Netflix soars, investors cheer…then Web service crashes.

October 21, 2010


It’s been a heady few months for Netflix, the DVD by-mail company fast becoming a online video streaming service. Yesterday, its third quarter numbers again beat Wall Street expectations as it revealed it is now the third largest video subscription service behind Comcast and DirecTV with nearly 17 million subscribers. Wall Street analysts at UBS and Oppenheimer, already in love with the company, upgraded it on Thursday morning helping to push shares to a new record high of $174.40 before closing at $172.69. To think you could have bought the stock for $47.56 exactly one year ago.

Analysts were m0st excited about the potential for Netflix’s video streaming-only service, which will do away with the heavy expense of delivering DVDs to subscribers homes across the country. In the words of Netflix Chief Executive Reed Hastings (here pictured):

“Three years ago, we were a DVD-by-mail company that offered some streaming.” “We are now a streaming company, which also offers DVD-by-mail.”

And then came the crash. Netflix’s streaming service crumbled on Thursday, as  reported earlier by CNET. The company told CNET it is aware of the problem and is working on it. Akamai, Netflix’s primary content delivery network for streaming videos, said there were no issues with its service (er, thanks guys!).

The service came up shortly after, but the damage had been done. Hopefully, this was a one-off; but, as Multichannel News reported yesterday, Netflix accounts for 20 percent of peak U.S. Internet bandwidth traffic between 8pm to 10pm, according to a study by Sandvine.

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