August 26, 2008, 12:00 AM

Netflix reveals source of shipment snag

Netflix Inc. says faulty hardware was the culprit in a fulfillment snafu that delayed millions of DVD shipments to the retailer’s customers earlier this month.

Katie Evans

Managing Editor, International Research

Netflix Inc. says faulty hardware was the culprit in a fulfillment snafu that delayed millions of DVD shipments to the retailer’s customers earlier this month.

“On Monday, 8/11, our monitors flagged a database corruption event in our shipping system. Over the course of the day, we began experiencing similar problems in peripheral databases until our shipping system went down,” Mike Osier, head of IT operations at Netflix, said in a blog post late last week. “We suspected hardware and moved the shipping system to an isolated environment, gradually getting DVD shipments moving again. Eventually the system was repaired and shipping returned to normal conditions.”

Osier said a hardware component “definitively caused the problem” yet reported no detectable errors. “We’ve taken steps to fortify our shipping system with the acquisition of additional equipment and worked with our vendors to verify we’re in good shape elsewhere,” he said.

Netflix, No. 17 in the Internet Retailer Top 500 Guide, was unable to ship DVDs to its 8.4 million customers on Tuesday, Aug. 11, and continued to report significant problems Wednesday and Thursday.

The company reported in a separate blog post that all of its 55 fulfillment centers were back in operation Friday and that the company shipped 3 million DVDs that day, and planned to ship other backlogged items Saturday.

Netflix is giving affected customers a 15% credit on their next bill. The retailer also extended for a week the free trials for new customers whose first DVD was delayed. The credits will lower Netflix third-quarter sales by about $6 million, Wedbush Morgan Securities analyst Michael Pachter says.

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