NetFlix 2003 Annual Report Download - page 49

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 as well as 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, Cable and Wireless. 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 customers, including us, could impact adversely the experience
of our subscribers. In addition, any financial difficulties faced by Cable and Wireless, such as its bankruptcy
reorganization, may have negative effects on our business, the nature and extent of which are difficult to predict.
Our executive offices and our San Jose-based shipping center are located in the San Francisco Bay Area.
In the event of an earthquake or other natural or man-made disaster, our operations would be affected
adversely.
Our executive offices and our San Jose-based shipping center, which also houses our customer service
operations and our excess DVD inventory, are located in the San Francisco Bay Area. Our business and
operations could be 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 San Jose-based operations 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.
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 harm our 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,
Thomas R. Dillon, our Chief Operations Officer, Leslie J. Kilgore, our Chief Marketing Officer, and Neil Hunt,
our Chief Product Officer. In addition, much of our key technology and systems are custom-made for our
business by our personnel. During the first quarter of 2004, Mr. McCarthy announced his plans to leave Netflix at
the end of 2004. The loss of Mr. McCarthy, or other key personnel, could disrupt our operations and have an
adverse effect on our ability to grow our business.
Privacy concerns could limit our ability to leverage our subscriber data.
In the ordinary course of business, and in particular, in connection with providing our personal movie
recommendation service, we collect and utilize data supplied by our subscribers. We currently face certain legal
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