NetFlix 2007 Annual Report Download - page 3

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Each year since we invented online DVD rental in 1999, Netfl ix has focused on under-
standing the preferences of our subscribers and on improving the customer experience.
And each year the result has been rapid growth in subscribers, revenue and — since we
went public in 2002 — earnings.
We continued that record of achievement in 2007:
• We made the best service even better by expanding our selection and off ering instant
streaming of select content as part of the Netfl ix subscription at no additional cost;
strengthening customer support with 800 number availability seven days a week, 24
hours a day; enhancing our web site’s ability to help our subscribers fi nd movies they’ll
love; and adding shipping points for more one-business-day delivery. As a result, Netfl ix
was once again rated number one in American e-commerce customer satisfaction in
independent surveys by Nielsen Online and ForeSee Results.
• We maintained our fi nancial discipline and customer-centric focus in a diffi cult competitive
environment and emerged at year-end with dominant share of online DVD rental and
a strong platform for extending our business model to instantly stream movies and TV
content over the Internet.
• And we delivered rapid growth in both subscribers and net income, once again demon-
strating the strength of our business model. We added 1.2 million subscribers, to end the
year with 7.5 million subscribers, grew revenue 21 percent to $1.2 billion, and increased
GAAP earnings per diluted share 37 percent to 97 cents.
Looking ahead
In 2008, Netfl ix will do what we did in 2007 — we’ll learn more about our market and our
subscribers, get better at what we do, and deliver solid operating and fi nancial performance.
One important focus in 2008 will be the continued development of our ability to instantly
stream movies and TV episodes over the Internet. While online DVD rental by mail will be
an exciting business and a source of growth for many years, we know that longer term
our subscribers will increasingly want the immediate response of Netfl ix content instantly
streamed over the Internet to their television screens.
Our leadership in online DVD rental provides a powerful platform upon which to build leader-
ship in Internet delivery of video rental. As with any innovation, it will take some time for
Internet delivery to emerge as a signifi cant business. With limited content available for Internet
delivery for the foreseeable future, we believe our ability to off er our large and growing sub -
scriber base a full range of rental content at one low cost, delivered either by mail or streamed
over the Internet, gives us a great advantage over any stand-alone Internet delivery service.
Overall, our goals remain simple: Build the world’s best Internet movie service, and deliver
growing EPS and subscribers every year. We achieved those goals in 2007 and prior
years primarily because of the skill, enthusiasm and commitment of all of our employees
and the support of our investors and subscribers. With their continued support, we are
confi dent we will achieve those goals in 2008 and beyond.
Sincerely,
Reed Hastings
Chief Executive Offi cer,
President and Co-founder
Dear Fellow Shareholders: