content titles available for viewing to our domestic subscribers as compared to the prior year. The increase is also partially attributed to an increase in streaming content titles available in Canada as well as to our Latin America and Caribbean expansion in the second half of 2011.



 

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Content delivery expenses decreased $39.0 million primarily due to a 13.6% decrease in the number of DVDs mailed to paying subscribers. The decrease in the number of DVDs mailed was driven by a 21.7% decline in monthly DVD rentals per average paying DVD subscriber primarily attributed to the migration of our DVD subscribers toward lower priced plans. The decrease in DVD delivery expenses was partially offset by an increase in costs associated with our use of third-party delivery networks resulting from an increase in the total number of hours of streaming content viewed by our subscribers. In the fourth quarter of 2011, global streaming content hours viewed exceeded 2 billion.



 

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Fulfillment costs associated with content processing and customer service centers expenses increased $16.2 million primarily due to a $22.3 million increase in costs associated with customer service call centers to support our growing subscriber population both domestically and internationally, partially offset by a $7.9 million decrease in hub operation expenses due to the 13.6% decrease in the number of DVDs mailed to paying subscribers.



 

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Credit card fees increased $30.9 million as a result of the 48.2% growth in revenues.



The $278.1 million increase in cost of revenues was due to the following factors:

 

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Content acquisition and licensing expenses increased by $165.9 million. This increase was primarily attributable to investments in streaming content, partially offset by decreases in DVD content acquisitions.



 

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Content delivery expenses increased $78.7 million primarily due to a 9.7% increase in the number of DVDs mailed to paying subscribers. The increase in the number of DVDs mailed was driven by a 40.9% increase in the domestic average number of paying subscribers, partially offset by a 21.6% decline in monthly DVD rentals per average paying DVD subscriber primarily attributed to the growing popularity of our lower priced plans and growth in streaming. In addition, content delivery expenses increased due to higher costs associated with our use of third-party delivery networks resulting from an increase in the total number of hours of streaming content viewed by our subscribers.



 

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Fulfillment costs associated with content processing and customer service centers expenses increased $13.5 million primarily due to a $12.4 million increase in personnel costs resulting from a 10.0% increase in headcount to support the higher volume of content delivery and growth in subscribers. In addition, encoding costs increased $7.0 million in support of the increasing number of titles and platforms offered for streaming content. 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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