NetFlix 2013 Annual Report Download - page 13

We accept payment methods other than payment cards. As our service continues to evolve and expand
internationally, we will likely continue to explore accepting various forms of payment, which may have higher
fees and costs than our currently accepted payment methods. If more consumers utilize higher cost payment
methods, our payment costs could increase and our results of operations could be adversely impacted.
In addition, we do not obtain signatures from members in connection with their use of payment methods. To
the extent we do not obtain members’ signatures, we may be liable for fraudulent payment transactions, even
when the associated financial institution approves payment of the orders. From time to time, fraudulent payment
methods are used to obtain service. While we do have certain safeguards in place, we nonetheless experience
some fraudulent transactions. We do not currently carry insurance against the risk of fraudulent payment
transactions. A failure to adequately control fraudulent payment transactions would harm our business and results
of operations.
If the market segment for online subscription-based entertainment video saturates, our business will be
adversely affected.
The market segment for online subscription-based entertainment video has grown significantly. Much of the
increasing growth can be attributed to the ability of our members to stream TV shows and movies on their TVs,
computers and mobile devices. As we face more competition in our market segment, our rate of growth relative
to overall growth in the segment may decline. Further, a decline in our rate of growth could indicate that the
market segment for online subscription-based entertainment video is beginning to saturate. While we believe that
this segment will continue to grow for the foreseeable future, if this market segment were to saturate, our
business would be adversely affected.
If our trademarks and other proprietary rights are not adequately protected to prevent use or
appropriation by our competitors, the value of our brand and other intangible assets may be diminished,
and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality and license agreements with our
employees, consultants and third parties with whom we have relationships, as well as trademark, copyright,
patent and trade secret protection laws, to protect our proprietary rights. We may also seek to enforce our
proprietary rights through court proceedings. We have filed and we expect to file from time to time for trademark
and patent applications. Nevertheless, these applications may not be approved, third parties may challenge any
patents or trademarks issued to or held by us, third parties may knowingly or unknowingly infringe our patents,
trademarks and other proprietary rights, and we may not be able to prevent infringement or misappropriation
without substantial expense to us. If the protection of our proprietary rights is inadequate to prevent use or
appropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors
may be able to more effectively mimic our service and methods of operations, the perception of our business and
service to members and potential members may become confused in the marketplace, and our ability to attract
members may 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. 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.
Intellectual property claims against us could be costly and result in the loss of significant rights related to,
among other things, our Web site, streaming technology, our recommendation and merchandising
technology, title selection processes and marketing activities.
Trademark, copyright, patent and other intellectual property rights are important to us and other companies.
Our intellectual property rights extend to our technology, business processes and the content on our Web site. We
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