NetFlix 2012 Annual Report Download - page 15

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Please find page 15 of the 2012 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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Any significant disruption in our computer systems or those of third-parties that we utilize in our
operations could result in a loss or degradation of service and could adversely impact our business.
Our reputation and ability to attract, retain and serve our subscribers is dependent upon the reliable
performance of our computer systems and those of third-parties that we utilize in our operations. Interruptions in
these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise
hinder our ability to deliver streaming content or fulfill DVD selections. From time to time, we experience
service interruptions and have voluntarily provided affected subscribers with a credit during periods of extended
outage. Service interruptions, errors in our software or the unavailability of computer systems used in our
operations could diminish the overall attractiveness of our subscription service to existing and potential
subscribers.
Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions and periodically experience directed attacks intended to lead to
interruptions and delays in our service and operations as well as loss, misuse or theft of data. Any attempt by
hackers to disrupt our service or otherwise access our systems, if successful, could harm our business, be
expensive to remedy and damage our reputation. We have implemented certain systems and processes to thwart
hackers and to date hackers have not had a material impact on our service or systems however this is no
assurance that hackers may not be successful in the future. Our insurance does not cover expenses related to such
disruptions or unauthorized access. Efforts to prevent hackers from disrupting our service or otherwise accessing
our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our
service offering and systems. Any significant disruption to our service or access to our systems could result in a
loss of subscribers and adversely affect our business and results of operation.
We utilize our own communications and computer hardware systems located either in our facilities or in that
of a third-party Web hosting provider. In addition, we utilize third-party Internet-based or “cloud” computing
services in connection with our business operations. We also utilize our own and third-party content delivery
networks to help us stream TV shows and movies in high volume to Netflix subscribers over the Internet.
Problems faced by us or our third-party Web hosting, “cloud” computing, or content delivery network providers,
including technological or business-related disruptions, could adversely impact the experience of our subscribers.
In addition, fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events
could damage these systems and hardware or cause them to fail completely. As we do not maintain entirely
redundant systems, a disrupting event could result in prolonged downtime of our operations and could adversely
affect our business.
We rely upon Amazon Web Services to operate certain aspects of our service and any disruption of or
interference with our use of the Amazon Web Services operation would impact our operations and our
business would be adversely impacted.
Amazon Web Services (“AWS”) provides a distributed computing infrastructure platform for business
operations, or what is commonly referred to as a “cloud” computing service. We have architected our software
and computer systems so as to utilize data processing, storage capabilities and other services provided by AWS.
Currently, we run the vast majority of our computing on AWS. Given this, along with the fact that we cannot
easily switch our AWS operations to another cloud provider, any disruption of or interference with our use of
AWS would impact our operations and our business would be adversely impacted. While the retail side of
Amazon competes with us, we do not believe that Amazon will use the AWS operation in such a manner as to
gain competitive advantage against our service.
If we experience difficulties with the operation and implementation of Open Connect, our single-purpose
Netflix content delivery network (“CDN”), our business and results of operation could be adversely
impacted.
In addition to general-purpose commercial CDNs, we have enabled Internet service providers (“ISPs”) to
obtain our streaming content from Open Connect, a single-purpose Netflix content delivery network that we have
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