Netflix (NFLX)

Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of DVD content and purchases of property and equipment. Cash used in investing activities increased $82.8 million for the three months ended March 31, 2009 as compared to the same prior-year period. This is primarily attributable to a decrease of $137.1 million in the proceeds from the sales and maturities of available-for-sale securities offset by a decrease in the purchases of available-for-sale securities of $39.6 million as compared to the same prior-year period.

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Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content library related to DVDs and purchases of property and equipment. Cash used in investing activities decreased $291.1 million in 2008 as compared to 2007. This decrease was primarily driven by a decrease in the purchases of short-term investments of $148.4 million coupled with an increase in the proceeds from the sale of short-term investments of $106.5 million. In addition, content acquisitions related to acquisitions of DVDs decreased by $45.8 million as more DVDs were obtained through revenue sharing agreements in 2008.

Cash used in investing activities increased $250.2 million in 2007 as compared to 2006. During the first quarter of 2007, we started an investment portfolio which is comprised of short-term investments consisting of corporate debt securities, government and agency securities and asset and mortgage-backed securities. Content acquisitions were $39.1 million higher in 2007 as compared to 2006. Purchases of property and equipment consisted of expenditures related to Company expansion, primarily to our headquarters in Los Gatos, California. In March 2006, we exercised our option to lease a building adjacent to our headquarters in Los Gatos, California. The building comprises approximately 80,000 square feet of office space and has an initial term of 5 years. The building was completed in the first quarter of 2008. Additionally, purchases of property and equipment consisted of automation equipment for our various shipping centers in order to achieve increased operational efficiencies.

Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content library related to DVDs and purchases of property and equipment. Cash used in investing activities decreased $291.1 million in 2008 as compared to 2007. This decrease was primarily driven by a decrease in the purchases of short-term investments of $148.4 million coupled with an increase in the proceeds from the sale of short-term investments of $106.5 million. In addition, content acquisitions related to acquisitions of DVDs decreased by $45.8 million as more DVDs were obtained through revenue sharing agreements in 2008.

Cash used in investing activities increased $250.2 million in 2007 as compared to 2006. During the first quarter of 2007, we started an investment portfolio which is comprised of short-term investments consisting of corporate debt securities, government and agency securities and asset and mortgage-backed securities. Content acquisitions were $39.1 million higher in 2007 as compared to 2006. Purchases of property and equipment consisted of expenditures related to Company expansion, primarily to our headquarters in Los Gatos, California. In March 2006, we exercised our option to lease a building adjacent to our headquarters in Los Gatos, California. The building comprises approximately 80,000 square feet of office space and has an initial term of 5 years. The building was completed in the first quarter of 2008. Additionally, purchases of property and equipment consisted of automation equipment for our various shipping centers in order to achieve increased operational efficiencies.

Investing Activities

During the three months ended September 30, 2008, our investing activities consisted primarily of acquisitions of content, purchases and sales of available-for-sale securities and purchases of property and equipment. Cash used in investing activities decreased $32.8 million for the three months ended September 30, 2008 as compared to the same prior-year period. This is primarily attributable to a decrease of $29.0 million in purchases of available-for-sale securities coupled with an increase of $9.3 million in the proceeds from the sales of available-for-sale securities.

During the nine months ended September 30, 2008, our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content and purchases of property and equipment. Cash used in investing activities decreased $261.2 million for the nine months ended September 30, 2008 as compared to the same prior-year period. This is primarily attributable to a decrease of $189.3 million in purchases of available-for-sale securities coupled with an increase of $82.2 million in the proceeds from the sales of available-for-sale securities as compared to the same prior-year period.

Investing Activities

During the three months ended June 30, 2008, our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content and purchases of property and equipment. Cash used in investing activities increased $25.8 million for the three months ended June 30, 2008 as compared to the same prior-year period. This is primarily attributable to an increase of $12.0 million in purchases of available-for-sale securities coupled with a decrease of $7.0 million in the proceeds from the sales of available-for-sale securities as compared to the same prior-year period. Purchases of property and equipment increased by $5.7 million for the three months ended June 30, 2008 as compared to the same prior year period as we invested in increasing the efficiency of our fulfillment centers. In addition, content acquisitions decreased by $2.2 million as the number of DVDs subject to revenue sharing agreements increased.

During the six months ended June 30, 2008, our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content and purchases of property and equipment. Cash used in investing activities decreased $228.4 million for the six months ended June 30, 2008 as compared to the same prior-year period. This is primarily attributable to a decrease of $160.2 million in purchases of available-for-sale securities coupled with an increase of $72.9 million in the proceeds from the sales of available-for-sale securities as compared to the same prior-year period.

Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content and purchases of property and equipment. Cash used in investing activities increased $254.2 million for the three months ended March 31, 2008 as compared to the same prior-year period. This is primarily attributable to a decrease of $172.3 million in purchases of available-for-sale securities coupled with an increase of $79.9 million in the proceeds from the sales of available-for-sale securities as compared to the same prior-year period.

Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content library, including Internet-delivered content in 2007, and purchases of property and equipment. Cash used in investing activities increased $264.9 million in 2007 as compared to 2006. During the first quarter of 2007, we started an investment portfolio which is comprised of short-term investments consisting of corporate debt securities, government and agency securities and asset and mortgage-backed securities. The majority of the portfolio is invested in “AAA” rated residential and commercial mortgage-backed securities. The mortgage bonds owned represent the senior tranches of the capital structure and provide credit enhancement through over-collateralization and their subordinated characteristics.

We continue to purchase additional titles, including Internet-delivered content in 2007, for our content library in order to support our larger subscriber base. Content acquisitions were $53.9 million higher in 2007 as compared to 2006. Purchases of property and equipment consisted of expenditures related to Company expansion, primarily to our headquarters in Los Gatos, California. In March 2006, we exercised our option to lease a building adjacent to our headquarters in Los Gatos, California. The building will comprise approximately 80,000 square feet of office space and have an initial term of 5 years. The building is expected to be completed in the first quarter of 2008. Additionally, purchases of property and equipment consisted of automation equipment for our various shipping centers in order to achieve increased operational efficiencies.

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Cash used in investing activities increased $52.6 million in 2006 as compared to 2005. Investing activities primarily consisted of additional titles being purchased for our content library in order to support our larger subscriber base and purchases of property and equipment in order to support our growing operations. Content acquisitions were $58.1 million higher in 2006 as compared to 2005 while purchases of property and equipment were flat.

Investing activities

Cash used in investing activities during the three months ended September 30, 2007 consisted primarily of purchases of investments in available-for-sale securities of $52.0 million and purchases of content library of $39.5 million. These uses of cash were offset by proceeds from the sale of investments in available-for-sale securities of $41.3 million.

Cash used in investing activities during the nine months ended September 30, 2007 consisted primarily of purchases of investments in available-for-sale securities of $370.1 million and purchases of content library of $165.3 million. These uses of cash were offset by proceeds from the sale of investments in available-for-sale securities of $165.4 million.

Investing activities

Net cash used in investing activities for the three months ended June 30, 2007 was $90.9 million as compared to $47.8 million for the same prior-year period. Cash used in investing activities during the three months ended June 30, 2007 consisted primarily of purchases of investments in available-for-sale securities of $53.9 million and purchases of content library of $64.3 million. These uses of cash were offset by proceeds from the sale of investments in available-for-sale securities of $28.7 million.

Net cash used in investing activities for the six months ended June 30, 2007 was $340.7 million as compared to $82.1 million for the same prior-year period. Cash used in investing activities during the six months ended June 30, 2007 consisted primarily of purchases of investments in available-for-sale securities of $318.1 million and purchases of content library of $132.9 million. These uses of cash were offset by proceeds from the sale of short-term investments of $124.1 million.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2007 increased by $215.5 million as compared to the same prior-year period. The increase in cash used was primarily attributable to the purchases of our investments in available-for-sale securities, increased purchases of content library in order to support the growth of our subscriber base, and increased purchases of property and equipment due to the growth of the company.