adjustments of $194.8 million and net changes in operating assets and liabilities of $30.0 million during 2007. The majority of the non-cash adjustments came from the amortization of the content library of $203.4 million which increased by $62.3 million over the prior period as we continue to purchase additional titles, including Internet-delivered content in 2007, in order to support our larger subscriber base. Cash provided by operating activities increased $44.0 million in 2007 as compared to 2006. This was primarily due to an increase in net income of $17.9 million, increased non-cash adjustments of $31.2 million and a decrease in net changes in operating assets and liabilities of $5.1 million.

Our operating activities consisted primarily of net income of $49.1 million, increased by non-cash adjustments of $163.7 million and net changes in operating assets and liabilities of $35.1 million during 2006. The majority of the non-cash adjustments came from the amortization of the content library of $141.2 million, which increased $44.3 million over the prior period as we continue to purchase additional titles in order to support our larger subscriber base. Cash provided by operating activities increased $90.4 million in 2006 as compared to 2005 due to higher net income of $7.1 million, non-cash adjustments of $80.8 million and net changes in assets and liabilities of $2.5 million.

Investing Activities

Our investing activities consisted primarily of purchases and sales of available-for-sale securities, acquisitions of content library, including Internet-delivered content in 2007, and purchases of property and equipment. Cash used in investing activities increased $264.9 million in 2007 as compared to 2006. During the first quarter of 2007, we started an investment portfolio which is comprised of short-term investments consisting of corporate debt securities, government and agency securities and asset and mortgage-backed securities. The majority of the portfolio is invested in “AAA” rated residential and commercial mortgage-backed securities. The mortgage bonds owned represent the senior tranches of the capital structure and provide credit enhancement through over-collateralization and their subordinated characteristics.

We continue to purchase additional titles, including Internet-delivered content in 2007, for our content library in order to support our larger subscriber base. Content acquisitions were $53.9 million higher in 2007 as compared to 2006. Purchases of property and equipment consisted of expenditures related to Company expansion, primarily to our headquarters in Los Gatos, California. In March 2006, we exercised our option to lease a building adjacent to our headquarters in Los Gatos, California. The building will comprise approximately 80,000 square feet of office space and have an initial term of 5 years. The building is expected to be completed in the first quarter of 2008. Additionally, purchases of property and equipment consisted of automation equipment for our various shipping centers in order to achieve increased operational efficiencies.

Cash used in investing activities increased $52.6 million in 2006 as compared to