NetFlix 2006 Annual Report Download - page 12

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Growth Strategy
Our strategy to provide a premier filmed entertainment subscription service to our large and growing
subscriber base includes the following key elements:
•Providing Compelling Value for Subscribers. We provide subscribers access to our comprehensive
library of more than 70,000 DVD titles with no due dates, late fees or shipping charges for a fixed
monthly fee. We merchandise titles in easy-to-recognize lists including new releases, by genre and other
targeted categories. We also offer more than 1,000 titles through our instant-viewing feature. Our
convenient, easy-to-use Web site allows subscribers to quickly select current titles, reserve upcoming
releases and build an individual queue for future viewing using our proprietary personalization
technology. We provide service features to our subscribers that, among other things, enable social
networking and further individualization of the service through establishment of sub-account queues and
recommendations. Our recommendation service provides subscribers with recommendations of titles
from our library and our Previews feature allows subscribers to experience recommended titles by
viewing promotional trailers in a simple, easy-to-use format. We quickly deliver DVDs to subscribers
from our shipping centers located throughout the United States by U.S. mail and in January 2007, we
introduced our instant-viewing feature which is being made available to subscribers in a phased roll-out.
•Utilizing Technology to Enhance Subscriber Experience and Operate Efficiently. We utilize proprietary
technology developed internally to manage the processing and distribution of DVDs from our shipping
centers. Our software automates the process of tracking and routing DVDs to and from each of our
shipping centers and allocates order responsibilities among them. We continuously monitor, test and seek
to improve the efficiency of our distribution, processing and inventory management systems as our
subscriber base and shipping volume grows. We operate a nationwide network of shipping centers and
continue to develop and grow this network to meet the demands of our operations.
•Building Mutually Beneficial Relationships with Filmed Entertainment Providers. We have invested
substantial resources in establishing strong ties with various filmed entertainment providers. We maintain
an office in Los Angeles that provides us access to the major studios. We acquire content either through
revenue sharing agreements or direct purchases. We work with the content providers to determine which
method of acquiring titles is the most beneficial for each party. Our growing subscriber base provides
studios with an additional distribution outlet for popular movies and television series, as well as niche
titles and programs.
Our Web site—www.netflix.com
We have applied substantial resources to plan, develop and maintain proprietary technology to implement
the features of our Web site, such as subscription account signup and management, personalized movie
merchandising, inventory optimization and customer support. We offer features such as our social networking
feature, called FriendsRand our queue management feature, called ProfilesSM. In addition, we recently launched
our Previews feature, allowing subscribers to browse promotional movie trailers as well as our instant-viewing
feature that allows subscribers to instantly watch certain movies and television series on their personal
computers. We also provide our subscribers with the ability to purchase certain previously viewed DVDs. Our
software is written in a variety of computing languages and runs on industry standard platforms.
Our recommendation service uses proprietary algorithms to compare each subscriber’s title preferences with
preferences of other users contained in our database. This technology enables us to provide personalized movie
recommendations unique to each subscriber.
We believe our dynamic store software optimizes subscriber satisfaction and management of our library by
integrating the predictions from our recommendation service, each subscriber’s current queue and viewing
history, inventory levels and other factors to determine which movies to promote to each subscriber.
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