Netflix Comes Out Of The Dark With Refunds To Customers


Online movie rental company Netflix tells me that business is back up and running after a computer glitch knocked out its 55 distribution centers nationwide, and will offer its customers a 15 percent refund for the inconvenience.

Netflixspokesman Steve Swasey says DVD distribution resumed earlier Friday with the company now shipping all the discs to customers who had already ordered movies, but hadn't received them since a software snafu knocked the service offline Monday.

There is a significant backlog of old orders that had yet to be processed, and new orders that have come in since then, but Swasey says the company is working through all of it as quickly as possible to get Netflix's business back to normal. Consumers may still feel some ongoing delays as Netflix tries to normalize distribution once again.

Swasey also says that affected customers will see an automatic 15 percent reduction in their monthly bills on their next statements. Netflix has 8.4 million customers; but only about a third were affected by the distribution snafu, says Swasey. I asked Swasey what went wrong, and he said that at this point it is an internal issue that Netflix will not be disclosing.

The Netflix outage prevented the company from shipping any DVDs on Tuesday, and only a handful on Wednesday and Thursday. Company officials have characterized this week's problems as the worst in Netflix's history. The outage follows website crashes at Netflix that took the company's site offline in July and March. Outages at the distribution facilities and the company's overall website are thought not to be related.

Meantime, investors won't know the total cost of the dropped shipments and 15 percent refund until the company reports its earnings, unless it is a material impact at which time the company may be forced to disclose it sooner. Citigroup analyst Tony Wible estimates that the outage could cost Netflix an estimated $1.8 million to $3.6 million a day in lost revenue, not including the refunds the company now plans to offer its customers.

Video: Netflix resumes shipping DVDs after a technical problem.

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