NetFlix 2002 Annual Report Download - page 40

infrastructure and fulfillment processes. Interruptions in these systems could make our Web site unavailable and hinder our ability to fulfill selections. Much of our software is proprietary,
and we rely on the expertise of members of our engineering and software development teams for the continued performance of our software and computer systems. Service interruptions or
the unavailability of our Web site could diminish the overall attractiveness of our subscription service to existing and potential subscribers.
Our servers are vulnerable to computer viruses, physical or electronic break−ins and similar disruptions, which could lead to interruptions and delays in our service and operations and loss,
misuse or theft of data. Our Web site periodically experiences directed attacks intended to cause a disruption in service. Any attempts by hackers to disrupt our Web site service or our
internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation. Our general business disruption insurance does not cover expenses related to
direct attacks on our Web site or internal systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services.
Any significant disruption to our Web site or internal computer systems could result in a loss of subscribers and adversely affect our business and results of operations.
Our communications hardware and the computer hardware used to operate our Web site are hosted at the facilities of a third party provider. Hardware for our delivery systems is maintained
in our shipping centers. Fires, floods, earthquakes, power losses, telecommunications failures, break−ins and similar events could damage these systems and hardware or cause them to fail
completely. Problems faced by our third party Web hosting provider, with the telecommunications network providers with whom it contracts or with the systems by which it allocates
capacity among its subscribers, including us, could impact adversely the experience of our subscribers. Any of these problems could result in a loss of subscribers.
Our executive offices and San Jose−based shipping center are located in the San Francisco Bay area. In the event of an earthquake, other natural or man−made disaster or power
loss, our operations would be affected adversely.
Our executive offices and San Jose−based distribution center, which houses our customer service operations and our excess DVD inventory, are located in the San Francisco Bay area. Our
business and operations could be materially adversely affected in the event of electrical blackouts, fires, floods, earthquakes, power losses, telecommunications failures, break−ins or similar
events. We may not be able to effectively shift our fulfillment and delivery operations due to disruptions in service in the San Francisco Bay area or any other facility. Because the San
Francisco Bay area is located in an earthquake−sensitive area, we are particularly susceptible to the risk of damage to, or total destruction of, our primary distribution center and the
surrounding transportation infrastructure. We are not insured against any losses or expenses that arise from a disruption to our business due to earthquakes. Further, the State of California has
experienced deficiencies in its power supply over the last few years, resulting in occasional rolling black−outs. If rolling blackouts or other disruptions in power occur, our business and
operations would be disrupted, and our business would be affected adversely.
The loss of one or more of our key personnel, or our failure to attract, assimilate and retain other highly qualified personnel in the future, could seriously harm our existing
business and new service developments.
We depend on the continued services and performance of our key personnel, including Reed Hastings, our Chief Executive Officer, President and Chairman of the Board, Barry McCarthy,
our Chief Financial Officer and Secretary, Thomas R. Dillon, our Vice President of Operations, Leslie J. Kilgore, our Vice President of Marketing, and Neil Hunt, our Vice President of
E−Commerce. In addition, much of our key technology and systems are custom made for our business by our personnel so that the loss of our key technology personnel could disrupt the
operation of our title selection and fulfillment systems and have an adverse effect on our ability to grow and expand our systems.
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