Netflix (NFLX)

8. Commitments and Contingencies

The Company accounts for streaming content in accordance with SFAS No. 63, Financial Reporting by Broadcasters , which requires classification of streaming content as either a current or non-current asset in the consolidated balance sheets based on the estimated time of usage after certain criteria have been met including availability of the streaming content for its first showing. The Company has $94.5 million of commitments at March 31, 2009 related to streaming content license agreements that have been executed but for which the streaming content does not meet the asset recognition criteria in SFAS 63.

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5.    Commitments and Contingencies

The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs. Further, 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 of 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.

Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2008 are as follows:

Rent expense associated with the operating leases was $15.3 million, $11.9 million and $10.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The Company also has $116.7 million of commitments at December 31, 2008 related to streaming content license agreements that have been executed but for which the streaming content does not meet the criteria in SFAS 63 to be classified as an asset.

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NETFLIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    Commitments and Contingencies

The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs. Further, 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 of 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.

Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2008 are as follows:

Rent expense associated with the operating leases was $15.3 million, $11.9 million and $10.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The Company also has $116.7 million of commitments at December 31, 2008 related to streaming content license agreements that have been executed but for which the streaming content does not meet the criteria in SFAS 63 to be classified as an asset.

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Table of Contents

NETFLIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    Commitments and Contingencies

FACE="Times New Roman" SIZE="2">The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs.
Further, 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 of 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.

Future minimum payments under lease financing obligations and non-cancelable operating
leases as of December 31, 2008 are as follows:

Rent expense associated with the operating leases was $15.3 million, $11.9 million and $10.8
million for the years ended December 31, 2008, 2007 and 2006, respectively.

The Company also has $116.7 million of commitments at
December 31, 2008 related to streaming content license agreements that have been executed but for which the streaming content does not meet the criteria in SFAS 63 to be classified as an asset.

5.    Commitments and Contingencies

FACE="Times New Roman" SIZE="2">The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs.
Further, 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 of 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.

Future minimum payments under lease financing obligations and non-cancelable operating
leases as of December 31, 2008 are as follows:

Rent expense associated with the operating leases was $15.3 million, $11.9 million and $10.8
million for the years ended December 31, 2008, 2007 and 2006, respectively.

The Company also has $116.7 million of commitments at
December 31, 2008 related to streaming content license agreements that have been executed but for which the streaming content does not meet the criteria in SFAS 63 to be classified as an asset.

5.    Commitments and Contingencies

FACE="Times New Roman" SIZE="2">The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs.
Further, 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 of 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.

Future minimum payments under lease financing obligations and non-cancelable operating
leases as of December 31, 2008 are as follows:

Rent expense associated with the operating leases was $15.3 million, $11.9 million and $10.8
million for the years ended December 31, 2008, 2007 and 2006, respectively.

The Company also has $116.7 million of commitments at
December 31, 2008 related to streaming content license agreements that have been executed but for which the streaming content does not meet the criteria in SFAS 63 to be classified as an asset.

5.    Commitments and Contingencies

SIZE="2">Lease Commitments

The Company leases facilities under non-cancelable operating leases with various expiration dates
through 2013. The facilities generally require the Company to pay property taxes, insurance and maintenance costs. Further, 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 of 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.

FACE="Times New Roman" SIZE="2">Future minimum lease payments under non-cancelable capital and operating leases as of December 31, 2007 are as follows:

Rent expense associated with the operating leases was $11.9 million, $10.8 million and $7.5
million for the years ended December 31, 2007, 2006 and 2005, respectively.