Reclassifications and Changes in Estimates
Certain prior year amounts have been reclassified to conform to the current year presentation in the consolidated financial statements. Payroll and related expenses of $19.3 million and $21.4 million for the years ended December 31, 2012 and 2011, respectively, associated with corporate marketing personnel, previously classified in "Marketing" on the Consolidated Statements of Operations, have been reclassified as "General and administrative." Historically these costs were substantially recorded in the Domestic streaming segment and impacted segment contribution profit. Management and the Company's chief operating decision maker consider such employee costs to be global corporate costs rather than marketing costs directly attributable to the segment and as such are not indicative of any given segment's performance. Accordingly, such costs have been reclassified as "General and administrative" expenses which are not a component of contribution profit. There was no impact to operating income in any year presented.
Prepaid content amounts are now included in Other current assets on both the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as they are not material.
Certain prior year amounts in the Consolidated Statements of Cash Flows have been revised to correctly present changes in accounts payable related to purchases of fixed assets. For the year ended December 31, 2012, a $1.2 million increase in accounts payable has been reclassified from purchases of property and equipment in "Net cash used in investing activities" to changes in accounts payable in "Net cash provided by operating activities." There was no impact to the Consolidated Statements of Operations or Consolidated Balance Sheets.
The Company had a change in estimate that is reflected in the consolidated financial statements for the year ended December 31, 2013. When the Company started with original content, the Company did not have specific data about viewing patterns over time for content that premieres on Netflix. Based on experience with other similar television series and initial estimates of viewing patterns, the Company amortized this type of content on a straight-line basis over the shorter of four years or the license period. If a subsequent season is added, the remaining amortization period is extended by a year. Current estimates of viewing patterns indicate that viewing in the first few months is significantly higher, relative to the remaining amortization period, than previously estimated. As a result, in the third quarter of 2013, the Company began amortizing this type of content on an accelerated basis over the amortization period. The effect of this change in estimate was an $18.9 million decrease in contribution profit for the Domestic streaming segment and a $6.1 million increase in contribution loss for the International streaming segment for the year ended December 31, 2013. The effect of this change in estimate was a decrease in operating income and net income of $25.0 million and $15.4 million, respectively for the year ended December 31, 2013. The effect to basic earnings per share and diluted earnings per share was a decrease of $0.27 and $0.25, respectively, for the year ended December 31, 2013. The effect of this change in estimate relates primarily to titles that first premiered on Netflix in the first and second quarters of 2013.
