NetFlix 2002 Annual Report Download - page 43

• reliability;
• speed of access;
• ease of use; and
• bandwidth availability.
The Internet has experienced a variety of outages and delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays
could frustrate public use of the Internet, including use of our Web site offerings. In addition, the Internet could lose its viability due to delays in the development or adoption of new
standards and protocols to handle increased levels of activity or due to governmental regulation.
If we become subject to liability for the Internet content that we publish or upload from our users, our results of operations would be affected adversely.
As a publisher of online content, we face potential liability for negligence, copyright, patent or trademark infringement or other claims based on the nature and content of materials that we
publish or distribute.
We also may face potential liability for content uploaded from our users in connection with our community−related content or movie reviews. If we become liable, then our business may
suffer. Litigation to defend these claims could be costly and harm our results of operations. We cannot assure you that we are adequately insured to cover claims of these types or to
indemnify us for all liability that may be imposed on us.
We may need to change the manner in which we conduct our business, or incur greater operating expenses, if government regulation of the Internet or other areas of our business
changes or if consumer attitudes toward use of the Internet change.
The adoption or modification of laws or regulations relating to the Internet or other areas of our business could limit or otherwise adversely affect the manner in which we currently conduct
our business. In addition, the growth and development of the market for online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us.
If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional expenses or
alter our business model.
The manner in which Internet and other legislation may be interpreted and enforced cannot be precisely determined and may subject either us or our customers to potential liability, which in
turn could have an adverse effect on our business, results of operations and financial condition. The adoption of any laws or regulations that adversely affect the popularity or growth in use
of the Internet could decrease the demand for our subscription service and increase our cost of doing business.
In addition, if consumer attitudes toward use of the Internet change, consumers may become unwilling to select their entertainment online or otherwise provide us with information necessary
for them to become subscribers. Further, we may not be able to effectively market our services online to users of the Internet. If we are unable to interact with consumers because of changes
in their attitude toward use of the Internet, our subscriber acquisition and retention and operating results may be affected adversely.
Risks Related to Our Stock Ownership
Our officers and directors and their affiliates will exercise significant control over Netflix.
Our executive officers and directors, their immediate family members and affiliated venture capital funds, as of March 12, 2003 beneficially owned, in the aggregate, approximately 55% of
our common stock. In particular,
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