NetFlix 2002 Annual Report Download - page 14

our shipping centers and allocates order responsibilities among them. We continuously monitor, test and seek to improve the efficiency of our distribution, processing
and inventory management systems as our subscriber base and shipping volume grows. As of December 31, 2002, we were operating from 13 shipping centers located
throughout the United States, including our San Jose facility. During 2003, we anticipate opening between 10 to 15 additional shipping centers to reduce delivery time
further and increase library utilization. We believe that shorter delivery time will result in improved customer acquisition, retention and satisfaction.
•Building Mutually Beneficial Relationships with Filmed Entertainment Providers . We have entered into revenue sharing agreements with studios that lower our upfront cost
of acquiring titles, minimize our inventory risk and increase the depth and breadth of our library. Our growing subscriber base provides studios with an additional distribution
outlet for popular movies and television series, as well as niche titles and programs.
Our Web Site—www.netflix.com
We have applied substantial resources to plan, develop and maintain proprietary technology to implement the features of our Web site, such as subscription account signup and management,
personalized movie merchandising, inventory optimization and customer support. Our software is written in a variety of languages and runs on industry standard platforms.
Our recommendation service uses proprietary algorithms to compare subscriber movie preferences with preferences of other users contained in our database. This technology enables us to
provide personalized predictions and movie recommendations unique to each subscriber.
We believe our dynamic store software optimizes subscriber satisfaction and the management of our library by integrating the predictions from our recommendation service, subscribers’
current queues and viewing histories, inventory levels and other factors to determine which movies to merchandise to each subscriber.
Our proprietary movie search engine indexes our extensive library by title, actor and director, and sorts them by genre into collections.
Our account signup and management tools provide a subscriber interface familiar to online shoppers. We use a real−time postal address validator to help our subscribers enter correct postal
addresses and to determine the additional postal address fields required to assure speedy and accurate delivery. We use an online credit card authorization service to help our subscribers
avoid typographic errors in their credit card entries. These features help prevent fraud and subscriber disappointment resulting from failures to initiate a trial.
Throughout our Web site, we have extensive measurement and testing capabilities, allowing us to continuously optimize our Web site according to our needs as well as those of our
subscribers. We use random control testing extensively.
Our Web site is run on hardware and software co−located at a service provider offering reliable network connections, power, air conditioning and other essential infrastructure. We manage
our Web site 24 hours a day, seven days a week. We utilize a variety of proprietary software, freely available tools and commercially supported tools, integrated in a system designed to
rapidly and precisely diagnose and recover from failures. Many of our Web site systems are redundant, including most of the networking hardware and the Web servers. We conduct
upgrades and installations of software in a manner designed to minimize disruptions to our subscribers.
We make available on our Web site, free of charge, our annual reports on Form 10−K, quarterly reports on Form 10−Q, current reports on Form 8−K, and amendments to these reports as
soon as reasonably practicable after electronically filing or furnishing those reports to the Securities and Exchange Commission.
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