In an article released today by Variety, Netflix has changed its accounting methods for personnel expenses that relate to the company’s streaming service. Unlike it previously had disclosed, Netflix’s move has shown how much more they have invested in global streaming.

The Variety article states the following:

As detailed in an SEC filing posted Thursday, Netflix is reallocating costs for employees previously recorded in “general and administrative” (G&A) and “technology and development” line items into cost of revenues and marketing, a change that will take effect in its reporting fourth-quarter 2018 results. The company released revised operating expense results going back to 2016 to provide comparable financial info.

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This move has in no way affected the wallets or “financial health” of the company. Netflix’s consolidated operating income, net income or cash flows are in no way affected by this. What this move does show is how much attention Netflix is putting into their global streaming. From January to September of 2018, Netflix spent $534 million more, or 5% of total operating costs, on streaming operations. Of that, $328 million (61%) was reallocated into international streaming.

Netflix explains the move as a more accurate reflection of the business as it moves to “self-produce and create more of its own content rather than license or procure it from third parties.” Netflix went on to say the following:

“… the nature of the work performed by certain personnel has changed to be more directly related to the development, marketing and delivery of our service… [the change] will also align external presentation of personnel related expenses with the way that the company’s chief operating decision maker expects to assess profitability and make resource allocation decisions going forward.”

This move can also be seen as the steps Netflix is taking to prepare for the arrival of rival streaming services soon to hit the market, mainly those coming from Disney, Apple, and Warner.

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Source: Variety.

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