NetFlix 2011 Annual Report Download - page 17

If we are unable to protect our domain names, our reputation and brand could be adversely affected.
We currently hold various domain names relating to our brand, including Netflix.com. Failure to protect our
domain names could adversely affect our reputation and brand and make it more difficult for users to find our
Web site and our service. The acquisition and maintenance of domain names generally are regulated by
governmental agencies and their designees. The regulation of domain names in the United States may change in
the near future. Governing bodies may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or
maintain relevant domain names. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear. We may be unable, without significant
cost or at all, to prevent third-parties from acquiring domain names that are similar to, infringe upon or otherwise
decrease the value of our trademarks and other proprietary rights.
In the event of an earthquake or other natural or man-made disaster, our operations could be adversely
affected.
Our executive offices and data centers are located in the San Francisco Bay Area. We have shipping centers
located throughout the United States, including earthquake and hurricane-sensitive areas. Our business and
operations could be adversely affected in the event of these natural disasters as well as from electrical blackouts,
fires, floods, power losses, telecommunications failures, break-ins or similar events. We may not be able to
effectively shift our fulfillment and delivery operations to handle disruptions in service arising from these events.
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 executive offices and data centers. We are not insured against
any losses or expenses that arise from a disruption to our business due to earthquakes and may not have adequate
insurance to cover losses and expenses from other natural disasters.
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.
We could be subject to economic, political, regulatory and other risks arising from our international
operations.
We offer an unlimited streaming plan in Canada, Latin America and beginning in early 2012 we expanded
our streaming service offering to the UK and Ireland. Operating in international markets requires significant
resources and management attention and will subject us to regulatory, economic and political risks that are
different from and incremental to those in the United States. In addition to the risks that we face in the United
States our international operations involve risks that could adversely affect our business, including:
• the need to adapt our content and user interfaces for specific cultural and language differences, including
licensing a certain portion of our content library before we have developed a full appreciation for its
performance within a given territory;
• difficulties and costs associated with staffing and managing foreign operations;
• management distraction;
• political or social unrest and economic instability;
• compliance with U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt
payments to government officials;
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