The business and culture of our digital lives,
from the L.A. Times

« Previous Post | Technology Home | Next Post »

Netflix queues up major delay in shipping DVDs*

August 14, 2008 | 10:56 am

*UPDATED 5:25 P.M.: Netflix spokesman Steve Swasey said this evening that the company had resumed shipping discs from an undisclosed number of distribution centers and hoped to have service "fully restored" by Friday.


Netflix, the DVD rental service, is suffering from the biggest shipping problem in its history, delaying delivery of those familiar red-and-white envelopes to millions of its customers.

The Los Gatos, Calif.-based company today told its 8.5 million subscribers that it had been experiencing "severe technical issues" that had prevented it from mailing movies and TV shows. The problems began Monday night and halted all shipments Tuesday. On Wednesday, the company was able to send about half the discs subscribers had ordered from its 55 distribution centers across the country.

Today, Netflix had yet to make any shipments as of 10:30 a.m. PDT.

"It's comprehensive, and it's affecting our entire nationwide distribution systems," Netflix spokesman Steve Swasey said.

The problem, which he wouldn't identify, has prevented delivery to about one-third of the company's members, or about 2.8 million subscribers, who have sent discs back and are awaiting their next shipments, he said.

In a message on its home page, Netflix said, "We apologize, and we'll be automatically issuing credits to all of you whose shipments have been delayed. Our goal is to ship DVDs as soon as possible and to provide a personalized e-mail update to you if your DVD shipment was delayed."

Netflix, which ships about 2 million discs a day, has missed shipments only one other time since it launched in September 1999. That delay occurred in March. Netflix then issued a 5% credit in monthly fees to members whose discs were delayed by one day and a 10% credit for shipments that were delayed for two or more days.

This time, the company hasn't yet determined how it will make it up to its members. "There's no set formula because this is only the second time in our company's history that we've missed our shipping date," Swasey said.

So far, the delay hasn't cost Netflix much in the way of consumer satisfaction, said Michael Pachter, an analyst with Wedbush Morgan Securities. "Most people aren't sitting by their mailboxes on a Wednesday or Thursday waiting for their Netflix movies," he said. "People watch movies on Friday or Saturday. So as long as [Netflix gets] the movies out today or tomorrow, most people won't even notice."

Netflix currently has no estimate of when its technical difficulties will be resolved. "We have hundreds of engineers working round the clock to fix this problem," Swasey said. 

-- Alex Pham

Photo: Netflix