NetFlix 2013 Annual Report Download - page 10

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.
We have built and deployed a single-purpose Netflix content delivery network that we call Open Connect.
Given our size and growth, we believe it makes economic sense to have our own specialized CDN. We will
continue to work with commercial CDN partners, but we believe that the vast majority of our streaming bits will
ultimately be served by Open Connect. To the extent Internet Service Providers (“ISPs”) do not interconnect with
Open Connect or if we experience difficulties in operating the Open Connect CDN service, our ability to
efficiently and effectively deliver our streaming content to our members could be adversely impacted and our
business and results of operation could be adversely affected. Failure to implement Open Connect could require
us to engage third-party solutions to deliver our content to ISPs, which could increase our costs and negatively
affect our operating results.
If we are unable to effectively utilize our recommendation and merchandising technology or develop user
interfaces that maintain or increase member engagement with our service, our business may suffer.
Our proprietary recommendation and merchandising technology enables us to predict and recommend titles
and effectively merchandise our library to our members. We also develop, test and implement various user
interfaces across multiple devices, in an effort to maintain and increase member engagement with our service.
We are continually refining our recommendation and merchandising technology as well as our various user
interfaces in an effort to improve the predictive accuracy of our TV show and movie recommendations and the
usefulness of and engagement with our service by our members. We may experience difficulties in implementing
refinements or other, third-party recommendation or merchandising technology or interfaces may become more
popular with or useful to our members. In addition, we cannot assure that we will be able to continue to make and
implement meaningful refinements to our recommendation technology.
If our recommendation and merchandising technology does not enable us to predict and recommend titles
that our members will enjoy or if we are unable to implement meaningful improvements thereto or otherwise
improve our user interfaces, our service may be less useful to our members. Such failures could lead to the
following:
• our member satisfaction may decrease, members may perceive our service to be of lower value and our
ability to attract and retain members may be adversely affected; and
• our ability to effectively merchandise and utilize our library will be adversely affected.
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