Netflix Is Out in More Ways Than One

They say that deaths happen in threes, so it's only natural that Netflix (Nasdaq: NFLX  ) would suffer a website outage the day after it posts a decline in quarter-over-quarter subscribers, and two days after munching on its own margins by lowering subscription-plan prices.

Yes, that storm cloud above Netflix's rain-soaked head is sticking around. Fellow Fool Rich Smith alerted me late last night that the Netflix website was down. The notice read that it would be back up by 5:00 Pacific time this morning. After that, it became 9:00 a.m., then 11:00 a.m., and then 1:00 p.m. And it's now resting on a 4:00 p.m. Pacific advisory.

Now, outages like this happen all the time. In fact, when XM Satellite Radio (Nasdaq: XMSR  ) suffered a signal degradation two months ago, I took the time to point out a few outages that have actually benefited the providers. When Research In Motion's (Nasdaq: RIMM  ) BlackBerry experienced an email outage for several hours back in April, users realized how vital the portable communications devices were in their lives. The same can be said of pronounced outages in the 1990s for Time Warner's (NYSE: TWX  ) AOL and for eBay (Nasdaq: EBAY  ) .

But Netflix is unlikely to get the same kind of halo treatment. With the company posting a churn rate of 4.6% in its latest quarter -- higher than in the previous quarter or during the same quarter a year earlier -- patrons are either quite aware of rival Blockbuster's (NYSE: BBI  ) Total Access program, or they are just not as loyal to DVD rentals by mail.

This isn't the best time to test that allegiance. Obviously, Netflix isn't doing this intentionally. It's just rotten luck. However, now that the company has been nudging users toward a couple of cheaper plans that provide a cap on rentals, it's going to have some pretty disappointed members who tossed a rental in the mail yesterday and were going to prioritize their online queues this morning.

Maybe I'm wrong. Maybe this is the kind of moment that galvanizes the Netflix subscriber community. However, with momentum working against the company, I don't see a good way to spin the temporary death of a popular website.

Other recent Netflix Foolishness:

Netflix, Time Warner, and eBay are recommendations for Motley Fool Stock Advisor newsletter subscribers. Finding out why is just a 30-day free trial subscription away.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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