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Their content production is amortized over 5 years. In reality, they're in the red.
by dilemma 9y ago
Their content production is amortized over 5 years. In reality, they're in the red.
- cletus 9y agoCash flow might be negative but that's not the same as being in the red. And I'm not even sure cash flow is negative. Content should be amortized as it will generate revenue for years. It's essentially being treated as a capital expense, which isn't unreasonable.
- kevinr 9y agoRecognizing both expenses and revenue over time is part of generally accepted accounting practices (GAAP). Intuitionistically, it makes total sense that you get a clearer picture of the true state of the finances of Netflix as a going concern if they recognize the costs of a show on their balance sheet over five years when they expect subscribers to still be watching it for the first (or second, or third) time several years on.