NetFlix 2013 Annual Report Download - page 9

We rely upon a number of partners to offer instant streaming of content from Netflix to various devices.
We currently offer members the ability to receive streaming content through a host of Internet-connected
devices, including TVs, digital video players, game consoles and mobile devices. We intend to continue to
broaden our capability to instantly stream TV shows and movies to other platforms and partners over time. If we
are not successful in maintaining existing and creating new relationships, or if we encounter technological,
content licensing or other impediments to our streaming content, our ability to grow our business could be
adversely impacted. Our agreements with our consumer electronics partners are typically between one and three
years in duration and our business could be adversely affected if, upon expiration, a number of our partners do
not continue to provide access to our service or are unwilling to do so on terms acceptable to us, which terms
may include the degree of accessibility and prominence of our service. Furthermore, devices are manufactured
and sold by entities other than Netflix and while these entities should be responsible for the devices’
performance, the connection between these devices and Netflix may nonetheless result in consumer
dissatisfaction toward Netflix and such dissatisfaction could result in claims against us or otherwise adversely
impact our business. In addition, technology changes to our streaming functionality may require that partners
update their devices. If partners do not update or otherwise modify their devices, our service and our members’
use and enjoyment could be negatively impacted.
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 members is dependent upon the reliable
performance of our computer systems and those of third parties that we utilize in our operations. These systems
may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters,
terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks,
or other attempts to harm these systems. 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
members 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
membership service to existing and potential members.
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 members 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 members 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 members.
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