NetFlix 2004 Annual Report Download - page 50

Any significant disruption in service on our Web site or in our computer systems could result in a loss of
subscribers.
Subscribers and potential subscribers access our service through our Web site, where the title selection
process is integrated with our delivery processing systems and software. Our reputation and ability to attract,
retain and serve our subscribers is dependent upon the reliable performance of our Web site, network
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 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 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. 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. As we do not maintain entirely redundant systems, a
disrupting event could result in prolonged downtime of our operations and could adversely affect our business.
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.
Our executive offices and our Sunnyvale-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 Sunnyvale-based shipping center, which also houses our customer service
operations, 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 Sunnyvale-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, W. Barry McCarthy Jr., our Chief Financial
Officer, Thomas R. Dillon, our Chief Operations Officer, Leslie J. Kilgore, our Chief Marketing Officer,
Theodore A. Sarandos, Chief Content Officer, and Neil D. Hunt, our Chief Product Officer. In addition, much of
our key technology and systems are custom-made for our business by our personnel. The loss of these or other
key personnel could disrupt our operations and have an adverse effect on our ability to grow our business.
34