These increases were partially offset by a $4.7 million increase in costs related to free-trials allocated to marketing due primarily to the 74.7% increase in gross subscriber additions.



 

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Credit card fees increased $20.0 million as a result of the 29.5% growth in revenues.



Operating Expenses

Marketing

Marketing expenses consist primarily of advertising expenses and also include payments made to our affiliates and consumer electronics partners and payroll related expenses. Advertising expenses include promotional activities such as television and online advertising, as well as allocated costs of revenues relating to free trial periods. Payments to our affiliates and consumer electronics partners may be in the form of a fixed-fee or may be a revenue sharing payment.

 

The $108.8 million increase in marketing expenses was primarily attributable to a $119.6 million increase in marketing program spending, attributable to increased spending in television, radio and online advertising coupled with an increase in payments to our affiliates. Approximately half of these increases were incurred in our International segments in large part due to our launch in Latin America and the Caribbean. These increases were partially offset by a decrease in direct mail and inserts, and payments made to our consumer electronics partners. The increase in marketing program spending was partially offset by decreases in the costs of free trials.

The $56.1 million increase in marketing expenses was primarily attributable to an increase of $17.4 million in domestic spending related to our consumer electronics partners, as we continued to expand the number of devices on which subscribers can view Netflix content. The increase is also due to a $16.2 million increase in other marketing program spending, principally in TV and radio advertising to promote our service, offset by a decrease in direct mail and inserts. In addition, costs of free trials increased $21.0 million due to the 67.7% increase in domestic gross unique subscriber additions, coupled with shipments of instant streaming discs which enable subscribers to stream content to certain consumer electronic devices and the expanded use of one month free trials. Subscriber acquisition cost decreased primarily due to continued strong organic subscriber growth.

Technology and Development

Technology and development expenses consist of payroll and related costs incurred in making improvements to our service offering, including testing, maintaining and modifying our user interfaces, our recommendation and merchandising technology, as well as, telecommunications systems and infrastructure and other internal-use software systems. Technology and development expenses also include costs associated with computer hardware and software.

The $95.7 million increase in technology and development expenses was primarily the result of an $83.0 million increase in personnel-related costs. These increases are primarily due to a 54% growth in average headcount supporting continued improvements in our streaming service and international expansion, coupled with an $18.7 million increase in stock-based compensation