NetFlix 2008 Annual Report Download - page 23

If we become subject to liability for content that we produce, publish or distribute through our service, our
results of operations would be adversely affected.
As a producer, publisher and distributor of content, we face potential liability for negligence, copyright,
patent or trademark infringement or other claims based on the nature and content of materials that we produce,
publish or distribute. We also may face potential liability for content uploaded from our users in connection with
our community-related content or movie reviews. If we become liable, then our business may suffer. Litigation to
defend these claims could be costly and the expenses and damages arising from any liability could harm our
results of operations. We cannot assure that we are adequately insured or indemnified to cover claims of these
types or liability that may be imposed on us.
If government regulations relating to the Internet or other areas of our business change or if consumer
attitudes toward use of the Internet change, we may need to alter the manner in which we conduct our
business, or incur greater operating expenses.
The adoption or modification of laws or regulations relating to the Internet or other areas of our business
could limit or otherwise adversely affect the manner in which we currently conduct our business. In addition, the
growth and development of the market for online commerce may lead to more stringent consumer protection
laws, which may impose additional burdens on us. If we are required to comply with new regulations or
legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur
additional expenses or alter our business model.
The manner in which Internet and other legislation may be interpreted and enforced cannot be precisely
determined and may subject either us or our customers to potential liability, which in turn could have an adverse
effect on our business, results of operations and financial condition. The adoption of any laws or regulations that
adversely affect the popularity or growth in use of the Internet, including laws limiting Internet neutrality, could
decrease the demand for our subscription service and increase our cost of doing business.
We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a
significant amount of our management’s time and attention.
From time to time, we are subject to litigation or claims that could negatively affect our business operations
and financial position. As we have grown, we have seen a rise in the number of litigation matters against us.
Most of these matters relate to patent infringement lawsuits, which are typically expensive to defend. Litigation
disputes could cause us to incur unforeseen expenses, could occupy a significant amount of our management’s
time and attention and could negatively affect our business operations and financial position.
Changes in securities laws and regulations have increased and may continue to increase our costs.
Changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-
Oxley Act of 2002 and recently enacted rules promulgated by the Securities and Exchange Commission, have
increased and may continue to increase our expenses as we devote resources to their requirements.
We may seek additional capital that may result in stockholder dilution or that may have rights senior to
those of our common stockholders.
From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt
securities. The decision to obtain additional capital will depend, among other things, on our development efforts,
business plans, operating performance and condition of the capital markets. If we raise additional funds through
the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges
senior to the rights of our common stock, and our stockholders may experience dilution.
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