NetFlix 2013 Annual Report Download - page 4

combined plans, making it necessary for members who wish to receive both DVDs-by-mail and streaming
content to have two separate membership plans.
BUSINESS SEGMENTS
The Company has three operating segments: Domestic streaming, International streaming and Domestic
DVD. The Domestic and International streaming segments derive revenues from monthly membership fees for
services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly
membership fees for services consisting solely of DVD-by-mail. For additional information regarding our
segments, including information about our financial results by geography, see Note 12 of Item 8, Financial
Statements and Supplementary Data.
COMPETITION
The market for entertainment video is intensely competitive and subject to rapid change. Many consumers
maintain simultaneous relationships with multiple entertainment video providers and can easily shift spending
from one provider to another. Our principal competitors vary by geographic region and include multichannel
video programming distributors providing free on demand content through authenticated Internet applications,
Internet-based movie and TV content providers, including both those that provide legal and illegal (or pirated)
entertainment video content, DVD rental outlets and kiosk services and entertainment video retail stores.
SEASONALITY
Our member growth exhibits a seasonal pattern that reflects variations when consumers buy Internet-
connected devices and when they tend to increase their viewing. Our domestic member growth is generally
greatest in our fourth and first quarters (October through March), slowing in our second quarter (April through
June) and then accelerating in our third quarter (July through September). We expect each market in our
international segment to demonstrate more predictable seasonal patterns as our service offering in each market
becomes more established and we have a longer history to assess such patterns. Additionally, the variable
expenses associated with shipments of DVDs are highest in the first quarter due to the seasonal nature of DVD
usage.
INTELLECTUAL PROPERTY
We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets,
proprietary technologies and similar intellectual property as important to our success. We use a combination of
patent, trademark, copyright and trade secret laws and confidential agreements to protect our proprietary
intellectual property. Our ability to protect and enforce our intellectual property rights is subject to certain risks
and from time to time we encounter disputes over rights and obligations concerning intellectual property. We
cannot provide assurance that we will prevail in any intellectual property disputes.
EMPLOYEES
As of December 31, 2013, we had 2,022 full-time employees. We also utilize part-time and temporary
employees, primarily in our DVD fulfillment operations, to respond to the fluctuating demand for DVD
shipments. As of December 31, 2013, we had 305 part-time and temporary employees. Our employees are not
covered by a collective bargaining agreement, and we consider our relations with our employees to be good.
OTHER INFORMATION
We were incorporated in Delaware in August 1997 and completed our initial public offering in May 2002.
Our principal executive offices are located at 100 Winchester Circle, Los Gatos, California 95032, and our
telephone number is [phone].
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