James Delahunty
16 Aug 2008 3:00
Online DVD Rental service Netflix resumed normal shipping activities on Friday following a three-day disruption. Netflix has been in operation for over a decade, and this has been the worst incident it has run into so far, and only second overall after experiencing delivery problems in March earlier this year. The company's earnings are not expected to take too much of a hit from the incident, but some analysts warned that problems such as this always impact a company's reputation.
New users who were on a two-week trial when the problems occurred will have their trail extended by a week, while customers who have been affected by delays will receive a 15% credit to their next billing statement. "We don't have in our terms of agreement that if you miss a day you get a credit," said Netflix spokesman Steve Swasey. "We just do that voluntarily because it's the right thing to do."
Backlogged shipments were expected to get moving on Friday, with the possibility of rare exceptions. The outage hit about one-third of the company's 8.4 million customers, but Netflix will not provide any specific details on what actuall caused it, nor the total expected cost of the refunds and trial extensions.
The company was prevented from mailing out DVDs on Tuesday but did manage partial deliveries on Wednesday and Thursday. The disruption could cost Netflix one or two cents in earnings per share for this financial quarter, or up to about $2 million in profit, according to Andy Hargreaves, an analyst with Pacific Crest Securities.