NetFlix 2003 Annual Report Download - page 9
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Netflix2003AnnualReport
Thefourthfactoristhateachnewshippingcenterweopencontributestoourplanned
growthinwaysthatareconsistentwithgrowthratesinotherregions.Toreachabillion
dollarsinrevenues,weneedapproximatelyfivepercentofU.S.householdstosubscribe
toNetflix.Growthinourinitialmarket,theSanFranciscoBayArea,hasbeenverysteady
overthepastfour-and-a-halfyears.TheBayAreareachedthefivepercentpenetrationlevel
andthenkeptrightongrowingwithnosignsofslowingdown.Itmaybepossiblethatthe
fivepercentpenetrationlevelisconservativeandwemaybeabletoreach10percentof
households,oreven20percent.Ifso,itwouldindicatethatthebillion-dollarrevenuemark
isnotthefinishlinebutmerelythefirstwateringstation.
Finally,thefifthfactorbehindourincreasingconfidenceisgreatexecution.Everyweek
weshipovertwoandahalfmillionDVDsfromournationwidenetworkofshippingcenters
withincrediblereliabilityandprecision.WebuymillionsofDVDseveryquarterandmaintain
strongrelationswithnearly100studiosanddistributors.Wehavegrownsteadilyevery
quarterwithoutamaterialoperationalmisstep.Wearevigilantaboutthreatsbothlong-
andshort-term.Wecaredeeplyaboutprovidingsubscribersagreatmovieexperience
andworkeverydaytomakeourservicebetterandbetter.
Lookingforwardto2004andbeyond,shareholdersandcustomersalikecanexpect
continuedsteadyexecutionofthekindthathaskeptusgrowingatanastounding
70percent-plusannualrate.
NewInitiatives
Tofuelourambitiousgrowth,wewillexploreseveralnewandexcitinginitiatives
intheyearahead.
In2004,weplantoaddtelevisionadvertisingtothemixofacquisitionchannelswe
usetogrowoursubscriberbase.Aswithlastyear,onlineadvertisingandwordofmouth
willcontinuetogeneratethebulkofournewsubscribers.Inthefourthquarterof2003,
wetestedTVadvertisinginseveralmarkets.Thosetestresultslookedpromising.IfTV
advertisingcontinuestoperformin2004,weexpectabroaderlaunchin2005.
During2004,wewillbepreparingtoexpandinternationallyin2005.Ourfirstmarketsare
likelytobeintheU.K.andCanada.Thesearegoodexpansionmarketsforus.Butinthe
nextfewyears,whiletheU.S.marketcontinuesitsrapidgrowth,weexpectthatovertime
internationaloperationswillcontributelessthan20percentofrevenues.Nevertheless,
itisprudentandexcitingforustobeginmovingfromadomestictoaglobalcompany.
LettertoShareholders