Yahoo 2004 Annual Report Download - page 21

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We have dedicated considerable resources to provide a variety of premium services, which may not prove to be successful in
generating significant revenue for us.
We offer fee-based enhancements to many of our free services, including email, personals, finance, games, music, and
sports. The development cycles for these technologies are long and generally require significant investment by us. We
have previously discontinued certain non-profitable premium services. We must however continue to provide new services
that are compelling to our users while continuing to develop an effective method for generating revenues for such
services. If we cannot generate revenues from these services that are greater than the cost of providing such services, our
operating results may be harmed.
We expect our operating expenses to continue to increase as we attempt to expand the Yahoo! brand, fund product development,
develop media properties and acquire other businesses which could harm our operating results.
We currently expect that our operating expenses will continue to increase as we expand our operations in areas of
expected growth, continue to develop and extend the Yahoo! brand, fund greater levels of product development, develop
and commercialize additional media properties and premium services, and acquire and integrate complementary busi-
nesses and technologies. If our expenses increase at a greater pace than our revenues, our operating results could be
harmed.
If we are unable to license or acquire compelling content at reasonable costs or if we do not develop compelling content, the
number of users of our services may not grow as anticipated which could harm our operating results.
Our future success depends in part upon our ability to aggregate compelling content and deliver that content through
our online properties. We license much of the content on our online properties, such as news items, stock quotes,
weather reports, maps and audio and video content from third parties. We have been providing increasing amounts of
audio and video content to our users and we believe that users will increasingly demand high-quality audio and video
content, such as the broadcast of music, film content, speeches, news footage, concerts and other special events. Such
content may require us to make substantial payments to third parties from whom we license or acquire such content. For
example, our music and entertainment properties rely on major sports organizations, radio and television stations, record
labels, cable networks, businesses, colleges and universities, film producers and distributors, and other organizations for a
large portion of the content available on our properties. Our ability to maintain and build relationships with third-party
content providers will be critical to our success. In addition, as new methods for accessing the Web become available,
including through alternative devices, we may need to enter into amended content agreements with existing third-party
content providers to cover the new devices. We may be unable to enter into new, or preserve existing, relationships with
the third parties whose content we seek to obtain. In addition, as competition for compelling content increases both
domestically and internationally, our content providers may increase the prices at which they offer their content to us and
potential content providers may not offer their content on terms agreeable to us. An increase in the prices charged to us
by third-party content providers could harm our operating results and financial condition. Further, many of our content
licenses with third parties are non-exclusive. Accordingly, other Webcasters and other media such as radio or television
may be able to offer similar or identical content. This increases the importance of our ability to deliver compelling
editorial content and personalization of this content for users in order to differentiate Yahoo! from other businesses. If we
are unable to license or acquire compelling content at reasonable prices, if other companies broadcast content that is
similar to or the same as that provided by Yahoo!, or if we do not develop compelling editorial content or personalization
services, the number of users of our services may not grow at all or may grow at a slower rate than anticipated, which
could harm our operating results.
Our intellectual property rights are valuable and any inability to protect them could reduce the value of our brand image and harm
our business and our operating results.
We regard our copyrights, patents, trademarks, trade dress, trade secrets, and similar intellectual property, including our
rights to certain domain names, as important to Yahoo!’s brand and success. While we attempt to protect and stop any
unauthorized use of our proprietary rights, the efforts we have taken to protect our proprietary rights may not be
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