Option Grant and Exercise Terms

Table of Contents 2021 As of Year Ended December 31, 2020 2019 (in thousands, except revenue per membership and percentages) Change 2021 vs. 2020 Revenues Paid net membership additions $ 3,266,601 $ 2,372,300 $ 1,469,521 $ 894,301 38 % 7,140 9,259 5,626 (2,119) (23)% Paid memberships at end of period (1) 32,632 25,492 16,233 7,140 28 % Average paying memberships 28,461 21,674 13,247 6,787 31 % Average monthly revenue per paying membership $ 9.56 $ 9.12 $ 9.24 $ 0.44 5 % Constant currency change (2) 2 % (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 certain other promotions that may be offered by the Company to new or 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 cancellations, as a result of a failed method of payment, become 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. (2) We believe constant currency information is useful in analyzing the underlying trends in average monthly revenue per paying membership. In order to exclude the effect of foreign currency rate fluctuations on average monthly revenue per paying membership, we estimate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period. For the year ended December 31, 2021, our revenues would have been approximately $443 million lower had foreign currency exchange rates remained constant with those for the year ended December 31, 2020. Cost of Revenues Amortization of content assets makes up the majority of cost of revenues. Expenses directly associated with the acquisition, licensing and production of content (such as payroll and related personnel expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production related costs and participations and residuals), streaming delivery costs and other operations costs make up the remainder of cost of revenues. We have built our own global content delivery network ("Open Connect") to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operations costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members. Cost of revenues As a percentage of revenues Year Ended December 31, 2021 2020 2019 Change 2021 vs. 2020 $ 17,332,683 $ 58 % (in thousands, except percentages) 15,276,319 $ 12,440,213 61 % $ 2,056,364 13 % 62 % The increase in cost of revenues for the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily due to a $1,423 million increase in content amortization relating to our existing and new content, including more exclusive and original programming. Other costs of revenues increased $633 million, primarily due to the continued growth in our content production activities, coupled with an increase in expenses associated with streaming delivery costs and payment processing fees driven by our growing member base. The decrease in cost of revenues as a percentage of revenues from 61% to 58% is primarily due to delays in content releases due to the COVID-19 pandemic, resulting in content amortization growing at a slower rate as compared to the growth in revenue. Marketing Marketing expenses consist primarily of advertising expenses and certain payments made to our marketing partners, including consumer electronics ("CE") manufacturers, MVPDs, mobile operators and ISPs. Advertising expenses include 22

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