NetFlix 2009 Annual Report Download - page 4

2009 was an amazing year for Netflix. During the year, we added more than 2.8 million net
new subscribers, continued to experience dramatic expansion and accelerating consumer
adoption of our hybrid service combining streaming with DVDs by mail, and achieved strong
gains in revenues and GAAP net income.
Outstanding growth
To put our subscriber growth into perspective: it took us four years, from 1999 to 2003, to
reach our first million subscribers; in 2009, we added more than 1 million net new subscribers
in the fourth quarter alone.
And we added subscribers at an increasing rate. Accelerating year-over-year subscriber
growth is a clear sign consumers are embracing the Netflix value proposition of unlimited
movies and TV episodes streamed over the Internet and on DVDs.
This subscriber growth translated into solid increases in revenues and net income. Revenue
for 2009 increased 22 percent to $1.7 billion, and GAAP net income increased 40 percent
to $115.9 million.
Focus on excellence
A key ingredient of our success is our persistent determination to deliver a truly excellent
customer experience – an extensive content selection, a highly intuitive and useful Web site,
outstanding customer service, and the most compelling value proposition.
That determination drove ongoing improvements to our movie recommendation algorithms,
which means our subscribers more easily find movies they will love.
We also made improvements to DVD by mail. In 2009, we completed the nationwide rollout
of Saturday shipping and continued to invest in automation for our distribution centers,
which will improve service quality while reducing costs.
And we continued to enhance our streaming feature. In 2009, we added new, relevant
content and new partnerships with consumer electronics manufacturers, ranging from
Blu-ray players and Internet-connected TVs to game consoles, including Microsoft’s Xbox
360 and Sony’s PlayStation3. As a result, we expect to be embedded in nearly every Blu-ray
player and Internet-connected TV sold in 2010.
Our subscribers have clearly engaged with streaming. In the fourth quarter of 2009, 48
percent of our subscribers instantly watched at least 15 minutes of a TV episode or movie,
up from 28 percent a year earlier.
Looking ahead
We anticipate that the factors that contributed to our strong performance in 2009 will
drive additional growth in 2010 and beyond. Those factors include the value proposition
of our subscription model combining streaming with DVDs by mail, our persistent focus
on delivering an outstanding customer experience and our growing ubiquity on Internet-
connected devices that bring our streaming content to our subscribers’ TVs, including
Nintendo’s Wii game console this spring.
Our long-term goals remain unchanged: To be a great Internet movie service by combining
Internet delivery with DVD by mail, and to grow subscribers and earnings every year while
continuing to invest in streaming. I am confident the innovation, skill and commitment of our
employees will enable Netflix to extend our record of delivering an outstanding experience
to our customers while creating value for our shareholders.
Sincerely,
Reed Hastings
Chief Executive Ocer,
President and Co-founder
Dear Fellow Shareholders