It's been a weird week for Netflix
The movie maven reported a massive quarter on Wednesday with 1.9 million new subscribers, shooting the stock up to fresh all-time highs on Thursday. In the process, Netflix proved pretty much all of my wild-eyed, crazy assumptions about the company entirely correct, reminding us all why the stock truly belongs in every portfolio.
So far, so good. This was a chance for Netflix to bask in the glory of doing everything right. Did CEO Reed Hastings have the Reality Distortion Field on loan from Steve Jobs?
And then the problem reports started pouring in to Twitter and Facebook, along with heavy search volumes for some gloomy query terms on the major search engines: Netflix was down.
Starting before lunch, Pacific time, and lasting well into the afternoon, the Netflix website that is so central to everything the company does was largely unavailable. Trying to access your account for a lunchtime movie stream or to fiddle with your DVD queue proved unfruitful, as you'd either get no response at all or, at best, a cryptic error message.
Service has since been restored, and everything is back to normal as far as I can tell. Netflix spokespeople say that it was an internal problem and no hack-attack from the outside, implying that your data is safe. But what kind of "internal problem" could cause this kind of extended outage for hours on end, in the middle of a regular Thursday?
The quick knee-jerk guess would be that exploding interest in Netflix after that fine quarterly report simply multiplied the site's traffic manifold and overwhelmed the servers. I don't buy that for several reasons:
- Peak hours for Netflix are roughly around the cherished primetime slot on network television, from about 8 p.m. to 10 p.m. in each time zone. If anything, the site should have been unavailable on Wednesday night if high traffic was the problem.
- Netflix routes its movie streams to consumers by way of three leading network delivery specialists: Akamai Technologies
(Nasdaq: AKAM), Level 3 Communications (Nasdaq: LVLT), and Limelight Networks (Nasdaq: LLNW). Moreover, the site infrastructure is largely hosted by the immense server farms of Amazon.com (Nasdaq: AMZN), thanks to a surprise deal signed last spring. I find it very unlikely that all of these tier-one services would become overwhelmed at the same time. A live webcast of the Pope having dinner and drinks with the Dalai Lama over world peace and a cure for cancer probably couldn't do that.
How to lose friends and alienate customers
The other obvious explanation would be planned network maintenance going awry. These things do happen despite the best-laid plans of mice and men, but it would be irresponsible for Netflix to schedule any kind of risky maintenance during business hours. As a Unix support dude for railroading giant CSX in an earlier life, I often cursed having to mosey down to the data center after midnight on Saturdays, but that was the safest spot to have a network outage without stopping revenue-generating trains so that's what we did.
If Netflix considers nine-to-five workdays "safe" for changes, upgrades, and maintenance, I think they're forgetting that many a worker wants to maintain their Netflix queues from that handy, networked workstation sitting on their office desks. And I'm pretty sure that Netflix as a company is smarter than that, especially since Reed Hastings built the company from an engineering background and still runs it with that mind-set.
What's the story?
I'd love to hear an official explanation from Netflix about this outage. Company representatives haven't exactly been forthcoming about it, and the @netflix Twitter feed went right from noting that everything was up and running to plugging the streaming availability of past Saturday Night Live seasons, all of two minutes later.
In the past, slip-ups like delayed DVD shipments have inspired Netflix to explain the issues in detail, apologize publicly, and apply automatic discounts to affected accounts. Twitter and Facebook might get away with the occasional Fail Whale because they're free services, but you expect more from a company that's collecting money in return for a reliable entertainment experience.
If the digital entertainment era just kicked off with the Netflix report, it's not off to a good start. Customer care is paramount to any service business, and Netflix can't afford a whole lot of kinks like this in the system.
Akamai is a Motley Fool Rule Breakers pick. Amazon and Netflix are Motley Fool Stock Advisor recommendations. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.