NetFlix 2007 Annual Report Download - page 22

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 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 and our Internet-
based delivery of content 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 adversely impact 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 adversely
affected.
Our executive offices and our Sunnyvale-based shipping center 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 our Chief Executive Officer, Chief Financial Officer or Chief Marketing Officer, 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 and
Leslie J. Kilgore, our Chief Marketing Officer. In addition, much of our key technology and systems are custom-
made for our business by our personnel. The loss of 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
obligations regarding the manner in which we treat such information. Other businesses have been criticized by
privacy groups and governmental bodies for attempts to link personal identities and other information to data
collected on the Internet regarding users’ browsing and other habits. Increased regulation of data utilization
practices, including self-regulation as well as increased enforcement of existing laws, could have an adverse
effect on our business.
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