Netflix: Unstreamed Assets

How long is the long tail? For Netflix, it’s a multimillion-dollar question.

An interesting note in Netflix’s 10-Q filed today under “Commitments and Contingencies” relates to how the company accounts for the value of streaming content, which it offers over the Internet to subscribers’ PCs, TiVos, Microsoft Xbox 360s, LG HDTV sets and a host of other devices.

Using an accounting rule from the Financial Accounting Standards Board that applies to broadcasters, Netflix said it had $94.5 million of content commitments as of March 31 that did not meet the technical definition of a “current asset” based on the estimated time of usage after initial availability:

The Company accounts for streaming content in accordance with SFAS No. 63, Financial Reporting by Broadcasters, which requires classification of streaming content as either a current or non-current asset in the consolidated balance sheets based on the estimated time of usage after certain criteria have been met including availability of the streaming content for its first showing. The Company has $94.5 million of commitments at March 31, 2009 related to streaming content license agreements that have been executed but for which the streaming content does not meet the asset recognition criteria in SFAS 63.

That $94.5 million is not an insignificant amount. Overall, Netflix reported that as of March 31 its content library was worth $660.6 million gross — minus $521.9 million accumulated amortization and $33.3 million for the net “current content library” — for a net value of $105.4 million.

The SFAS 63 accounting has a bearing on Netflix’s current assets, but not on its total assets.

But what it indicates is that there’s a heckuva lot of long-tail content lying fallow on Netflix’s Internet service right now. (In addition, the non-current content assets might include some video that is unavailable because of windowing restrictions.)