Netflix : Letter to Shareholders

January 21, 2020

Fellow shareholders,

We had a strong finish to 2019, with Q4 revenue growing 31% year over year, bringing full year 2019 revenue to over $20 billion, while FY19 operating income rose 62% to $2.6 billion. During the quarter, we surpassed 100 million paid memberships outside of the US. Streaming entertainment is a global phenomenon and we're working hard to build on our early progress.

Q4 Results and Q1 Forecast

In Q4, average streaming paid memberships grew 21% year over year while streaming ARPU increased 9% year over year. Excluding a -$133 million impact from foreign currency, streaming ARPU rose 12% year over year. Operating income in Q4 amounted to $459m (vs. $216m last year). While this was slightly lower than our beginning-of-quarter forecast of $475m, we're primarily managing by our full year operating margin target, which we met (13% in FY19 vs. 10% in FY18).

EPS for Q4 amounted to $1.30 vs. $0.30 a year ago. During Q4, the US Treasury issued final regulations on certain aspects of the 2017 US tax reform. As a result, we had over-accrued in the first three quarters of 2019 for tax, which was adjusted in Q4, resulting in our n​et income being higher than operating income this quarter. We paid US corporate taxes for the full year inclusive of this Q4 adjustment.

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Global paid net additions totaled 8.8m in Q4, on par with the 8.8m in the prior year period and ahead of our forecast of 7.6m, fueled by our broad slate of original programming and the worldwide adoption of streaming video. We generated Q4-record paid net adds in each of the EMEA, LATAM and APAC regions, while UCAN paid net adds totaled 0.55m (with 0.42m in the US) vs. 1.75m in the year ago quarter. Our low membership growth in UCAN is probably due to our recent price changes and to US competitive launches. We have seen more muted impact from competitive launches outside the US (NL, CA, AU). As always, we are working hard to improve our service to combat these factors and push net adds higher over time.

As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report. For Q1'20, we forecast global paid net adds of 7.0m vs. 9.6m in Q1'19, which was an all-time high in quarterly paid net adds. Our Q1'20 forecast reflects the continued, slightly elevated churn levels we are seeing in the US plus an expectation for more balanced paid net adds across Q1 and Q2 this year, with seasonality more similar to 2018 than 2019. This is due in part to the timing of last year's price changes and a strong upcoming Q2 content slate, where we'll have some of our bigger titles like ​La Casa De Papel (aka ​Money Heist​) season 4.

We're targeting a 16% operating margin in 2020 (up 300 basis points year over year). As a reminder, large swings in foreign exchange (F/X) could lead to some temporary variations from our annual margin progression, partially because we don't spend on derivatives to hedge our F/X exposure and about half of our revenue is not in US dollars.

Content

Great content grows engagement among our members, which we believe drives word-of-mouth, improves retention and grows paid memberships. We have many exciting releases for Q1'20 including

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returning seasons of ​Sex Education​,​Altered Carbon​, ​Narcos: Mexico​, the Spanish series ​Elite​and Korean historical zombie thriller ​Kingdom,​as well as action film ​Spenser Confidential​(starring Mark Wahlberg) and the movie sequel ​To All the Boys: P.S. I Still Love You​. New original series include the recently released ​Messiah​and the buzzy docu-series​Killer Inside: The Mind of Aaron Hernandez​and the upcoming ​I Am Not Okay with This.

These titles build off of a highly successful Q4 content slate, which included new seasons of ​The Crown, Big Mouth​and ​You​and new series and films like ​Rhythm & Flow​, ​American Son​, Turkish series ​The Gift and French film ​Banlieusards ​(aka ​Street Flow​). The psychological thriller ​You​, which originated on US linear TV with a modest audience, has evolved into a global phenomenon on Netflix; we estimate, based on the first few weeks, 54m member households will choose to watch season 2 in its first 4 weeks. In its first four weeks, over 21m member households have chosen to watch season 3 of ​The Crown​(up over 40% from Season 2 over the same time period) and in total, over 73m households worldwide have chosen ​The Crown​since the series launched. ​The Crown​and the all new Season 3 cast just won the Screen Actors Guild Award for Best Ensemble in a Drama series and star Olivia Colman won the Golden Globe for Best Actress in a Drama Series.

During December, we also launched ​The Witcher​, which is tracking to be ​our biggest season one TV series ever​. Through its first four weeks of release, 76m member households chose to watch this action-packed fantasy, starring Henry Cavill. As a testament to how our hit content can penetrate the global zeitgeist and influence popular culture, the show's launch drove up sales of ​The Witcher​​booksand ​games​around the world, and spawned a viral musical ​hit​.

Our Q4 movie slate set a new bar for the variety and high quality of films we produce to appeal to our members' many different tastes. We released ​6 Underground​, from director Michael Bay and starring Ryan Reynolds, and 83m member households chose this crowd-pleasing action film through its first four weeks. The exceptional breadth and quality of our film slate was recognized as we led all studios with 24 Academy Award nominations across eight different films. The nominated feature films produced by the Netflix studio like ​The Irishman​, ​Marriage Story​and ​The Two Popes ​were also very popular with our members. Having launched our original film initiative just under five years ago, this is a proud achievement and a testament to the creative talent with whom we partner​.

Across both film and TV, we were also recognized for being the home for storytellers and creators from many diverse backgrounds. We're honored to lead the industry in nominations at both the ​NAACP Image Awards​(42 nominations) and the ​GLAAD Media Awards​(15 nominations).

We know that local audiences love local stories. In fact, local originals were the most popular 2019 titles in many countries, including India, Korea, Japan, Turkey, Thailand, Sweden and the UK. In addition, we've seen how members all around the world also love these stories with ​La Casa de Papel/Money Heist​appearing on our top ten lists in more than 70 countries. K-content is also popular globally, and we're investing heavily in Korean stories. In this past quarter, we inked a TV output deal with JTBC, a leading Korean media company, and a strategic partnership with CJ ENM's Studio Dragon, Korea's largest TV studio. These deals will enable us to bring more K-dramas to fans all over the world.

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Over the past several years, we've been developing an animation studio within Netflix to produce a wide array of animated content for kids, adults and families. We have amazing creators with pedigree from Disney Animation, Pixar, DreamWorks Animation and Illumination now working at Netflix on their next big projects. In Q4, we debuted filmmaker Sergio Pablos' ​Klaus​, our first original feature-length animated film that was also nominated for an Academy Award. In its first 28 days, 40m members chose to watch this heartwarming Santa Claus origin story. Later in 2020, we'll premiere the ambitious ​Over The Moon​, from legendary animator Glen Keane, followed by a schedule that builds to several big animated feature films per year.

As we've expanded our original content, we've been working on how to best share content highlights that demonstrate popularity. Given that we now have titles with widely varying lengths - from short episodes (e.g. ​Special​at around 15 minutes) to long films (e.g. ​The Highwaymen​at 132 minutes), we believe that reporting households viewing a title based on 70% of a single episode of a series or of an entire film, which we have been doing, makes less sense. We are now reporting on households (accounts) that chose to watch a given title1. Our new methodology is similar to the BBC iPlayer in their rankings​based on "requests" for the title, "most popular" articles on the New York Times which include those who opened the articles, and YouTube view counts. This way, short and long titles are treated equally, leveling the playing field for all types of our content including interactive content, which has no fixed length. The new metric is about 35% higher on average than the prior metric. For example, 45m member households chose to watch ​Our Planet​under the new metric vs. 33m under the prior metric.

Product and Partnerships

In Product, we are investing our resources to grow engagement and our storytelling capabilities (like the branching narratives in ​Black Mirror: Bandersnatch​), deepen our penetration in key markets and help our members find great content through better suggestions. To do this, we try many approaches; in 2019 alone, we conducted hundreds of product tests to try to improve our member experience from sign up to billing and payments to content discovery. About 30% of these led to a gain in retention, engagement or revenue, up from 20% in the prior year. It's a humbling exercise as so many of our ideas do not "win" with members, but this helps tune our judgment and innovation priorities for the future.

In Q4, we launched a mobile-only plan in Malaysia and Indonesia (which we introduced to India in Q3 last year). We've seen similar results with this plan driving incremental subscriber growth and improving retention. We expect the mobile-only plan to be revenue-positive which will allow us to further invest in content to be enjoyed by our members and continue to feed the virtuous cycle. We plan to continue to test adding this plan, as well as additional ideas in other countries around the world.

Competition

Many media companies and tech giants are launching streaming services, reinforcing the major trend of the transition from linear to streaming entertainment. This is happening all over the world and is still in its early stages, leaving ample room for many services to grow as linear TV wanes. We have a big

• Chose to watch and did watch for at least 2 minutes -- long enough to indicate the choice was intentional -- is the precise definition

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headstart in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years - pleasing members. We believe if we do that well, Netflix will continue to prosper. As an example, in Q4, despite the big debut of Disney+ and the launch of Apple TV+, our viewing per membership grew both globally and in the US on a year over year basis, consistent with recent quarters. Below is a comparison of ​Google search trends​for ​The Witcher​, Disney's ​The Mandalorian​, Amazon's Jack Ryan​and Apple's ​The Morning Show​.

Source: Google Trends. Note: Netflix, Amazon Prime Video and Apple TV+ are global x-China, while Disney+ is only in NL, US, CA, and AU. If Disney+ were global we don't think the picture would be much different, to judge from the ​NL results​where Disney+ first launched.

Cash Flow and Capital Structure

In Q4, net cash used in operating activities was -$1.5 billion vs. -$1.2 billion in the prior year period. Free cash flow (FCF)2 in Q4 totaled -$1.7 billion vs. -$1.3 billion in Q4'18. For the full year, FCF was -$3.3 billion which we believe is the peak in our annual FCF deficit.

Our plan is to continually improve FCF each year and to move slowly toward FCF positive. For 2020, we currently forecast FCF of approximately -$2.5 billion. Along the way, we'll continue to use the debt market to finance our investment needs as we did in Q4'19, when we raised $1.0 billion 4.875% senior notes and €1.1 billion 3.625% senior notes, both due in 2030. With our FCF profile improving, this means that over time we'll be less reliant on public markets and will be able to fund more of our investment needs organically through our growing operating profits.

• For a reconciliation of free cash flow to net cash (used in) operating activities, please refer to the reconciliation in tabular form on the attached unaudited financial statements and the footnotes thereto.

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Reference

For quick reference, our eight most recent investor letters are: ​October 2019​, ​July 2019​, ​April 2019​, January 2019​, ​October 2018​, ​July 2018​, ​April 2018​, ​January 2018​.

Appendix

Table 1

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Table 2 (Final letter for this table)

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January 21, 2020 Earnings Interview, 3pm PST

Our video interview with Michael Morris of Guggenheim Securities will be on ​youtube/netflixir​at 3pm PST today. Questions that investors would like to see asked should be sent to [e-mail]​. Reed Hastings, CEO, Spence Neumann, CFO, Ted Sarandos, Chief Content Officer, Greg Peters, Chief Product Officer and Spencer Wang, VP of IR/Corporate Development will all be on the video to answer Michael's questions.

IR Contact:	PR Contact:
Spencer Wang	Richard Siklos
VP, Finance/IR & Corporate Development	VP, Communications
408 809-5360	408 540-2629

Use of Non-GAAP Measures

This shareholder letter and its attachments include reference to the non-GAAP financial measure of free cash flow and adjusted EBITDA. Management believes that free cash flow and adjusted EBITDA are important liquidity metrics because they measure, during a given period, the amount of cash generated that is available to repay debt obligations, make investments and for certain other activities or the amount of cash used in operations, including investments in global streaming content. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, net income, operating income, diluted earnings per share and net cash provided by operating activities, or other financial measures prepared in accordance with GAAP. Reconciliation to the GAAP equivalent of these non-GAAP measures are contained in tabular form on the attached unaudited financial statements.

Forward-Looking Statements

This shareholder letter contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding global paid net additions; churn; seasonality;; distribution of net adds across quarters; full-year operating margin target; future content offerings; product tests; revenue impact of product changes; future capital raises; reliance on public markets for cash needs; impact of competition; global streaming paid memberships and growth; consolidated revenue, revenue growth, operating income, operating margin, net income, and earnings per share; and peak free cash flow. The forward-looking statements in this letter are subject to risks and uncertainties that could cause actual results and events to differ, including, without limitation: our ability to attract new members and retain existing members; our ability to compete effectively; maintenance and expansion of device platforms for streaming; fluctuations in consumer usage of our service; service disruptions; production risks; actions of Internet Service Providers; and, competition, including consumer adoption of different modes of viewing in-home filmed entertainment. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our filings with the Securities and Exchange

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Commission, including our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on January 29, 2019, as amended by Form 10-K/A, filed with the SEC on February 8, 2019. The Company provides internal forecast numbers. Investors should anticipate that actual performance will vary from these forecast numbers based on risks and uncertainties discussed above and in our Annual Report on Form 10-K, as amended by Form 10-K/A. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this shareholder letter.

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Netflix, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

			Three Months Ended				Twelve Months Ended
	December 31,	September 30,		December 31,		December 31,		December 31,
		2019		2019		2018		2019		2018
Revenues	$	5,467,434	$	5,244,905	$	4,186,841	$	20,156,447	$	15,794,341
Cost of revenues		3,466,023		3,097,919		2,733,400		12,440,213		9,967,538
Marketing		878,937		553,797		730,355		2,652,462		2,369,469
Technology and development		409,376		379,776		331,789		1,545,149		1,221,814
General and administrative		254,586		233,174		175,530		914,369		630,294
Operating income		458,512		980,239		215,767		2,604,254		1,605,226
Other income (expense):
Interest expense		(177,801)		(160,660)		(128,807)		(626,023)		(420,493)
Interest and other income (expense)		(131,378)		192,744		32,436		84,000		41,725
Income before income taxes		149,333		1,012,323		119,396		2,062,231		1,226,458
Provision for (benefit from) income taxes		(437,637)		347,079		(14,538)		195,315		15,216
Net income	$	586,970	$	665,244	$	133,934	$	1,866,916	$	1,211,242
Earnings per share:
Basic	$	1.34	$	1.52	$	0.31	$	4.26	$	2.78
Diluted	$	1.30	$	1.47	$	0.30	$	4.13	$	2.68
Weighted-average common shares outstanding:
Basic		438,547		438,090		436,385		437,799		435,374
Diluted		451,367		451,552		451,116		451,765		451,244

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Netflix, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

		As of
		December 31,		December 31,
		2019		2018
Assets
Current assets:
Cash and cash equivalents	$	5,018,437	$	3,794,483
Current content assets, net		-		5,151,186
Other current assets		1,160,067		748,466
Total current assets		6,178,504		9,694,135
Non-current content assets, net*		24,504,567		14,951,141
Property and equipment, net		565,221		418,281
Other non-current assets*		2,727,420		910,843
Total assets	$	33,975,712	$	25,974,400
Liabilities and Stockholders' Equity
Current liabilities:
Current content liabilities*	$	4,413,561	$	4,681,562
Accounts payable		674,347		562,985
Accrued expenses and other liabilities*		843,043		481,874
Deferred revenue		924,745		760,899
Total current liabilities		6,855,696		6,487,320
Non-current content liabilities		3,334,323		3,759,026
Long-term debt		14,759,260		10,360,058
Other non-current liabilities		1,444,276		129,231
Total liabilities		26,393,555		20,735,635
Stockholders' equity:
Common stock		2,793,929		2,315,988
Accumulated other comprehensive loss		(23,521)		(19,582)
Retained earnings		4,811,749		2,942,359
Total stockholders' equity		7,582,157		5,238,765
Total liabilities and stockholders' equity	$	33,975,712	$	25,974,400

*Certain prior period amounts have been reclassified to conform to the current period presentation. DVD content assets have been reclassified from "Non-current content assets, net" to "Other non-current assets" and DVD content liabilities have been reclassified from "Current content liabilities" to "Accrued expenses and other liabilities".

11

Netflix, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Three Months Ended			Twelve Months Ended
December 31,	September 30,	December 31,		December 31,	December 31,
2019	2019	2018	2019	2018

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash used in operating activities:

Additions to streaming content assets Change in streaming content liabilities Amortization of streaming content assets

Depreciation and amortization of property, equipment and intangibles

Stock-based compensation expense Other non-cash items*

Foreign currency remeasurement loss (gain) on long-term debt

Deferred taxes

Changes in operating assets and liabilities: Other current assets

Accounts payable

Accrued expenses and other liabilities Deferred revenue

Other non-current assets and liabilities Net cash used in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Change in other assets*

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of debt Debt issuance costs

Proceeds from issuance of common stock Other financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Non-GAAP free cash flow reconciliation:

Net cash used in operating activities

Purchases of property and equipment

Change in other assets

Non-GAAP free cash flow

$	586,970	$	665,244	$	133,934	$	1,866,916	$	1,211,242
	(3,945,542)		(3,648,292)		(3,784,252)		(13,916,683)		(13,043,437)
	(571,351)		(95,548)		266,653		(694,011)		999,880
	2,579,669		2,279,977		2,053,660		9,216,247		7,532,088
	27,818		26,704		23,219		103,579		83,157
	100,066		100,262		88,714		405,376		320,657
	63,893		57,934		18,301		228,230		81,640
	122,100		(171,360)		(21,953)		(45,576)		(73,953)
	(188,694)		52,105		(14,479)		(94,443)		(85,520)
	(195,951)		145		(88,359)		(252,113)		(200,192)
	230,847		(7,643)		121,831		96,063		199,198
	(234,036)		260,872		(49,776)		157,778		150,422
	9,239		22,729		44,176		163,846		142,277
	(47,003)		(44,923)		(26,741)		(122,531)		2,062
	(1,461,975)		(501,794)		(1,235,072)		(2,887,322)		(2,680,479)
	(107,737)		(45,333)		(70,120)		(253,035)		(173,946)
	(99,834)		(4,021)		(10,238)		(134,029)		(165,174)
	(207,571)		(49,354)		(80,358)		(387,064)		(339,120)
	2,226,110		-		2,061,852		4,469,306		3,961,852
	(17,942)		-		(18,879)		(36,134)		(35,871)
	15,633		11,989		11,450		72,490		124,502
	-		-		(559)		-		(1,956)
	2,223,801		11,989		2,053,864		4,505,662		4,048,527
	29,810		(29,325)		(4,957)		469		(39,682)
	584,065		(568,484)		733,477		1,231,745		989,246
	4,459,721		5,028,205		3,078,564		3,812,041		2,822,795
$	5,043,786	$	4,459,721	$	3,812,041	$	5,043,786	$	3,812,041
	Three Months Ended				Twelve Months Ended
December 31,	September 30,	December 31,	December 31,	December 31,
	2019		2019		2018		2019		2018
$	(1,461,975)	$	(501,794)	$	(1,235,072)	$	(2,887,322)	$	(2,680,479)
	(107,737)		(45,333)		(70,120)		(253,035)		(173,946)
	(99,834)		(4,021)		(10,238)		(134,029)		(165,174)
$	(1,669,546)	$	(551,148)	$	(1,315,430)	$	(3,274,386)	$	(3,019,599)

*Certain prior period amounts have been reclassified to conform to the current period presentation. The amortization of DVD content assets has been reclassified into "Other non-cash items" within "Cash flows from operating activities". In addition, cash flows from the acquisition of DVD content assets have been reclassified into "Change in other assets" within "Cash flows from investing activities".

12

Netflix, Inc.

Regional Information (unaudited)

(in thousands)

		As of / Three Months Ended		As of/ Twelve Months Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
		2019			2019			2018			2019			2018
UCAN Streaming
Revenues	$	2,671,908	$	2,621,250	$	2,160,979	$	10,051,208	$	8,281,532
Paid memberships at end of period		67,662			67,114			64,757			67,662			64,757
Paid net membership additions		548			613			1,747			2,905			6,335
Average number of paying memberships		67,388			66,808			63,884			66,615			61,845
Average monthly revenue per paying streaming membership	$	13.22	$	13.08	$	11.28	$	12.57	$	11.16
EMEA Streaming
Revenues	$	1,562,561	$	1,428,040	$	1,096,812	$	5,543,067	$	3,963,707
Paid memberships at end of period		51,778			47,355			37,818			51,778			37,818
Paid net membership additions		4,423			3,126			3,982			13,960			11,814
Average number of paying memberships		49,567			45,792			35,827			44,731			31,601
Average monthly revenue per paying streaming membership	$	10.51	$	10.40	$	10.20	$	10.33	$	10.45
LATAM Streaming
Revenues	$	746,392	$	741,434	$	567,137	$	2,795,434	$	2,237,697
Paid memberships at end of period		31,417			29,380			26,077			31,417			26,077
Paid net membership additions		2,037			1,490			1,962			5,340			6,360
Average number of paying memberships		30,399			28,635			25,096			28,391			22,767
Average monthly revenue per paying streaming membership	$	8.18	$	8.63	$	7.53	$	8.21	$	8.19
APAC Streaming
Revenues	$	418,121	$	382,304	$	276,756	$	1,469,521	$	945,816
Paid memberships at end of period		16,233			14,485			10,607			16,233			10,607
Paid net membership additions		1,748			1,543			1,146			5,626			4,106
Average number of paying memberships		15,359			13,714			10,034			13,247			8,446
Average monthly revenue per paying streaming membership	$	9.07	$	9.29	$	9.19	$	9.24	$	9.33
Total Streaming
Revenues	$	5,398,982	$	5,173,028	$	4,101,684	$	19,859,230	$	15,428,752
Paid memberships at end of period		167,090			158,334			139,259			167,090			139,259
Paid net membership additions		8,756			6,772			8,837			27,831			28,615
Average number of paying memberships		162,712			154,948			134,841			152,984			124,658
Average monthly revenue per paying streaming membership	$	11.06	$	11.13	$	10.14	$	10.82	$	10.31

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Netflix, Inc.

Non-GAAP Information (unaudited)

(in thousands)

		December 31,		March 31,		June 30,	September 30,		December 31,
		2018		2019		2019		2019		2019
Non-GAAP Adjusted EBITDA reconciliation:
GAAP net income	$	133,934	$	344,052	$	270,650	$	665,244	$	586,970
Add:
Other expense (income)		96,371		59,425		205,503		(32,084)		309,179
Provision for (benefit from) income taxes		(14,538)		55,607		230,266		347,079		(437,637)
Depreciation and amortization of property,		23,219		23,561		25,496		26,704		27,818
equipment and intangibles
Stock-based compensation expense		88,714		101,200		103,848		100,262		100,066
Adjusted EBITDA	$	327,700	$	583,845	$	835,763	$	1,107,205	$	586,396

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Netflix, Inc.

Appendix:

Domestic Streaming, International Streaming and DVD Information (unaudited)

(in thousands)

		As of / Three Months Ended			As of/ Twelve Months Ended
	December 31,	September 30,	December 31,	December 31,	December 31,
		2019		2019		2018		2019		2018
Domestic Streaming
Paid memberships at end of period		61,043		60,620		58,486		61,043		58,486
Paid net membership additions		423		517		1,529		2,557		5,676
Revenues	$	2,457,663	$	2,412,598	$	1,996,092	$	9,243,005	$	7,646,647
Cost of revenues		1,321,283		1,210,105		1,093,446		4,867,343		4,038,394
Marketing		379,597		211,793		312,739		1,063,042		1,025,351
Contribution profit		756,783		990,700		589,907		3,312,620		2,582,902
International Streaming
Paid memberships at end of period		106,047		97,714		80,773		106,047		80,773
Paid net membership additions		8,333		6,255		7,308		25,274		22,939
Revenues	$	2,941,319	$	2,760,430	$	2,105,592	$	10,616,225	$	7,782,105
Cost of revenues		2,113,631		1,860,021		1,606,275		7,449,663		5,776,047
Marketing		499,340		342,004		417,616		1,589,420		1,344,118
Contribution profit		328,348		558,405		81,701		1,577,142		661,940
Domestic DVD
Paid memberships at end of period		2,153		2,276		2,706		2,153		2,706
Revenues	$	68,452	$	71,877	$	85,157	$	297,217	$	365,589
Cost of revenues		31,109		27,793		33,679		123,207		153,097
Contribution profit		37,343		44,084		51,478		174,010		212,492
Consolidated
Revenues	$	5,467,434	$	5,244,905	$	4,186,841	$	20,156,447	$	15,794,341
Cost of revenues		3,466,023		3,097,919		2,733,400		12,440,213		9,967,538
Marketing		878,937		553,797		730,355		2,652,462		2,369,469
Contribution profit		1,122,474		1,593,189		723,086		5,063,772		3,457,334
Other operating expenses		663,962		612,950		507,319		2,459,518		1,852,108
Operating income		458,512		980,239		215,767		2,604,254		1,605,226
Other income (expense)		(309,179)		32,084		(96,371)		(542,023)		(378,768)
Provision for (benefit from) income taxes		(437,637)		347,079		(14,538)		195,315		15,216
Net income	$	586,970	$	665,244	$	133,934	$	1,866,916	$	1,211,242

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