NetFlix 2008 Annual Report Download - page 9

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Please find page 9 of the 2008 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

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•Utilizing Technology to Enhance Subscriber Experience and Operate Efficiently. We utilize proprietary
and other technology to manage the processing and distribution of DVDs from our shipping centers and
the delivery of streaming content over the Internet. Our software and equipment automate the process of
tracking and routing DVDs to and from each of our shipping centers and allocate 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 Entertainment Video Providers. We have invested
substantial resources in establishing strong ties with various entertainment video providers. We maintain
an office in Beverly Hills, California that provides us access to the major studios. We obtain content
through direct purchases, revenue sharing agreements or license agreements. 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 apply substantial resources to develop and maintain technology to implement the features of our Web
site, such as subscription account signup and management, personalized movie merchandising, inventory
optimization and streaming content. We believe that our Web site provides our subscribers with an easy-to-use
interface that enhances the value of our service. We believe that our ability to personally merchandise our content
through the Web site 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. Subscribers pay for our service
by a credit or debit card. We utilize third party services to authorize and process our payment methods.
Throughout our Web site, we have extensive measurement and testing capabilities, allowing us to continuously
optimize our Web site according to our needs, as well as those of our subscribers. We use random control testing
extensively, including testing service levels, plans, promotions and pricing.
Merchandising
We use our proprietary recommendation service along with other data, such as viewing history and
inventory levels, to determine which titles are presented to a subscriber. In doing so, we believe we provide our
subscribers with a quick and personalized way to find titles they are more likely to enjoy while also effectively
managing our inventory utilization. Our merchandising efforts are used throughout our website to determine
which titles are displayed to subscribers, including the generation of lists of similar titles. We believe our
merchandising efforts create a powerful method for catalog browsing and efficient library utilization.
We also provide our subscribers with detailed information about each title in our library which helps them
select movies they will enjoy. This information may include:
• factual data, including length, rating, cast and crew, special DVD features and screen formats;
• movie trailers and other editorial perspectives, including plot synopses and reviews written by our
editors, third parties and by other Netflix subscribers; and
• data from our recommendation service, including personal rating, average rating and other similar titles
the subscriber may enjoy.
Marketing
We use multiple marketing channels through which we attract subscribers to our service. Online advertising
is an important channel for acquiring subscribers. We advertise our service online through such vehicles as paid
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