Netflix Puts Out a Fire

Netflix (Nasdaq: NFLX  ) is acting quickly to crush a sensitive accusation.

Anti-data-cap blog Stop the Cap! revealed that some accounts are being limited to a single stream at a time -- a claim that Netflix is now denying.

In the past, when streaming was included at no additional cost, conventional wisdom dictated that the number of concurrent streams was related directly to how many discs a subscriber could have out. Someone on the three-disc unlimited plan, for example, could have three devices streaming different content at the same time.

Well, Stop the Cap! was tipped off -- and later able to duplicate -- an error message from the streaming service when a second video was launched under the same account.

"There are 1 movies being watched, which is the limit for your membership," reads the error message captured by the site.

"No Netflix member is limited to less than two concurrent streams," Netflix VP of Corporate Communications Steve Swasey wrote to GigaOm this morning. "A few Netflix members have heard differently from us, which is an error that we are correcting."

Well, either one party is lying or there is a technical glitch at play.

Obviously, Netflix can't offer an unlimited amount of simultaneous streams. Folks would just begin sharing single accounts that way. However, this controversy comes at a bad time for Netflix. Now that couch potatoes have a choice in either paying Netflix $7.99 a month or not for streams, making the service even more restrictive would drive away even more subscribers than Netflix is likely to lose this month with the new rates that kick in during the September billing cycle.

There is a real opportunity here for Netflix to expand its money-making potential, but it has also never been this vulnerable. If there was ever a time for Amazon.com (Nasdaq: AMZN  ) , DISH Network's (Nasdaq: DISH  ) Blockbuster, or Coinstar's (Nasdaq: CSTR  ) Redbox to make a move on the Netflix streaming model, this would be it.

We'll see how this plays out. Regardless of how many movies can be watched at the same time, we know that both what Netflix and Stop the Cap! are saying can't be true concurrently.

Will Netflix lose more subscribers than it gains this quarter? Share your thoughts in the comments box below.

Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix and buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder and subscriber since 2002. He owns no shares in any of the other stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 07, 2011, at 11:48 PM, rookiex wrote:

    Nflx sucks...their movie selection for streaming is embarrassing & they don't control their own destiny...studios can charge whatever they want...time to short

  • Report this Comment On September 08, 2011, at 12:38 PM, BioBat wrote:

    "Obviously, Netflix can't offer an unlimited amount of simultaneous streams. Folks would just begin sharing single accounts that way. "

    You would think so but that's been the norm more than the exception over the past few years. People have been sharing accounts on multiple devices within the home, within dorms, and even across the country on a single account. It was sloppy for Netflix to let this go on as long as it did, which says to me they've gone too big, too fast in the streaming world.

    While I think closing the loophole should increase the revenue per subscriber by limiting streams, they're likely to lose a lot of subscribers who took advantage of Netflix lack of oversight in this area for the past few years. Once you get people hooked on paying $8-10 for something (multiple streams from one account), it's hard to get them to swallow a doubling or tripling of price.

    Q3 is going to be a mess for them.

  • Report this Comment On September 08, 2011, at 1:28 PM, inkstainedwretch wrote:

    The next few months will tell us for sure whether NFLX has a sustainable business model.

    My big concern has been that NFLX is at the mercy of its content suppliers and customers. They have very little control over their input costs and even less over their product prices.

  • Report this Comment On September 09, 2011, at 3:28 PM, dougnunes wrote:

    this complaining about Netflix giving away streaming for the past several years is crazy. Customers were not paying for streaming and for them to now say there is a bump in price is not understandable. The busines model says you pay for what you get, to say you can get contents for cheaper seems impossible to me.

    Netflix is now doing what they always intended to do, charge for DVD and for streaming. As to the sharing of accounts and getting movies delivered to differnet machines at the same time, now is the time to fix that, when the streaming was free it didn't matter much.

    As to this complaining about the content sucks.....when it was free it didn't seem to suck, with customers paying for what they get Netflix will be is a better place to seek and negotiate for the better content. This all seems to me like a success busniess model.

    I don't think Netflix will miss all those 8 out at a time accounts who were mailing back movies the day the were able to copy them and then asking for more. The loss of those freaks will also help Netflix's bottom line on the DVD side.

    As long as we can get good clear streaming and get the blu-ray discs Netflix is better that comcast, redbox and Amazon; we have yet to see what Direct TV can bring to the table I don't think they will be able to beat Comcast, but time will tell.

    I'm sticking with Netflix for both DVD(Blue-Ray) and Streaming, seems like a very good deal to me; a non-couch potato.

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