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The above graph represents the Netflix costs and expenses by quarter, starting from fiscal Q1 2002 to the recently completed quarter. The company’s costs and operating expenses include cost of Revenue, marketing expenses, technology and development expenses, general and administrative expenses. Netflix’s total quarterly revenue reached an all-time high of $5767.7 million in Q1 2020. Out of that, about $4,809.4 million were costs and expenses.
|Source||Netflix Quarterly Reports, SEC Filings|
|Note||Netflix fiscal year starts from January 1st|
During Q1 2020, the company’s spent nearly 21% of its total quarterly revenue on marketing, technology and development, general and administrative activities. Netflix operating expenses (excluding cost of revenue) declined a notable 21.6% YoY in Q1 2020, to $1,209.7 million.
Cost of Revenues
Netflix cost of revenue in Q1 2020 amounted to $3,599.7 million, with 25.4% YoY growth. The increase in cost of revenues was primarily due to a $359 million increase in content amortization relating to Netflix’s existing and new content, including more exclusive and original programming.
It was Q4 2014 when Netflix’s quarterly cost of revenue surpassed $1 billion mark for the first time. The company reported nearly 23.6% YoY growth in its cost of revenues, amounting to $1,014.3 million.
Netflix marketing expenses declined from a record $878.9 million in Q4 2019 to $503.8 in Q1 2020, representing a strong 42.7% YOY decline. On a yearly basis, the company reported a notable 18.3% decline in Q1 2020 marketing expenses.
Interestingly, in Q1 2018, the video streaming giant had increased its marketing spending by 75.3% YoY, to a whopping $536.8 million, worldwide.
Technology and Development Expenses
Meanwhile, Netflix technology and development expenses also increased an appreciable 21.7% YoY in Q1 2020, to $453.8 million. The increase in expenses was primarily due to a $78 million YoY increase in personnel-related costs.
General and Administrative Expenses
During the first quarter of 2020, the OTT player spent nearly 4% of its total quarterly revenue on general and administrative activities. With 24.8% YoY growth, Netflix general and administrative expenses totalled $252.1 million in Q1 2020. However, on a quarterly basis, it’s nearly 0.98% decline from Q4 2019.
About Netflix, Inc.
Netflix Inc. (NASDAQ: NFLX) was founded on August 29, 1997, by Reed Hastings and Marc Randolph as a DVD-rental-by-mail firm. However, the company began its operations on April 14, 1998, by opening the world’s first online DVD rental store. For $19.95 a month, subscribers can rent as many DVDs as they want. The company slowly expanded its business by offering the streaming service in the US while retaining the DVD and Blu-ray rental service. In September 2010, the company began offering its streaming service to Canada, which later expanded to other international markets such as Latin America, the United Kingdom, Ireland, Australia, etc. Netflix is now available almost every corner of the world, except in mainland China (due to local restrictions), Syria, North Korea, and Crimea (due to US sanctions).
Netflix’s IPO (initial public offering) completed on May 29, 2002, selling 5.5 million shares of common stock at the price of $15.00 per share.
On January 22, 2018, Netflix’s market capitalization ballooned to $100 billion, becoming the largest digital media and entertainment company in the world.
Netflix is ranked #38 on the list of the World’s Most Valuable Brands by Forbes, with a brand value of $15.5 billion in 2019.
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