asset of $41 million, representing the total costs of the buildings and improvements, including the costs paid by the lessor (the legal owner of the buildings), with corresponding liabilities. Upon completion of construction of each building, the Company did not meet the sale-leaseback criteria for de-recognition of the building assets and liabilities. Therefore the leases are accounted for as financing obligations. At December 31, 2018, the lease financing obligation balance was $28 million, the majority of which is recorded in “Other non-current liabilities,” on the Consolidated Balance Sheets. The remaining future minimum payments under the lease financing obligation are $11 million. The lease financing obligation balance at the end of the lease term will be approximately $22 million which approximates the net book value of the buildings to be relinquished to the lessor. In addition to the lease financing obligation, future minimum lease payments include $1,157 million as of December 31, 2018 related to non-cancelable operating leases for the expanded headquarters in Los Gatos, California and the office space in Los Angeles, California. Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2018 are as follows:
Rent expense associated with the operating leases was $107 million, $75 million and $53 million for the years ended December 31, 2018, 2017 and 2016, respectively. Legal Proceedings From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims, including claims relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company's view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations or its financial position, liquidity or results of operations. The Company is involved in litigation matters not listed herein but does not consider the matters to be material either individually or in the aggregate at this time. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold. |
Guarantees—Indemnification Obligations |
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Guarantees [Abstract] | |
Guarantees—Indemnification Obligations | Guarantees—Indemnification Obligations In the ordinary course of business, the Company has entered into contractual arrangements under which it has agreed to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements and out of intellectual property infringement claims made by third parties. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. The Company’s obligations under these agreements may be limited in terms of time or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations vary. It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. No amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Preferred Stock The Company has authorized 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. None of the preferred shares were issued and outstanding at December 31, 2018 and 2017. Voting Rights The holders of each share of common stock shall be entitled to one vote per share on all matters to be voted upon by the Company’s stockholders. Stock Option Plans In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of December 31, 2018, approximately 8.7 million shares were reserved for future grants under the 2011 Stock Plan. A summary of the activities related to the Company’s stock option plans is as follows:
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2018 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 2018. This amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised for the years ended December 31, 2018, 2017 and 2016 was $863 million, $464 million and $189 million, respectively. Cash received from option exercises for the years ended December 31, 2018, 2017 and 2016 was $125 million, $88 million and $37 million, respectively. Stock-Based Compensation Stock options granted are exercisable for the full ten year contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior. The Company calculates expected volatility 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 |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income before provision for income taxes was as follows:
The components of provision for (benefit from) income taxes for all periods presented were as follows:
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. In accordance with the Act, the Company recorded $79 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The total expense included $32 million related to the transition tax and $47 million related to the remeasurement of certain deferred tax assets and liabilities. Additionally, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. December 22, 2018 marked the end of the measurement period for purposes of SAB 118. As such, the Company has completed the analysis based on legislative updates relating to the Act currently available which resulted in an additional SAB 118 tax benefit of $34 million in the fourth quarter of 2018 and a total tax benefit of $72 million for the year ended December 31, 2018. The total tax provision benefit included $45 million related to adjustments to the transition tax and a $27 million benefit related to the remeasurement of certain deferred tax assets and liabilities. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory Federal income tax rate to income before income taxes is as follows:
The components of deferred tax assets and liabilities were as follows:
All deferred tax assets are classified as “Other non-current assets” on the Consolidated Balance Sheets as of December 31, 2018 and December 31, 2017. In evaluating its ability to realize the net deferred tax assets, the Company considered all available positive and negative evidence, including its past operating results and the forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. As of December 31, 2018, the valuation allowance of $125 million was primarily related to certain foreign tax credits that are not likely to be realized. As of December 31, 2018, the Company's Federal R&D tax credit and state tax credit carryforwards for tax return purposes were $248 million, and $193 million, respectively. The Federal R&D tax credit carryforwards expire through 2038. State tax credit carryforwards can be carried forward indefinitely. As of December 31, 2018, the Company's foreign tax credit carryforwards for tax return purposes were $99 million. The Federal foreign tax credit carryovers expire through 2028. The unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year are classified as “Other non-current liabilities” and a reduction of deferred tax assets which is classified as "Other non-current assets" in the Consolidated Balance Sheets. As of December 31, 2018, the total amount of gross unrecognized tax benefits was $48 million, of which $44 million, if recognized, would favorably impact the Company’s effective tax rate. As of December 31, 2017, the total amount of gross unrecognized tax benefits was $43 million, of which $38 million, if recognized, would favorably impact the Company’s effective tax rate. The aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes and in “Other non-current liabilities” in the Consolidated Balance Sheets. Interest and penalties included in the Company's provision for income taxes were not material in all the periods presented. The Company files U.S. Federal, state and foreign tax returns. In August 2018, the Company reached a favorable settlement with the IRS for tax years 2014 & 2015 and recorded a discrete tax benefit of $7 million in the third quarter of 2018. The Company is currently under examination by the IRS for the years 2016 and 2017 and the state of California for the years 2014 and 2015. The 2009 through 2017 state tax returns are subject to examination by state tax authorities. The Company is also currently under examination in the UK for 2015 and 2016. The Company has no other significant foreign jurisdiction audits underway. The years 2013 through 2017 remain subject to examination by foreign tax authorities. Given the potential outcome of the current examinations as well as the impact of the current examinations on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible adjustments cannot be made at this time. |
Employee Benefit Plan |
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Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plan | Employee Benefit Plan The Company maintains a 401(k) savings plan covering substantially all of its employees. Eligible employees may contribute up to 80% of their annual salary through payroll deductions, but not more than the statutory limits set by the Internal Revenue Service. The Company matches employee contributions at the discretion of the Board. During 2018, 2017 and 2016, the Company’s matching contributions totaled $27 million, $20 million and $16 million, respectively. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 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 revenue and contribution profit (loss) for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses incurred by the segment. The Company has aggregated the results of the International operating segments into one reportable segment because these operating segments share similar long-term economic and other qualitative characteristics. As markets within the Company's International streaming segment become profitable, the CODM increasingly focuses on the Company's global operating margin as a measure of profitability. The Domestic streaming segment derives revenues from monthly membership fees for services related to streaming content to the members in the United States. The International streaming segment derives revenues from monthly membership fees for services related to streaming content to members outside of the United States. The Domestic DVD segment derives revenues from monthly membership fees for services consisting solely of DVD-by-mail. Revenues and the related payment processing 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. Amortization of streaming content assets makes up the majority of cost of revenues. The Company obtains multi-territory or global rights for its streaming content and allocates these rights between Domestic and International streaming segments based on estimated fair market value. Amortization of content assets and other expenses associated with the acquisition, licensing, and production of streaming content for each streaming segment thus includes both expenses directly incurred by the segment as well as an allocation of expenses incurred for global or multi-territory rights. Other costs of revenues such as delivery costs are either attributed to the operating segment based on amounts directly incurred by the segment or are allocated across segments by management. Marketing expenses consist primarily of advertising expenses and certain payments made to marketing partners, including CE manufacturers, MVPDs, mobile operators and ISPs, 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:
The following tables represent segment information for the year ended December 31, 2018:
The following tables represent segment information for the year ended December 31, 2017.
The following tables represent segment information for the year ended December 31, 2016.
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Reclassification |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification | Reclassification The Company reclassified certain streaming personnel related expenses on its Consolidated Statement of Operations effective for the fourth quarter of 2018. Specifically, expenses for personnel that support global content and marketing that were previously classified in General and administrative expenses were reclassified to Cost of revenues and Marketing, respectively. In addition, expenses for personnel that support global streaming delivery that were previously classified in Technology and development were also reclassified to Cost of revenues. The Company is making this change in classification in order to reflect how the nature of the work performed by certain personnel has changed to be more directly related to the development, marketing and delivery of our service as a result of the continued evolution of the Company’s strategy to self-produce and create more of its own content rather than license or procure it from third parties. This change in classification will also align external presentation of personnel related expenses with the way that the Company's chief operating decision maker expects to assess profitability and make resource allocation decisions going forward. The Company has reclassified these personnel related expenses for all prior periods in order to present comparable financial results. There is no change to consolidated operating income, net income or cash flows or DVD segment results as a result of this change in classification. The revised Consolidated Statements of Operations as well as segment results for the three month periods ended March 31, 2016, 2017 and 2018, June 30, 2016, 2017 and 2018, September 30, 2016, 2017 and 2018 and December 31, 2016 and 2017 and for the twelve month periods ended December 31, 2016 and 2017 are as follows:
The following tables represent the reclassification of costs for the quarterly domestic streaming segment results for 2016, 2017 and 2018, respectively:
The following tables represent the reclassification of costs for the quarterly international streaming segment results for 2016, 2017 and 2018, respectively:
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Selected Quarterly Financial Data (Unaudited) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data (Unaudited) | Selected Quarterly Financial Data (Unaudited) The following selected quarterly financial data for the year ended December 31, 2018 and 2017 as reclassified. Refer to Note 12 for additional information on the headcount reclassification.
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Organization and Summary of Significant Accounting Policies (Policy) |
12 Months Ended |
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Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the streaming content asset amortization policy and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates these assumptions, judgments and estimates. Actual results may differ from these estimates. |
Recently accounting pronouncements | Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company adopted ASU 2014-09 in the first quarter of 2018 using the modified retrospective approach. Because the Company's primary source of revenues is from monthly membership fees which are recognized ratably over each monthly membership period, the impact on its consolidated financial statements is not material. In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The Company adopted ASU 2016-18 in the first quarter of 2018 and the impact on its consolidated financial statements is not material as the Company's restricted cash balances are immaterial. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the “Act”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. In the first quarter of 2018, the Company elected to treat any potential GILTI inclusions as a period cost. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. The Company adopted the rule in the fourth quarter of 2018 and the impact on its consolidated financial statements was not material. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019 utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019. While the Company is continuing to assess the potential impacts of ASU 2016-02, the Company estimates that the adoption of ASU 2016-02 will result in the recognition of right-of-use assets and lease liabilities for operating leases of approximately $700 million on its Consolidated Balance Sheets, with no material impact to its Consolidated Statements of Operations. |
Cash Equivalents and Short-Term Investments | Cash Equivalents and Short-term Investments The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. The Company also classifies amounts in transit from payment processors for customer credit card and debit card transactions as cash equivalents. In July 2017, the Company sold all short-term investments. The Company classified short-term investments, which consisted of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments were reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” within Stockholders’ equity in the Consolidated Balance Sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in “Interest and other income (expense)” in the Consolidated Statements of Operations. The Company used the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments. Short-term investments were reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviewed factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, the Company’s intent to sell, or whether it would be more likely than not that the Company would be required to sell the investments before the recovery of their amortized cost basis. |
Streaming Content | Streaming Content The Company acquires, licenses and produces content, including original programming, in order to offer members unlimited viewing of TV series and films. The content licenses are for a fixed fee and specific windows of availability. Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense. Payments for content, including additions to streaming assets and the changes in related liabilities, are classified within "Net cash used in operating activities" on the Consolidated Statements of Cash Flows. For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. The portion available for streaming within one year is recognized as “Current content assets, net” and the remaining portion as “Non-current content assets, net” on the Consolidated Balance Sheets. For productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. These amounts are included in "Non-current content assets, net" on the Consolidated Balance Sheets. Participations and residuals are expensed in line with the amortization of production costs. Based on factors including historical and estimated viewing patterns, the Company amortizes the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability or estimated period of use or 10 years, beginning with the month of first availability. The amortization is on an accelerated basis, as the Company typically expects more upfront viewing, for instance due to additional merchandising and marketing efforts, and film amortization is more accelerated than TV series amortization. The Company reviews factors impacting the amortization of the content assets on an ongoing basis. The Company's estimates related to these factors require considerable management judgment. The Company's business model is subscription based as opposed to a model generating revenues at a specific title level. Therefore, content assets, both licensed and produced, are reviewed in aggregate at the operating segment level when an event or change in circumstances indicates a change in the expected usefulness of the content asset. To date, the Company has not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost, net realizable value or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the respective assets, generally up to 30 years, or the expected lease term for leasehold improvements, if applicable. Leased buildings are capitalized and included in property and equipment when the Company was involved in the construction funding and did not meet the “sale-leaseback” criteria. |
Revenue Recognition | Revenue Recognition The Company's primary source of revenues are from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. Deferred revenue consists of membership fees billed that have not been recognized and gift and other prepaid memberships that have not been redeemed. |
Marketing | Marketing Marketing expenses consist primarily of advertising expenses and certain payments made to the Company’s partners, including CE manufacturers, MVPDs, mobile operators and ISPs. Advertising expenses include promotional activities such as digital and television advertising. Advertising costs are expensed as incurred. |
Research and Development | Research and Development Research and development expenses consist of payroll and related costs incurred in making improvements to our service offerings. |
Income Taxes | Income Taxes The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain. The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. |
Foreign Currency | Foreign Currency The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive loss" in Stockholders’ equity on the Consolidated Balance Sheets. The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense). |
Earnings Per Share | Earnings Per Share Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options. |
Stock-Based Compensation | Stock-Based Compensation The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures. |
Organization and Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Net Income Per Share | The computation of earnings per share is as follows:
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Summary of Potential Common Shares Excluded from Diluted Calculation | The following table summarizes the potential common shares excluded from the diluted calculation:
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Cash, Cash Equivalents and Restricted Cash (Tables) |
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Short-Term Investments And Fair Value Measurement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | The following table summarizes the Company's cash, cash equivalents and restricted cash as of December 31, 2018 and 2017:
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Balance Sheet Components (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Content Library | Content assets consisted of the following:
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Property and Equipment and Accumulated Depreciation | Property and equipment and accumulated depreciation consisted of the following:
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Long-term Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table provides a summary of the Company's outstanding long-term debt and the fair values based on quoted market prices in less active markets as of December 31, 2018 and December 31, 2017:
(1) Debt is denominated in euro with a €1,300 million principal amount. Total proceeds were $1,421 million. (2) Debt is denominated in euro with a €1,100 million principal amount. Total proceeds were $1,262 million. |
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Schedule of Expected Timing of Principal and Interest Payments for the Notes | The expected timing of principal and interest payments for these Notes are as follows:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected Timing of Payments for Streaming Content Obligations | The expected timing of payments for these streaming content obligations is as follows:
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Future Minimum Payments Under Lease Financing Obligations and Non-cancelable Operating Leases | Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2018 are as follows:
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Future Minimum Payments Under Capital Leases | Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2018 are as follows:
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Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity Related to Stock Option Plans | A summary of the activities related to the Company’s stock option plans is as follows:
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Summary of Assumptions Used to Value Stock Option Grants Using Lattice-Binomial Model | The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
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Accumulated Other Comprehensive Loss (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Accumulated Other Comprehensive Loss | The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax:
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Income Taxes (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Taxes | Income before provision for income taxes was as follows:
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Components of Provision for Income Taxes | The components of provision for (benefit from) income taxes for all periods presented were as follows:
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Reconciliation of Provision for Income Taxes | A reconciliation of the provision for income taxes, with the amount computed by applying the statutory Federal income tax rate to income before income taxes is as follows:
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Deferred Tax Assets and Liabilities | The components of deferred tax assets and liabilities were as follows:
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Summary of Changes in Unrecognized Tax Benefits | The aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
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Segment Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-lived Assets by Geographic Areas | The Company's long-lived tangible assets were located as follows:
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Information on Reportable Segments and Reconciliation to Consolidated Net Income | The following tables represent segment information for the year ended December 31, 2018:
The following tables represent segment information for the year ended December 31, 2017.
The following tables represent segment information for the year ended December 31, 2016.
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Reclassification (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reclassifications | The revised Consolidated Statements of Operations as well as segment results for the three month periods ended March 31, 2016, 2017 and 2018, June 30, 2016, 2017 and 2018, September 30, 2016, 2017 and 2018 and December 31, 2016 and 2017 and for the twelve month periods ended December 31, 2016 and 2017 are as follows:
The following tables represent the reclassification of costs for the quarterly domestic streaming segment results for 2016, 2017 and 2018, respectively:
The following tables represent the reclassification of costs for the quarterly international streaming segment results for 2016, 2017 and 2018, respectively:
|
Selected Quarterly Financial Data (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data | The following selected quarterly financial data for the year ended December 31, 2018 and 2017 as reclassified. Refer to Note 12 for additional information on the headcount reclassification.
|
Organization and Summary of Significant Accounting Policies (Computation of Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Basic earnings per share: | |||||||||||
Net income | $ 133,934 | $ 402,835 | $ 384,349 | $ 290,124 | $ 185,517 | $ 129,590 | $ 65,600 | $ 178,222 | $ 1,211,242 | $ 558,929 | $ 186,678 |
Weighted-average common shares outstanding | 435,374 | 431,885 | 428,822 | ||||||||
Basic earnings per share (in USD per share) | $ 0.31 | $ 0.92 | $ 0.88 | $ 0.67 | $ 0.43 | $ 0.30 | $ 0.15 | $ 0.41 | $ 2.78 | $ 1.29 | $ 0.44 |
Diluted earnings per share: | |||||||||||
Net income | $ 133,934 | $ 402,835 | $ 384,349 | $ 290,124 | $ 185,517 | $ 129,590 | $ 65,600 | $ 178,222 | $ 1,211,242 | $ 558,929 | $ 186,678 |
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 435,374 | 431,885 | 428,822 | ||||||||
Employee stock options | 15,870 | 14,929 | 9,830 | ||||||||
Weighted-average number of shares | 451,244 | 446,814 | 438,652 | ||||||||
Diluted earnings per share (in USD per share) | $ 0.30 | $ 0.89 | $ 0.85 | $ 0.64 | $ 0.41 | $ 0.29 | $ 0.15 | $ 0.40 | $ 2.68 | $ 1.25 | $ 0.43 |
Organization And Summary Of Significant Accounting Policies (Summary of Potential Common Shares Excluded From Diluted Calculation) (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Employee stock options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Employee stock options | 330 | 189 | 1,545 |
Long-term Debt (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | ||
Aggregate outstanding principal | $ 10,360,058 | $ 6,499,432 |
Debt issuance cost | $ 89,000 | |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Redemption price, percent of outstanding principal | 101.00% |
Long-term Debt (Maturities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Less than one year | $ 538,384 | $ 311,339 |
Due after one year and through three years | 1,550,581 | 627,444 |
Due after three years and through five years | 1,646,101 | 1,761,465 |
Due after five years | 11,138,129 | 6,348,580 |
Total debt obligations | $ 14,873,195 | $ 9,048,828 |
Long-term Debt (Revolving Credit Facility) (Details) - Revolving Credit Facility - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Jul. 31, 2017 |
|
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum borrowing capacity | $ 500,000,000 | |
Line of credit facility, additional maximum borrowing capacity | $ 250,000,000 | |
Commitment fee percentage | 0.10% | |
London Interbank Offered Rate (LIBOR) | ||
Line of Credit Facility [Line Items] | ||
Basis spread on variable rate | 0.75% | |
Federal Funds Rate | ||
Line of Credit Facility [Line Items] | ||
Basis spread on variable rate | 0.50% | |
One-Month LIBOR Rate | ||
Line of Credit Facility [Line Items] | ||
Basis spread on variable rate | 1.00% | |
One-Month LIBOR Rate | Minimum | ||
Line of Credit Facility [Line Items] | ||
Basis spread on variable rate | 0.00% |
Commitments and Contingencies (Streaming Content) (Narrative) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Contractual Obligation [Line Items] | ||
Total streaming content obligations | $ 19,285,875 | $ 17,694,642 |
Current content liabilities | 4,686,019 | 4,173,041 |
Non-current content liabilities | 3,759,026 | 3,329,796 |
Unrecorded streaming obligations | 10,800,000 | 10,200,000 |
Current Content Liabilities | ||
Contractual Obligation [Line Items] | ||
Current content liabilities | 4,700,000 | 4,200,000 |
Non-current Content Liabilities | ||
Contractual Obligation [Line Items] | ||
Non-current content liabilities | $ 3,800,000 | $ 3,300,000 |
Commitments and Contingencies (Expected Timing of Payments for Commitments) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Less than one year | $ 8,611,398 | $ 7,446,947 |
Due after one year and through 3 years | 8,841,561 | 8,210,159 |
Due after 3 years and through 5 years | 1,684,582 | 1,894,001 |
Due after 5 years | 148,334 | 143,535 |
Total streaming content obligations | $ 19,285,875 | $ 17,694,642 |
Commitments and Contingencies (Lease Obligations) (Narrative) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Capital Leased Assets [Line Items] | |||
Rent expense | $ 107 | $ 75 | $ 53 |
Land, Buildings and Improvements | Los Gatos Buildings | |||
Capital Leased Assets [Line Items] | |||
Total costs of buildings and improvements | 41 | ||
Capital lease obligations | 28 | ||
Capital leases, future minimum payments due | 11 | ||
Capital lease financing obligation under extended lease term | 22 | ||
Land, Buildings and Improvements | Los Gatos Buildings Expanded Site and Los Angeles | |||
Capital Leased Assets [Line Items] | |||
Operating leases, future minimum payments due | $ 1,157 |
Commitments and Contingencies (Future Minimum Payments Under Lease Financing Obligations and Non-Cancelable Operating Leases) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 172,470 |
2020 | 139,366 |
2021 | 145,175 |
2022 | 156,527 |
2023 | 151,200 |
Thereafter | 943,630 |
Total minimum payments | $ 1,708,368 |
Stockholders' Equity (Preferred Stock and Voting Rights) (Narrative) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018
vote
$ / shares
shares
|
Dec. 31, 2017
$ / shares
shares
|
|
Stockholders' Equity Note [Abstract] | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value (in USD per share) | $ / shares | $ 0.001 | $ 0.001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Number of voting rights per share | vote | 1 |
Stockholders' Equity (Stock Option Plans) (Narrative) (Details) - USD ($) shares in Millions, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total intrinsic value of options exercised | $ 863 | $ 464 | $ 189 |
Cash received from option exercised | $ 125 | $ 88 | $ 37 |
2011 Stock Plan | Employee Stock Option | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares available for future issuance | 8.7 |
Stockholders' Equity (Summary of Assumptions Used to Value Stock Option Grants) (Details) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018
USD ($)
$ / shares
|
Dec. 31, 2017
USD ($)
$ / shares
|
Dec. 31, 2016
USD ($)
$ / shares
|
|
Stockholders' Equity Note [Abstract] | |||
Dividend yield | 0.00% | 0.00% | 0.00% |
Expected volatility, minimum | 40.00% | 34.00% | 40.00% |
Expected volatility, maximum | 42.00% | 37.00% | 50.00% |
Risk-free interest rate, minimum | 2.61% | 2.24% | 1.57% |
Risk-free interest rate, maximum | 3.09% | 2.45% | 2.04% |
Suboptimal exercise factor, minimum | 2.80 | 2.48 | 2.48 |
Suboptimal exercise factor, maximum | 3.01 | 2.63 | 2.48 |
Valuation data: | |||
Weighted-average fair value (in USD per share) | $ / shares | $ 157.19 | $ 71.45 | $ 48.85 |
Total stock-based compensation expense (in thousands) | $ 320,657 | $ 182,209 | $ 173,675 |
Total income tax impact on provision (in thousands) | $ 67,575 | $ 61,842 | $ 65,173 |
Income Taxes (Schedule of Income before Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
United States | $ 845,402 | $ 144,100 | $ 188,078 |
Foreign | 381,056 | 341,221 | 72,429 |
Income before income taxes | $ 1,226,458 | $ 485,321 | $ 260,507 |
Income Taxes (Components of Provision for Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current tax provision: | |||
Federal | $ (22,176) | $ 54,245 | $ 54,315 |
State | (10,234) | (7,601) | 5,790 |
Foreign | 133,146 | 88,436 | 60,571 |
Total current | 100,736 | 135,080 | 120,676 |
Deferred tax provision: | |||
Federal | (37,396) | (153,963) | (24,383) |
State | (52,391) | (52,695) | (14,080) |
Foreign | 4,267 | (2,030) | (8,384) |
Total deferred | (85,520) | (208,688) | (46,847) |
Provision for (benefit from) income taxes | $ 15,216 | $ (73,608) | $ 73,829 |
Income Taxes (Reconciliation of Provision for Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Expected tax expense at U.S. Federal statutory rates | $ 257,556 | $ 169,860 | $ 91,179 |
State income taxes, net of Federal income tax effect | 33,611 | 6,404 | 7,261 |
Foreign earnings at other than U.S. rates | 63,519 | (87,514) | 14,639 |
Federal and California R&D tax credits | (140,749) | (79,868) | (41,144) |
Excess tax benefits on stock-based compensation | (191,323) | (157,888) | 0 |
Rate Change / Transition Tax | (71,516) | 79,077 | 0 |
U.S. Minimum Tax on Foreign Entities | 43,099 | 0 | 0 |
Nondeductible Officers Compensation | 14,377 | 28 | 28 |
Other | 6,642 | (3,707) | 1,866 |
Provision for (benefit from) income taxes | $ 15,216 | $ (73,608) | $ 73,829 |
Effective Tax Rate | 1.00% | (15.00%) | 28.00% |
Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred tax assets (liabilities): | ||
Stock-based compensation | $ 190,451 | $ 149,367 |
Depreciation and amortization | (151,678) | (70,382) |
Federal and California tax R&D credits | 369,023 | 260,686 |
Foreign tax credits | 218,026 | 102,242 |
Accruals and reserves | 36,396 | 34,170 |
Other | 27,203 | 51,614 |
Gross deferred tax assets | 689,421 | 527,697 |
Valuation allowance | (124,996) | (49,431) |
Net deferred tax assets | $ 564,425 | $ 478,266 |
Income Taxes (Summary of Changes in Unrecognized Tax Benefits) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Beginning Balance | $ 42,902 | $ 19,739 |
Increases related to tax positions taken during prior periods | 4,486 | |
Decreases related to tax positions taken during prior periods | (17,922) | (3,226) |
Increases related to tax positions taken during the current period | 18,068 | 26,389 |
Ending Balance | $ 47,534 | $ 42,902 |
Employee Benefit Plan (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Retirement Benefits [Abstract] | |||
Eligible employees maximum contribution percentage | 80.00% | ||
Contributions by employer | $ 27 | $ 20 | $ 16 |
Segment Information (Narrative) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
Segment Information (Long-lived Assets by Geographic Areas) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 381,947 | $ 289,875 |
International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 36,334 | $ 29,529 |
Segment Information (Information on Reportable Segments and Reconciliation to Consolidated Net Income) (Details) membership in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018
USD ($)
membership
|
Sep. 30, 2018
USD ($)
|
Jun. 30, 2018
USD ($)
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
membership
|
Sep. 30, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
|
Mar. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
membership
|
Sep. 30, 2016
USD ($)
|
Jun. 30, 2016
USD ($)
|
Mar. 31, 2016
USD ($)
|
Dec. 31, 2018
USD ($)
membership
|
Dec. 31, 2017
USD ($)
membership
|
Dec. 31, 2016
USD ($)
membership
|
|
Segment Reporting Information [Line Items] | |||||||||||||||
Total paid memberships at end of period | membership | |||||||||||||||
Revenues | $ 4,186,841 | $ 3,999,374 | $ 3,907,270 | $ 3,700,856 | $ 3,285,755 | $ 2,984,859 | $ 2,785,464 | $ 2,636,635 | $ 2,477,541 | $ 2,290,188 | $ 2,105,204 | $ 1,957,736 | $ 15,794,341 | $ 11,692,713 | $ 8,830,669 |
Cost of revenues | 2,531,128 | 2,402,431 | 2,300,579 | 2,214,334 | 2,086,239 | 1,991,696 | 1,740,731 | 1,719,716 | 1,593,768 | 1,525,397 | 1,418,581 | 9,967,538 | 8,033,000 | 6,257,462 | |
Marketing | 510,330 | 592,007 | 536,777 | 466,527 | 352,446 | 311,160 | 306,148 | 314,447 | 311,017 | 240,590 | 231,465 | 2,369,469 | 1,436,281 | 1,097,519 | |
Contribution profit (loss) | 3,457,334 | 2,223,432 | 1,475,688 | ||||||||||||
Other operating expenses | 1,852,108 | 1,384,753 | 1,095,895 | ||||||||||||
Operating income | 480,668 | 462,213 | 446,578 | 245,303 | 208,627 | 127,807 | 256,942 | $ 153,934 | 106,036 | 70,370 | 49,453 | 1,605,226 | 838,679 | 379,793 | |
Other income (expense) | (378,768) | (353,358) | (119,286) | ||||||||||||
Provision for income taxes | 15,216 | (73,608) | 73,829 | ||||||||||||
Net income | $ 133,934 | 402,835 | 384,349 | 290,124 | $ 185,517 | 129,590 | 65,600 | 178,222 | 1,211,242 | 558,929 | 186,678 | ||||
Amortization of content assets | $ 7,573,300 | $ 6,258,474 | $ 4,867,450 | ||||||||||||
Domestic Streaming | |||||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||||
Total paid memberships at end of period | membership | 58,486 | 52,810 | 47,905 | 58,486 | 52,810 | 47,905 | |||||||||
Total paid net membership additions | membership | 5,676 | 4,905 | 4,504 | ||||||||||||
Total free trials at end of period | membership | 2,065 | 1,940 | 1,526 | 2,065 | 1,940 | 1,526 | |||||||||
Revenues | 1,937,314 | 1,893,222 | 1,820,019 | $ 1,630,274 | 1,547,210 | 1,505,499 | 1,470,042 | $ 1,403,462 | 1,304,333 | 1,208,271 | 1,161,241 | $ 7,646,647 | $ 6,153,025 | $ 5,077,307 | |
Cost of revenues | 1,038,473 | 969,995 | 936,480 | 916,100 | 902,275 | 868,530 | 783,954 | 788,598 | 746,220 | 729,399 | 687,756 | 4,038,394 | 3,470,859 | 2,951,973 | |
Marketing | 210,595 | 251,298 | 250,719 | 211,057 | 141,533 | 124,903 | 126,253 | 113,916 | 116,687 | 93,751 | 88,574 | 1,025,351 | 603,746 | 412,928 | |
Contribution profit (loss) | 688,246 | 671,929 | 632,820 | $ 503,117 | 503,402 | 512,066 | 559,835 | $ 500,948 | 441,426 | 385,121 | 384,911 | 2,582,902 | 2,078,420 | 1,712,406 | |
Amortization of content assets | $ 3,115,170 | $ 2,756,947 | $ 2,337,950 | ||||||||||||
International Streaming | |||||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||||
Total paid memberships at end of period | membership | 80,773 | 57,834 | 41,185 | 80,773 | 57,834 | 41,185 | |||||||||
Total paid net membership additions | membership | 22,939 | 16,649 | 13,747 | ||||||||||||
Total free trials at end of period | membership | 7,131 | 4,998 | 3,180 | 7,131 | 4,998 | 3,180 | |||||||||
Revenues | 1,973,283 | 1,921,144 | 1,782,086 | $ 1,550,329 | 1,327,435 | 1,165,228 | 1,046,199 | $ 947,666 | 853,480 | 758,201 | 651,748 | $ 7,782,105 | $ 5,089,191 | $ 3,211,095 | |
Cost of revenues | 1,455,554 | 1,392,512 | 1,321,706 | 1,255,749 | 1,136,877 | 1,070,432 | 896,558 | 872,972 | 783,877 | 728,168 | 657,730 | 5,776,047 | 4,359,616 | 3,042,747 | |
Marketing | 299,735 | 340,709 | 286,058 | 255,470 | 210,913 | 186,257 | 179,895 | 200,531 | 194,330 | 146,839 | 142,891 | 1,344,118 | 832,535 | 684,591 | |
Contribution profit (loss) | $ 217,994 | $ 187,923 | $ 174,322 | $ 39,110 | $ (20,355) | $ (91,461) | $ (30,254) | $ (125,837) | $ (124,727) | $ (116,806) | $ (148,873) | 661,940 | (102,960) | (516,243) | |
Amortization of content assets | $ 4,416,918 | $ 3,440,870 | $ 2,450,548 | ||||||||||||
Domestic DVD | |||||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||||
Total paid memberships at end of period | membership | 2,706 | 3,330 | 4,029 | 2,706 | 3,330 | 4,029 | |||||||||
Total paid net membership additions | membership | (624) | (699) | (758) | ||||||||||||
Total free trials at end of period | membership | 25 | 53 | 85 | 25 | 53 | 85 | |||||||||
Revenues | $ 365,589 | $ 450,497 | $ 542,267 | ||||||||||||
Cost of revenues | 153,097 | 202,525 | 262,742 | ||||||||||||
Marketing | 0 | 0 | 0 | ||||||||||||
Contribution profit (loss) | 212,492 | 247,972 | 279,525 | ||||||||||||
Amortization of content assets | $ 41,212 | $ 60,657 | $ 78,952 |
Reclassification (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | $ 4,186,841 | $ 3,999,374 | $ 3,907,270 | $ 3,700,856 | $ 3,285,755 | $ 2,984,859 | $ 2,785,464 | $ 2,636,635 | $ 2,477,541 | $ 2,290,188 | $ 2,105,204 | $ 1,957,736 | $ 15,794,341 | $ 11,692,713 | $ 8,830,669 |
Cost of revenues | 2,531,128 | 2,402,431 | 2,300,579 | 2,214,334 | 2,086,239 | 1,991,696 | 1,740,731 | 1,719,716 | 1,593,768 | 1,525,397 | 1,418,581 | 9,967,538 | 8,033,000 | 6,257,462 | |
Marketing | 510,330 | 592,007 | 536,777 | 466,527 | 352,446 | 311,160 | 306,148 | 314,447 | 311,017 | 240,590 | 231,465 | 2,369,469 | 1,436,281 | 1,097,519 | |
Technology and development | 308,620 | 299,095 | 282,310 | 247,132 | 230,223 | 242,484 | 233,871 | 205,912 | 197,506 | 190,204 | 186,610 | 1,221,814 | 953,710 | 780,232 | |
General and administrative | 168,628 | 151,524 | 134,612 | 112,459 | 107,324 | 112,317 | 98,943 | 83,532 | 81,861 | 78,643 | 71,627 | 630,294 | 431,043 | 315,663 | |
Operating income | 480,668 | 462,213 | 446,578 | 245,303 | 208,627 | 127,807 | 256,942 | 153,934 | 106,036 | 70,370 | 49,453 | 1,605,226 | 838,679 | 379,793 | |
Contribution profit (loss) | 3,457,334 | 2,223,432 | 1,475,688 | ||||||||||||
Domestic Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | 1,937,314 | 1,893,222 | 1,820,019 | 1,630,274 | 1,547,210 | 1,505,499 | 1,470,042 | 1,403,462 | 1,304,333 | 1,208,271 | 1,161,241 | 7,646,647 | 6,153,025 | 5,077,307 | |
Cost of revenues | 1,038,473 | 969,995 | 936,480 | 916,100 | 902,275 | 868,530 | 783,954 | 788,598 | 746,220 | 729,399 | 687,756 | 4,038,394 | 3,470,859 | 2,951,973 | |
Marketing | 210,595 | 251,298 | 250,719 | 211,057 | 141,533 | 124,903 | 126,253 | 113,916 | 116,687 | 93,751 | 88,574 | 1,025,351 | 603,746 | 412,928 | |
Contribution profit (loss) | $ 688,246 | $ 671,929 | $ 632,820 | $ 503,117 | $ 503,402 | $ 512,066 | $ 559,835 | $ 500,948 | $ 441,426 | $ 385,121 | $ 384,911 | 2,582,902 | $ 2,078,420 | $ 1,712,406 | |
Contribution margin | 35.50% | 35.50% | 34.80% | 30.90% | 32.50% | 34.00% | 38.10% | 35.70% | 33.80% | 31.90% | 33.10% | 33.80% | 33.70% | ||
International Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | $ 1,973,283 | $ 1,921,144 | $ 1,782,086 | $ 1,550,329 | $ 1,327,435 | $ 1,165,228 | $ 1,046,199 | $ 947,666 | $ 853,480 | $ 758,201 | $ 651,748 | 7,782,105 | $ 5,089,191 | $ 3,211,095 | |
Cost of revenues | 1,455,554 | 1,392,512 | 1,321,706 | 1,255,749 | 1,136,877 | 1,070,432 | 896,558 | 872,972 | 783,877 | 728,168 | 657,730 | 5,776,047 | 4,359,616 | 3,042,747 | |
Marketing | 299,735 | 340,709 | 286,058 | 255,470 | 210,913 | 186,257 | 179,895 | 200,531 | 194,330 | 146,839 | 142,891 | 1,344,118 | 832,535 | 684,591 | |
Contribution profit (loss) | $ 217,994 | $ 187,923 | $ 174,322 | $ 39,110 | $ (20,355) | $ (91,461) | $ (30,254) | $ (125,837) | $ (124,727) | $ (116,806) | $ (148,873) | $ 661,940 | $ (102,960) | $ (516,243) | |
Contribution margin | 11.00% | 9.80% | 9.80% | 2.50% | (1.50%) | (7.80%) | (2.90%) | (13.30%) | (14.60%) | (15.40%) | (22.80%) | (2.00%) | (16.10%) | ||
As Previously Reported | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | $ 3,999,374 | $ 3,907,270 | $ 3,700,856 | $ 3,285,755 | $ 2,984,859 | $ 2,785,464 | $ 2,636,635 | $ 2,477,541 | $ 2,290,188 | $ 2,105,204 | $ 1,957,736 | $ 11,692,713 | $ 8,830,669 | ||
Cost of revenues | 2,412,346 | 2,289,867 | 2,196,075 | 2,107,354 | 1,992,980 | 1,902,308 | 1,657,024 | 1,654,419 | 1,532,844 | 1,473,098 | 1,369,540 | 7,659,666 | 6,029,901 | ||
Marketing | 435,269 | 526,780 | 479,222 | 419,939 | 312,490 | 274,323 | 271,270 | 284,996 | 282,043 | 216,029 | 208,010 | 1,278,022 | 991,078 | ||
Technology and development | 327,026 | 317,213 | 300,730 | 273,351 | 255,236 | 267,083 | 257,108 | 225,191 | 216,099 | 207,300 | 203,508 | 1,052,778 | 852,098 | ||
General and administrative | 344,065 | 311,197 | 278,251 | 239,808 | 215,526 | 213,943 | 194,291 | 159,001 | 153,166 | 138,407 | 127,225 | 863,568 | 577,799 | ||
Operating income | 480,668 | 462,213 | 446,578 | 245,303 | 208,627 | 127,807 | 256,942 | 153,934 | 106,036 | 70,370 | 49,453 | 838,679 | 379,793 | ||
As Previously Reported | Domestic Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | 1,937,314 | 1,893,222 | 1,820,019 | 1,630,274 | 1,547,210 | 1,505,499 | 1,470,042 | 1,403,462 | 1,304,333 | 1,208,271 | 1,161,241 | 6,153,025 | 5,077,307 | ||
Cost of revenues | 991,823 | 925,703 | 894,873 | 873,372 | 864,408 | 831,962 | 749,488 | 761,479 | 720,658 | 707,106 | 666,546 | 3,319,230 | 2,855,789 | ||
Marketing | 183,521 | 227,961 | 228,022 | 195,784 | 128,901 | 113,608 | 115,038 | 105,589 | 108,495 | 86,806 | 81,942 | 553,331 | 382,832 | ||
Contribution profit (loss) | $ 761,970 | $ 739,558 | $ 697,124 | $ 561,118 | $ 553,901 | $ 559,929 | $ 605,516 | $ 536,394 | $ 475,180 | $ 414,359 | $ 412,753 | $ 2,280,464 | $ 1,838,686 | ||
Contribution margin | 39.30% | 39.10% | 38.30% | 34.40% | 35.80% | 37.20% | 41.20% | 38.20% | 36.40% | 34.30% | 35.50% | 37.10% | 36.20% | ||
As Previously Reported | International Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | $ 1,973,283 | $ 1,921,144 | $ 1,782,086 | $ 1,550,329 | $ 1,327,435 | $ 1,165,228 | $ 1,046,199 | $ 947,666 | $ 853,480 | $ 758,201 | $ 651,748 | $ 5,089,191 | $ 3,211,095 | ||
Cost of revenues | 1,383,422 | 1,324,240 | 1,258,809 | 1,191,497 | 1,081,485 | 1,017,612 | 847,317 | 834,794 | 748,515 | 698,162 | 629,899 | 4,137,911 | 2,911,370 | ||
Marketing | 251,748 | 298,819 | 251,200 | 224,155 | 183,589 | 160,715 | 156,232 | 179,407 | 173,548 | 129,223 | 126,068 | 724,691 | 608,246 | ||
Contribution profit (loss) | $ 338,113 | $ 298,085 | $ 272,077 | $ 134,677 | $ 62,361 | $ (13,099) | $ 42,650 | $ (66,535) | $ (68,583) | $ (69,184) | $ (104,219) | $ 226,589 | $ (308,521) | ||
Contribution margin | 17.10% | 15.50% | 15.30% | 8.70% | 4.70% | (1.10%) | 4.10% | (7.00%) | (8.00%) | (9.10%) | (16.00%) | 4.50% | (9.60%) | ||
Reclassifications | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Cost of revenues | 118,782 | 112,564 | 104,504 | 106,980 | 93,259 | 89,388 | 83,707 | 65,297 | 60,924 | 52,299 | 49,041 | 373,334 | 227,561 | ||
Marketing | 75,061 | 65,227 | 57,555 | 46,588 | 39,956 | 36,837 | 34,878 | 29,451 | 28,974 | 24,561 | 23,455 | 158,259 | 106,441 | ||
Technology and development | (18,406) | (18,118) | (18,420) | (26,219) | (25,013) | (24,599) | (23,237) | (19,279) | (18,593) | (17,096) | (16,898) | (99,068) | (71,866) | ||
General and administrative | (175,437) | (159,673) | (143,639) | (127,349) | (108,202) | (101,626) | (95,348) | (75,469) | (71,305) | (59,764) | (55,598) | (432,525) | (262,136) | ||
Operating income | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
Reclassifications | Domestic Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
Cost of revenues | 46,650 | 44,292 | 41,607 | 42,728 | 37,867 | 36,568 | 34,466 | 27,119 | 25,562 | 22,293 | 21,210 | 151,629 | 96,184 | ||
Marketing | 27,074 | 23,337 | 22,697 | 15,273 | 12,632 | 11,295 | 11,215 | 8,327 | 8,192 | 6,945 | 6,632 | 50,415 | 30,096 | ||
Contribution profit (loss) | (73,724) | (67,629) | (64,304) | (58,001) | (50,499) | (47,863) | (45,681) | (35,446) | (33,754) | (29,238) | (27,842) | (202,044) | (126,280) | ||
Reclassifications | International Streaming | |||||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||||
Revenues | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
Cost of revenues | 72,132 | 68,272 | 62,897 | 64,252 | 55,392 | 52,820 | 49,241 | 38,178 | 35,362 | 30,006 | 27,831 | 221,705 | 131,377 | ||
Marketing | 47,987 | 41,890 | 34,858 | 31,315 | 27,324 | 25,542 | 23,663 | 21,124 | 20,782 | 17,616 | 16,823 | 107,844 | 76,345 | ||
Contribution profit (loss) | $ (120,119) | $ (110,162) | $ (97,755) | $ (95,567) | $ (82,716) | $ (78,362) | $ (72,904) | $ (59,302) | $ (56,144) | $ (47,622) | $ (44,654) | $ (329,549) | $ (207,722) |
Selected Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||
Total revenues | $ 4,186,841 | $ 3,999,374 | $ 3,907,270 | $ 3,700,856 | $ 3,285,755 | $ 2,984,859 | $ 2,785,464 | $ 2,636,635 | $ 2,477,541 | $ 2,290,188 | $ 2,105,204 | $ 1,957,736 | $ 15,794,341 | $ 11,692,713 | $ 8,830,669 |
Gross profit | 1,453,441 | 1,468,246 | 1,504,839 | 1,400,277 | 1,071,421 | 898,620 | 793,768 | 895,904 | |||||||
Net income | $ 133,934 | $ 402,835 | $ 384,349 | $ 290,124 | $ 185,517 | $ 129,590 | $ 65,600 | $ 178,222 | $ 1,211,242 | $ 558,929 | $ 186,678 | ||||
Earnings (loss) per share: | |||||||||||||||
Basic (in USD per share) | $ 0.31 | $ 0.92 | $ 0.88 | $ 0.67 | $ 0.43 | $ 0.30 | $ 0.15 | $ 0.41 | $ 2.78 | $ 1.29 | $ 0.44 | ||||
Diluted (in USD per share) | $ 0.30 | $ 0.89 | $ 0.85 | $ 0.64 | $ 0.41 | $ 0.29 | $ 0.15 | $ 0.40 | $ 2.68 | $ 1.25 | $ 0.43 | ||||
As Previously Reported | |||||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||
Total revenues | $ 3,999,374 | $ 3,907,270 | $ 3,700,856 | $ 3,285,755 | $ 2,984,859 | $ 2,785,464 | $ 2,636,635 | $ 2,477,541 | $ 2,290,188 | $ 2,105,204 | $ 1,957,736 | $ 11,692,713 | $ 8,830,669 |
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