Is Netflix Getting Cocky?

I'm not the type to falsely apply one personal anecdote to an entire company with millions of subscribers. All the same, I'm worried that my own recent experiences with Netflix (Nasdaq: NFLX) may reflect a broader pattern.

I've been a subscriber since 2002, back when East Coasters like me had to wait several days for my new flicks to arrive from the company's West Coast hub. Then the distribution centers began popping up all over like popcorn kernels at a multiplex, turning a good service into a great one. Throughout most of the country, 48-hour turnaround times became the norm.

I guess I've been spoiled since then. I drop off a returned rental in the mail on Monday. My nearest distribution center in Fort Lauderdale gets it on Tuesday, and Netflix ships out my next item from there the same day. I get it on Wednesday.

That's how it's supposed to happen, but it's not always perfect. Sometimes the process takes three mailing days, when a mailer going in or out gets held up a day in transit -- lamentable, but obviously acceptable.

But last Wednesday morning, I sent back a flick, looking forward to something new to watch over the weekend. The Fort Lauderdale distribution center received it on Thursday, as usual. But I noted on Netflix's site that next available title in my queue wouldn't ship until Friday. Weird.

The site sent me a note, explaining that the title is not available locally, and will be shipping out of a different distribution center. It finally arrived yesterday -- six days after I shipped out my return.

In the midst of that unfortunate delay on the Netflix tarmac, I shipped out another return on Friday. I know the drill. If I want one of Tuesday's new releases, I need to send in a film by Friday or Saturday. That'll make sure that my local distribution center has it by Monday, when the new release ships, so that I get it by Tuesday.

Alas, Netflix didn't get that second return until Tuesday morning. By that time, the new title topping my queue was no longer available, forcing the site to skip past it to the next film down on my list. That one, you can probably pin on the post office, though such a delay is unprecedented in my five years as a Netflix subscriber -- and investor.

I'm not a hyperactive renter, so it's not as if my account should be tagged for throttling. I'm left wondering whether my incidents are normal, or whether Netflix just knows that it's got me just where it wants me.

How Netflix got its groove back
There are certainly good reasons for Netflix to show a little swagger these days. All of the storm clouds that loomed several months ago are fading away.

• Blockbuster's (NYSE: BBI) Total Access -- the plan that was battering Netflix, adding nearly twice as many net new subscribers as the red-enveloped renter over the past three quarters -- bumped up its pricing. The original $17.99 Total Access monthly plan, which allows for unlimited in-store exchanges, is now priced at $24.99 a month.
• Apple's (Nasdaq: AAPL) AppleTV is an uncharacteristic dud in the company's orchard. The home-theater appliance promised to ease convergence, getting iTunes videos and other multimedia into living rooms. If successful, it would have ushered in an era of digitally delivered convenience. Poor reviews and video-quality concerns have held the product back.
• Amazon.com (Nasdaq: AMZN) came up with a better mousetrap than the AppleTV to help popularize its Unbox video purchase and rental service. Wi-Fi-connected TiVo (Nasdaq: TIVO) boxes can download Unbox content directly. However, the TiVo installed base is surprisingly small, and it appears that the service is slow to catch on.
• Movie Gallery (Nasdaq: MOVI), the country's second-largest video rental chain behind Blockbuster, is on the ropes. It has asked for three consecutive extensions from its creditors. The retailer is closing 520 underperforming stores. Even if it survives, some amount of displaced movie buffs may have little choice but to fall into Netflix's lap.

Add it all up. These recent external developments will help get Netflix growing again. I'm not suggesting that my recent disappointment with the company's service is uniform, but if it is happening, it comes at the one time that Netflix has the luxury of phoning it in.

Let's hope that's not the case. Netflix has always ranked high as an Internet brand. Market researcher ForeSee had it tied with QVC.com as the Web's highest-rated player in customer service.

Netflix got there by always going the extra mile. Whether building out its network of distribution centers, proactively slashing prices, or launching an online streaming service at no extra charge, the company has always put subscribers first. These costly moves initially seemed to be putting the shareholder last, given the near-term financial hits they created, but patient investors know that CEO Reed Hastings delivers the goods in the long run. Let's hope that's still the case.

Check out these other feature presentations:

• Movie Gallery is struggling.
• Blockbuster is hiking Total Access rates.
• Netflix is so subscriber-driven that it even wants them to type less.