net of proceeds from sales and maturities, of short-term investments. In addition, purchases of property and equipment increased $15.8 million primarily due to purchases of automation equipment for our various DVD shipping centers. These increases were partially offset by a $38.7 million decrease in acquisitions of DVD content library.

Cash provided by financing activities increased $361.7 million or 361.5%, primarily due to our public offering of 2.9 million shares of common stock for net proceeds of $199.9 million and $198.1 million net proceeds received from the issuance of our Convertible Notes in the fourth quarter of 2011. In addition, repurchases of our common stock decreased by $10.6 million. These increases were partially offset by a $30.2 million decrease in proceeds from the issuance of common stock upon exercise of options and a $16.4 million decrease in excess tax benefits from stock-based compensation expense.

Cash provided by operating activities decreased by $48.7 million or 15.0%, primarily due to increased payments for content acquisition and licensing other than DVD library of $267.8 million. This increase was coupled with increased payroll expenses, payments for advertising and affiliates transactions, credit card fees, content delivery expenses and excess tax benefits from stock-based compensation. The increase in these expenses was partially offset by an increase in subscription revenues of $492.4 million resulting from a 40.9% increase in the domestic average number of paying subscribers.

Cash used in investing activities decreased $130.0 million or 52.8%, primarily due to a $54.9 million decrease in the purchases, net of proceeds, of short-term investments and a $69.1 million decrease in acquisitions of DVD content library, as more DVDs were obtained through revenue sharing arrangements. In addition, purchases of property and equipment decreased by $12.1 million, as a significant amount of payments for automation equipment for our various shipping centers were made in 2009.

Cash used in financing activities increased $15.4 million or 18.2%, primarily due to the $193.9 million net proceeds received from the issuance of our 8.50% Notes in 2009. This decrease was partially offset by a $114.1 million decrease in repurchases of our common stock coupled with a $49.5 million increase in the excess tax benefits from stock-based compensation expense and a $14.5 million increase in proceeds from the issuance of common stock upon exercise of options.

Free Cash Flow

We define free cash flow as cash provided by operating and investing activities excluding the non-operational cash flows from purchases, maturities and sales of short-term investments and cash flows from investments in businesses. We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, repurchase our stock and for certain other activities. Free cash flow is considered a non-GAAP financial measure and should not be considered in isolation of, or as a substitute for, net income, operating income, cash flow from operating