Gary Krakow
Updated from 1:15 p.m. EDT.
Is the Netflix(NFLX Quote - Cramer on NFLX - Stock Picks) business model at risk of total meltdown? Will the Apple(AAPL Quote - Cramer on AAPL - Stock Picks) TV method of delivering videos into your living room prove to be superior in the long run? According to Steve Swasey, Netflix's vice president of corporate communications, the company experienced a major disruption earlier this week. He told me that there has been a problem is centered at Netflix distribution and shipping centers. No DVDs were shipped on Tuesday, some were shipped Wednesday but none have been shipped so far Thursday. A quick look at the Netflix Web site Thursday finds it's difficult to tell that there has been any sort of problem. Most Netflix customers probably won't mind the slight delays. Some might not even realize they are even happening. I'm sure Netflix, which has been successfully sending and receiving DVDs by mail for the past nine years, will straighten this out soon and get back to its core business. But, this outage -- or any outage, for that matter -- points out a major flaw in the Netflix business model. Netflix deals with hard goods -- DVDs, in this case -- while competitors are perfecting ways to avoid similar setbacks. One major company that comes to mind is Apple and its 21st Century Web delivery methods. Think about it. Without worrying about physical inventory, big warehouses or dealing with mailing services and personnel and weather delays, Apple, through its iTunes store, can instantly rent you a video at competitive prices.
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