Updated from 1:15 p.m. EDT.
business model at risk of total meltdown? Will the
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
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.
The best part is that you're forced to wait only a minute or two for your film to begin downloading to -- and playing on -- your video-capable iPod, iPhone, Mac desktop or laptop or your Apple TV box. Standard definition movies at $2.99 and high-def versions are $3.99.
Which would you prefer? I think your choice is a no-brainer. To be fair, Netflix offers a second service which lets you rent and stream movies directly to your PC or TV with the use of a $100 player by
. But the downside here is that you only have a selection of 12,000 movies when you stream compared to Netflix's more than 100,000 DVD-by-mail titles.
Download-only services could have similar technical problems, but, being a purely software operation, delays and backlogs should be minimized. Netflix though, has to deal with software and also hardware problems -- the worst of both worlds.
Gary Krakow is TheStreet.com's senior technology correspondent.