NetFlix 2012 Annual Report Download - page 7

Competitive Strengths
Netflix differentiates itself from the competition and has been able to grow its business through the
following demonstrated unique competitive strengths:
Leading Scale Advantage Builds Compelling Content—Leveraging our substantial scale and significant
content budget, Netflix has built a broad and deep content library. Our licensing teams are expert programmers
informed by more than a decade of rich data on viewer preferences and viewing habits which uniquely enables
them to license a compelling mix of TV and movie content to efficiently provide Netflix members with
compelling content. To further differentiate our content offering from our competitors, we have increasingly
licensed exclusive and original content.
Outstanding Member Experience Attracts and Retains Subscribers—We provide our members with
innovative and effective user interfaces that enhance their Netflix experience and help increase engagement.
Netflix leverages its large global scale and billions of hours of subscriber viewing data and algorithms in order to
tailor the Netflix recommendations and merchandising to each individual user. We believe that, our user
experience, driven by our focus on innovation and technology, help drive subscriber viewing, engagement,
retention, and overall customer satisfaction. Relative to the competition, we believe we are further along the
experience curve when it comes to improving our user interface and delivering great quality streaming.
Brand Clarity and Focus Increases Pace of Innovation for Members—We are focused on making
subscription streaming video great. Nearly all of our notable competitors in the space today have many other
product lines and services that require management attention and resources. We believe that our focus on
streaming video will help us innovate faster and satisfy our consumers better than our competition. We also
believe that our focus will provide a level of clarity to our brand that will help consumers more easily discover,
understand and appreciate our service offering.
Growth Drivers
Our core strategy is to grow our streaming subscription business domestically and internationally, and is
built upon the following drivers:
Investment in Streaming Content—We believe that our investments in streaming content lead to more
subscriber viewing, delight, and positive consumer word-of-mouth. This, in turn, leads to subscriber acquisition
and revenue growth, which allows us to invest in more streaming content, which enables the growth cycle to
continue. With more than 33 million global subscribers and our increasingly exclusive and original programming
that differentiates us from competitors, we believe we are well positioned to capitalize upon this virtuous cycle.
Continuous Service Improvements—We’ve found that incremental improvements in our service and quality
enhance our member satisfaction and retention. We continue to refine our technology, user interfaces, and
delivery infrastructure to improve the customer experience. For example, using our “adaptive streaming”
technology we automatically and constantly optimize the streaming bit-rate to each user’s Internet speed. This
minimizes loading and buffering times, delivering the best click-and-watch experience. We have added programs
in Super HD and with Dolby Digital Plus 5.1 surround sound for a high quality, immersive entertainment
experience. We believe that improvements such as these will help us build a great streaming service.
Overall Adoption and Growth of Internet TV—Domestically, cable and satellite pay TV subscriber numbers
have stagnated, while DVR penetration has continued to climb. We see this as indicative of consumers desiring
more control and freedom in their ability to watch what they want, when they want, where they want, and how
they want. We are leading this wave of consumer change and growth of Internet TV by providing broad, click-
and-watch video entertainment video.
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