NetFlix 2014 Annual Report Download - page 9

Table of Contents
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 computer systems and those of third parties we use in our operations are vulnerable to cybersecurity risks, including cyber attacks
such as computer viruses, denial of service attacks, physical or electronic break-ins and similar disruptions. These systems 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 obtain our data, disrupt our service, or otherwise access our systems, or those of third parties we use, 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 protect our data and systems. 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 “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, as well as cybersecurity threats, could adversely impact the experience of our members.
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 the technology we use in operating our business fails, is unavailable, or does not operate to expectations, our business and results of
operation could be adversely impacted.
We utilize a combination of proprietary and third party technology to operate our business. This includes the technology that we have
developed to recommend and merchandise content to our consumers as well as enable fast and efficient delivery of content to our members and
their various consumer electronic devices. For example, we have built and deployed our own content-delivery network (“CDN”). To the extent
Internet Service Providers ("ISPs") do not interconnect with our CDN or if we experience difficulties in its operation, 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. Likewise, if our recommendation and merchandising technology does not enable us to predict and recommend titles that our
members will enjoy, our ability to attract and retain members may be adversely affected. We also utilize third party technology to help market
our service, process payments, and otherwise manage the daily operations of our business. If our technology or that of third parties we utilize in
our operations fails or otherwise operates improperly, our ability to operate our service, retain existing members and add new members may be
impaired. Also, any harm to our members' personal computers or other devices caused by software used in our operations could have an
adverse effect on our business, results of operations and financial condition.
If government regulations relating to the Internet or other areas of our business change, we may need to alter the manner in which we
conduct our business, or incur greater operating expenses.
The adoption or modification of laws or regulations relating to the Internet or other areas of our business could limit or otherwise
adversely affect the manner in which we currently conduct our business. In addition, the continued growth and development of the market for
online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. If we are required to
comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur
additional expenses or alter our business model.
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