Today is not a good day to loan out DVDs.
A service outage at Netflix
The Netflix downtime isn't as potentially detrimental as the worrisome downgrade at Blockbuster. A tech snafu has limited Netflix's ability to ship out DVD rentals through its distribution centers since Tuesday, even though the story is only coming to light today.
Netflix has had outages before. Its website was down for a significant spell back in March. The company bounced back. It always does.
"Will subscribers bolt in droves?" I rhetorically asked after March's outage.
"Of course not," I answered. "History is actually kind to the purveyors of downtime. There were pronounced outages in the 1990s for Time Warner's (NYSE: TWX) AOL and for eBay (Nasdaq: EBAY). They clearly rose above it. Last year's prolific killjoys included Research In Motion's (Nasdaq: RIMM) BlackBerry in April, Sirius XM Radio's
If you need any proof that Netflix will get over this week's distributory slip, just consider that Netflix had just 7.5 million subscribers at the beginning of the year, and was up to 8.4 million movie buffs by the end of June. Folks keep coming. The outages are unfortunate, but they sometimes validate the model, once subscribers realize how badly they miss the service.
Blockbuster's burden won't be so easy to fix. Credit rating agency Moody's is cutting the company's probability of default rating. Even though Blockbuster's backing away from plunging into a risky acquisition of Circuit City
Then again, investors know that there are risks aplenty in Blockbuster. When the share price is lower then the going rate on a movie rental, it starts looking more and more like a lottery ticket.
Let's hope that "fade to black" is a better description for the conclusions of the films Netflix and Blockbuster rent than the fortunes of the companies themselves.
Be kind, rewind these earlier stories:
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.