Embarrassing 18 Hours For Netflix

Movie Rental Site Crashes As Database Is Updated With Price Cuts

(AP)  Netflix Inc. frustrated investors and customers alike Tuesday as the movie rental company's stock price plunged to its lowest point in more than two years while its Web site was inaccessible most of the day because of unexplained technical problems.

The 7 percent drop in Netflix's shares wasn't a shock after the Los Gatos-based company reported the first quarterly customer losses in its history and dimmed its earnings outlook for the rest of the year.

But the Web site outage was a surprising - and embarrassing - setback.

The online hub of Netflix's rental system went down Monday evening and remained unavailable until Tuesday afternoon, locking out subscribers for more than 18 hours. Spokesman Steve Swasey attributed the outage to database problems.

The breakdown wasn't related to San Francisco power outages that were blamed for temporarily knocking out several other popular Web sites, including Craigslist, Technorati, Typepad and Livejournal.

Service to Netflix's site was finally restored around 3 p.m. PDT after Netflix's engineers had missed several earlier estimated times for fixing the trouble.

Netflix had been in the process of updating its computers to reflect price reductions that took effect Tuesday.

Netflix was the 74th most visited Web site in the United States during the week July 21, according to the research firm Hitwise. It accounted for about 12 percent of all U.S. online traffic to movie and entertainment sites, ranking behind only Amazon.com Inc.'s IMDb.com.

The timing of the breakdown was especially awkward because it occurred shortly after Netflix management had briefed industry analysts on plans to improve its customer service in an increasingly bitter battle with rival Blockbuster Inc.

Lowering prices will erode Netflix's profit - a sacrifice that the company is making in an attempt to regain market share from Blockbuster. The decision led to a further drubbing of Netflix's already battered stock, which has plummeted by 38 percent this year.

The shares dropped as low as $15.62 early Tuesday, their lowest point since June 2005. The stock later rebounded, but still finished down $1.20 at $16.07.

Hoping to retain more of its current customers while enticing new subscribers, Netflix is decreasing monthly fees by $1 on its two most popular plans to match Blockbuster's prices for comparable Internet-only services.

Netflix has been having trouble signing up subscribers since late last year, when Blockbuster began giving its online customers the option of swapping DVDs at one of its stores instead of relying on the mail and waiting at least two days for another movie.

"We are in a very competitive, large battle," Reed Hastings, Netflix's chief executive, said in an interview Monday after the company released its second-quarter earnings. "But we feel like we are still in a great position."

Wedbush Morgan Securities analyst Michael Pachter believes Blockbuster may have exposed Netflix's Achilles' heel by aggressively promoting the convenience of Blockbuster stores to build its online service.

"Netflix has a broken model," Pachter said. "They aren't used to competition and now someone is competing against them very effectively."

Netflix ended June with 6.74 million subscribers, a decrease of 55,000 customers from April. It marked the first time Netflix's total subscribers have declined from one quarter to the next since the service began renting DVDs through its Web site in 1999.

Blockbuster is expected to update its online subscriber count Thursday when it releases second-quarter results. The Dallas-based company ended March with 3 million subscribers after outstripping Netflix's customer growth for two consecutive quarters.

The gains haven't helped Blockbuster financially. The company lost $49 million in the first quarter. Blockbuster last month indicated it might try to reverse that trend by raising the prices of its online service. If that happens, Netflix's earnings during the second half of this year might not shrink as much as management currently expects.

Assuming Blockbuster holds steady, Netflix expects its performance during the second half of the year to lag 2006's pace. Management expects Netflix's full-year profit to range from $42.4 million to $52.4 million, down from an April forecast of $55 million to $60 million. Netflix earned $35.4 million through the first half of this year.

[luckygirl042]

I love my Netflix. I've been a member for well over a year and I am always amazed at how fast the turnaround is (I live in Western PA). I receive very timely e-mails and I love all the features of the site.
It's a shame if there are people who are having problems with it. I have not experienced Blockbuster's service, so I can't comment on it. Competition with Blockbuster should make each company even better!

[mayaderen-2009]

hhusted you are being very nasty! Why can you have an opinion but the person you're trashing can't. It's a known fact that Netflix DOES hold the DVDs longer than they should before mailing them out - there was a Class Action Lawsuit against them for doing that. I was one of the people that signed on to it because I had that same problem & in the end, Netflix had to give ALL of us a free month.

The Netflix distribution center in my area is 20 minutes from my house & it was taking 3 days for each film to reach me! Crazy. When I complained, Netflix didn't listen (again) and then I filed another complaint w/ the Attorney General in California (Netflix home base) & sure enough, Netflix contacted me and the DVDs were turned around within a day's time. Then they slacked off again. I had enough & switched to Blockbuster & couldn't be happier.

Just because YOU hhusted don't like Blockbuster, you don't have to knock anyone that does. If you love Netflix & have a good experience with them then fine.

[mayaderen-2009]

We tried Netflix for a few years off & on and have always ended up with the same problem - things going well for a period and suddenly problems w/the mail (per Netflix). The distribution center in our area is a 20 minute drive from my house.

After numerous complaints, I did a web search & discovered that people in other areas were experiencing similar problems with the "mail" (Netflix just wasn't processing the DVDs fast enough). I filed a complaint with the Attorney General in California (Netflix home base) and sure enough, was contacted by someone at Netflix to help me out - and then no "mail" delays for some time until it started happening again. I was also sent something for a Class Action Lawsuit against Netflix that was started by other people with this slow turnaround delivery problem - Netflix ended up giving all of us in the suit a free month of service.

After the upteenth time of fast and then incredibly slow DVD delivery time, we switched to Blockbuster & have been thrilled. And Blockbuster allows its members to take the mailed DVDs to any of their stores & get a DVD there.

Blockbuster also sends us coupons for an additional free store rental of a film or game. We are on the 3 out at a time DVD plan and this extra coupon (sent each month in e-mail) is a nice bonus.

We are very happy with Blockbuster & after giving Netflix so many chances, we are glad to be rid of them.

[missyx21]

Obviously you are a Foreigner since you like foreign flicks.

Posted by hhusted at 12:53 PM : Jul 25, 2007

*****************
hehehe, I just thought that was funny. I don't really know where that comes into play. I wonder what that makes me, cause I like foreign films, anime, dramas, new releases, and independent films. And netflix has a great selection of all those...(not much anime but I can find those else where for free)


anyways, I haven't had any problems with Netflix yet. I'm on the "one DVD at a time" plan which is fine with me because life is too busy to be sitting on your butt all day long. So whenever I'm done I just send it back and it takes about two days for me to get another one.

[jimfinster]

Posted by hhusted at 12:53 PM : Jul 25, 2007

I totally agree with your post. I have used Netflix for the past year, and have been very pleased with their service.

[hhusted]

genghis007, you wrote this:

"I tried Netflix for 2 years - they were awful. Unlimited rental does not mean unlimited. They hold your return several days before they release the next movies. They decide weekly how many movies you are allowed to receive."

For your information what you stated above is totally false. When you sign up for Netflix and pay them a certain monthly fee, you get that level of service. Nextflix does not hold any DVD. As soon as they register your returned DVD, they send out the next one the same day. I know because I have been a member for years and never had a problem with them. You are trashing them because you are a Blockbuster jerk. To me anyone who rents from a low-class chain like Blockbuster (who caters to all the scum on earth), shouldn't even be allowed to talk here. Obviously you are a Foreigner since you like foreign flicks.

[dumbfounded5]

I love NetFlix and wouldn't get anything from Blockbuster. I always get my movie on time every week. It works perfect for me.

[dzfromsc]

My boyfriend has been waiting for Blockbuster to send him Smallville for four months...rediculous!

I hope Netflix does make it.

[vallel]

I love Netflix!! really don't know what the complain is. I have been a member since 2002, and I love that I can select the movie, read the reviews, and don't have to drive to pick them up or return them, there concept was very innovative, of course Blockbuster copy it , since they were loosing business, I was one of them, I quit going to blockbuster since ea time I went i usually pay more than 20 dollars for 3 movies, plus the goodies that my children got, plus the gas. I recommend netflix to any one.

[sandy19731]

I am also a Netflix fan, my son and I watched two movies last night from my computer and it was great. Then I got an e-mail this morning telling me the price of my plan had been discounted a little. Didn't know the site was down. My son can use my plan to watch downloaded video's from his apartment which is nice, too (and they don't offer porn). One can simply give your username and password to a trusted person and they can use it at their home. Nice!!