August 15, 2008, 12:00 AM

Netflix resumes shipping DVDs after three-day disruption

Netflix says it will apply a 15% credit to the bills of customers whose DVDs were delayed by the shipping snafu that largely shut down the company’s shipping operation starting Tuesday. Netflix has not said what caused the problem.

Netflix Inc. said today it had resumed shipping DVDs after an embarrassing and costly three-day disruption. The retailer has yet to reveal the root of the problem.

“This morning, we’re happy to report that all of our shipping centers are resuming normal operations after experiencing three days of significant issues,” the company said today on its blog. “Throughout the night and as we post this update, our distribution centers are processing customer orders and getting them into the mail.”

Netflix, No. 17 in the Internet Retailer Top 500 Guide, was unable to ship DVDs to its 8.4 million customers on Tuesday and continued to report significant problems Wednesday and Thursday. The company alerted customers to the problem with a note at the top of its home page headlined, “IMPORTANT: Your DVD Shipments Have Likely Been Delayed.” The note explained the shipping delay, apologized and promised credits to anyone whose order was postponed.

In the posting this morning, the company said it would automatically apply a 15% credit to the next bill of all affected customers and extend free trials for a week for new customers whose first disc was held up.

Today’s blog posting by the retailer suggested Netflix may not know the cause of the snafu. “Rest assured that we are taking aggressive steps to fully understand the root cause of this week’s problems and safeguard against issues like these in the future,” the post said.

Citigroup analyst Tony Wible, who follows Netflix, wrote in a note yesterday that the company stood to lose between $1.8 million and $3.6 million in revenue, assuming the disruption affected about a third of its customers. And Wible added that a prolonged outage could cost it customers, especially given competitor Blockbuster Inc.’s aggressive online DVD rental and in-store kiosk initiatives. Blockbuster is No. 35 in the Internet Retailer Top 500 Guide.

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