Netflix Goes Down as Market Value Goes Up

I know it is being anthropomorphic, but doesn't it sometimes seem that if a digital-based system can cause a person or company major embarrassment by not working at an inopportune time, it will figure out a way to do so?

Those working at Netflix may be feeling this way today.

On Wednesday, Netflix proudly announced its third quarter results, which were very good indeed. As its press release noted,

"Q3 represents our fourth consecutive quarter of more than one million net subscriber additions.  This growth is clearly driven by the strength of our streaming offering.  In fact, by every measure, we are now primarily a streaming company that also offers DVD-by-mail."

In addition, the company announced its Q3 revenues were $553.2 million, a growth of over 30% from last year, along with a gross profit margin of nearly 38%.

This LA Times story yesterday also reported that, "Chief Executive Reed Hastings said Netflix was looking to offer a new lower-cost plan (in the US) through which subscribers could access movies and TV shows solely online."

It has piloted this streaming-only service in Canada for $7.99 a month, and the service has proved very popular.

All the good news sent Netflix stock higher in trading by nearly 13% to over $172 a share, no doubt making everyone at the company feel that life was good, at least until an IT issue spoiled the celebration.

For at around 1630 ET yesterday, Netflix was unavailable on line for its 17 million plus subscribers for about three hours, reports this story at the Huffington Post. Even after the unspecified problem was fixed, Netflix warned last night that some subscribers might still have difficulties accessing the Netflix web site.

Things appear normal today, however.

The Huffington Post story went on to say that:

"Netflix's streaming service has become so popular that it is now the largest source of U.S. Internet traffic during peak evening hours, according to Sandvine Inc., a Canadian company that supplies traffic-management equipment to Internet service providers. Streaming by Netflix subscribers accounted for about one-fifth of that peak-time traffic, more than double the volume flowing from Google Inc.'s YouTube."

So, between YouTube and Netflix alone, 30% of peak US Internet traffic is devoted to watching streaming video. I don't know whether to be impressed by this or depressed.