Netflix (NFLX)

Provision for Income Taxes

In 2008, our effective tax rate differed from the federal statutory rate of 35% principally due to state income taxes of $5 million or 4% of income before income tax. This was partially offset by R&D tax credits of $3 million. In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state income taxes.

Provision for Income Taxes

In 2008, our effective tax rate differed from the federal statutory rate of 35% principally due to state income taxes of $5 million or 4% of income before income tax. This was partially offset by R&D tax credits of $3 million. In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state income taxes.

Provision for
Income Taxes

In 2008, our effective tax rate differed from the federal statutory rate of 35% principally due to
state income taxes of $5 million or 4% of income before income tax. This was partially offset by R&D tax credits of $3 million. In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state
income taxes.

Provision for
Income Taxes

In 2008, our effective tax rate differed from the federal statutory rate of 35% principally due to
state income taxes of $5 million or 4% of income before income tax. This was partially offset by R&D tax credits of $3 million. In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state
income taxes.

Provision for
Income Taxes

In 2008, our effective tax rate differed from the federal statutory rate of 35% principally due to
state income taxes of $5 million or 4% of income before income tax. This was partially offset by R&D tax credits of $3 million. In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state
income taxes.

Provision for Income Taxes

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Table of Contents

In the third quarter of 2006 we recorded an income tax expense of $9.0 million (41.2% effective tax rate), compared to tax expense of $52 thousand for the third quarter of 2005. Our tax expense is higher in 2006 because we no longer have a valuation allowance against deferred tax assets, the realization of which served to minimize tax expense in prior years. Prior to the fourth quarter of 2005 we only recorded income tax expense related to currently payable alternative minimum tax liabilities. In the fourth quarter of 2005 we recorded an income tax benefit due to a reduction in our valuation allowance of $34.9 million. We continuously monitor the circumstances impacting the expected realization of our deferred tax assets. In the fourth quarter of 2005, based on our then updated forecast of future projected income and as a result of current developments in the competitive landscape, we reduced the valuation allowance after determining that substantially all deferred tax assets were more likely than not to be realized due to expected future income.

Provision for Income Taxes

25

Table of Contents

In the second quarter of 2006 we recorded an income tax expense of $10.6 million (38.2% effective tax rate), compared to tax expense of $13 thousand for the second quarter of 2005. Our tax expense is higher in 2006 because we no longer have a valuation allowance against deferred tax assets, the realization of which served to minimize tax expense in prior years. Prior to the fourth quarter of 2005 we only recorded income tax expense related to currently payable alternative minimum tax liabilities. In the fourth quarter of 2005 we recorded an income tax benefit due to a reduction in our valuation allowance of $34.9 million. We continuously monitor the circumstances impacting the expected realization of our deferred tax assets. In the fourth quarter of 2005, based on our then updated forecast of future projected income and as a result of current developments in the competitive landscape, we reduced the valuation allowance after determining that substantially all deferred tax assets were more likely than not to be realized due to expected future income.