NetFlix 2002 Annual Report Download - page 15

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Please find page 15 of the 2002 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

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Merchandizing
The key to our merchandizing efforts is the personal recommendations generated by our recommendation service. All subscribers and site visitors are given many opportunities to rate titles.
Based on the ratings we collect, we are able to predict how a particular subscriber will feel about other titles in our library. We can also generate “average” ratings for titles.
The ratings from our recommendation service also determine which titles are displayed to a subscriber and in which order. For example, a list of new releases may be ranked by user
preference rather than by release date, allowing subscribers to quickly find titles they are more likely to enjoy. Ratings also determine which titles are featured in lead page positions on our
Web site to increase customer satisfaction and selection activity. Finally, data from our recommendation service is used to generate lists of similar titles, which has proven to be a powerful
method for catalogue browsing. Subscribers often start from a familiar title and use our “Recommendations” link to find other titles they may enjoy.
Recommendations are available to anyone who has rated titles on our Web site, whether or not they are a subscriber. By aggregating the ratings of our subscribers and other visitors, we have
built what we believe to be the world’s largest personal movie ratings database, containing more than 230 million ratings.
We also provide our subscribers with decision support information about each title in our library. This information includes:
• factual data, including length, rating, cast and crew, special DVD features and screen formats;
• editorial perspective, including plot synopses, movie trailers and reviews written by our editors, third parties, and by other Netflix subscribers; and
• Data from our recommendation service, including personal rating, average rating and other similar titles the subscriber may enjoy.
Marketing
We have multiple marketing channels through which we attract subscribers to our service. We compensate the majority of our channel partners on a pay−for−performance basis. We believe
that our paid marketing efforts are significantly enhanced by the benefits of word−of−mouth advertising, our subscriber referrals and our active public relations program.
Online Advertising
Online advertising is our largest paid source of new subscribers. We advertise our service online through paid search listings, permission based e−mails, banner ads, and text on popular Web
portals and other Web sites. In addition, we have an affiliate program whereby we make available Web−based banner ads and other advertisements that third parties may retrieve on a
self−assisted basis from our Web site and place on their Web sites. Third parties that place our advertisements and generate online subscriber referrals are generally paid a cash bounty for
each subscriber referred to us, with no minimum or maximum amounts for which we are liable.
Other Channels
We work with a number of other channels on an opportunistic basis. We have agreements with leading DVD player manufacturers requiring them to place inside DVD player boxes a Netflix
insert that describes our service and offers a free trial. We have a relationship with Best Buy, a leading consumer electronics and video retailer, which involves a variety of promotional
efforts using point−of−sale materials, stickers on product packaging and other items to promote Netflix in its stores and those of its subsidiaries.
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