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Unread August 14th, 2008, 11:40 AM
JustTheFacts JustTheFacts is offline
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Looking more and more like a lottery ticket

Bad News for Netflix and Blockbuster
By Rick Aristotle Munarriz
August 14, 2008 Comment (0) Recommend (0)
Today is not a good day to loan out DVDs.

A service outage at Netflix (Nasdaq: NFLX) and a credit downgrade at Blockbuster (NYSE: BBI) are making this a doozy of a day for an industry that should be raking it in during this staycation summer.

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 (Nasdaq: SIRI) XM in May, and yes, even Netflix, in July. All of these companies are watching over larger user bases today."

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 (NYSE: CC), it still faces model viability and refinancing challenges.

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.
  #2  
Unread August 15th, 2008, 08:37 PM
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sar94pga sar94pga is offline
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my favorite part of the day was reading about now netflix had a HUGE computer glitch and werent able to mail out discs yesterday.
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Unread August 17th, 2008, 12:34 PM
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The Omen The Omen is offline
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i like lottery tickets specially the ones you scratch and try to win! Then when you think you lost, you get to scratch another box, then you find out you really did lose.

I think i will keep my money next time
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Unread August 18th, 2008, 09:14 AM
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Can you use BBI stock as coupons for rentals?
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