NetFlix 2015 Annual Report Download - page 11

compelling to consumers, our ability to establish and maintain a positive reputation may be adversely impacted.
Furthermore, to the extent our marketing, customer service and public relations efforts are not effective or result
in negative consumer reaction, our ability to establish and maintain a positive reputation may likewise be
adversely impacted. As we expand into new markets, we will also need to establish our reputation with
consumers and to the extent we are not successful in creating positive impressions, our business in these new
markets may be adversely impacted.
Changes in how we market our service could adversely affect our marketing expenses and membership
levels may be adversely affected.
We utilize a broad mix of marketing and public relations programs, including social media sites such as
Facebook and Twitter, to promote our service to potential new members. We may limit or discontinue use or
support of certain marketing sources or activities if advertising rates increase or if we become concerned that
members or potential members deem certain marketing practices intrusive or damaging to our brand. If the
available marketing channels are curtailed, our ability to attract new members may be adversely affected.
If companies that promote our service decide that we negatively impact their business, that they want to
compete more directly with our business or enter a similar business or decide to exclusively support our
competitors, we may no longer have access to such marketing channels. We also acquire a number of members
who rejoin our service having previously cancelled their membership. If we are unable to maintain or replace our
sources of members with similarly effective sources, or if the cost of our existing sources increases, our member
levels and marketing expenses may be adversely affected
We face risks, such as unforeseen costs and potential liability in connection with content we acquire,
produce, license and/or distribute through our service.
As a distributor of content, we face potential liability for negligence, copyright and trademark infringement,
or other claims based on the nature and content of materials that we acquire, produce, license and/or distribute.
We also may face potential liability for content used in promoting our service, including marketing materials and
features on our Web site such as member reviews. As we expand our original programming, we have become
responsible for production costs and other expenses, such as ongoing guild payments. We also take on risks
associated with production, such as completion and key talent risk. To the extent we do not accurately anticipate
costs or mitigate risks, including for content that we obtain but ultimately does not appear on our service, or if we
become liable for content we acquire, produce, license and/or distribute, our business may suffer. Litigation to
defend these claims could be costly and the expenses and damages arising from any liability or unforeseen
production risks could harm our results of operations. We may not be indemnified against claims or costs of
these types and we may not have insurance coverage for these types of claims.
If studios, content providers or other rights holders refuse to license streaming content or other rights
upon terms acceptable to us, our business could be adversely affected.
Our ability to provide our members with content they can watch depends on studios, content providers and
other rights holders licensing rights to distribute such content and certain related elements thereof, such as the
public performance of music contained within the content we distribute. The license periods and the terms and
conditions of such licenses vary. If the studios, content providers and other rights holders are not or are no longer
willing or able to license us content upon terms acceptable to us, our ability to stream content to our members
will be adversely affected and/or our costs could increase. Many of the licenses for content provide for the
studios or other content providers to withdraw content from our service relatively quickly. Because of these
provisions as well as other actions we may take, content available through our service can be withdrawn on short
notice. As competition increases, we may see the cost of programming increase. As we seek to differentiate our
service, we are increasingly focused on securing certain exclusive rights when obtaining content, including
original content. We are also focused on programming an overall mix of content that delights our members in a
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