Netflix Puts Out a Fire

Netflix (NAS: NFLX) is acting quickly to crush a sensitive accusation.

Anti-data-cap blog Stop the Cap! revealed that some accounts are being limited to a single stream at a time -- a claim that Netflix is now denying.

In the past, when streaming was included at no additional cost, conventional wisdom dictated that the number of concurrent streams was related directly to how many discs a subscriber could have out. Someone on the three-disc unlimited plan, for example, could have three devices streaming different content at the same time.

Well, Stop the Cap! was tipped off -- and later able to duplicate -- an error message from the streaming service when a second video was launched under the same account.

"There are 1 movies being watched, which is the limit for your membership," reads the error message captured by the site.

"No Netflix member is limited to less than two concurrent streams," Netflix VP of Corporate Communications Steve Swasey wrote to GigaOm this morning. "A few Netflix members have heard differently from us, which is an error that we are correcting."

Well, either one party is lying or there is a technical glitch at play.

Obviously, Netflix can't offer an unlimited amount of simultaneous streams. Folks would just begin sharing single accounts that way. However, this controversy comes at a bad time for Netflix. Now that couch potatoes have a choice in either paying Netflix $7.99 a month or not for streams, making the service even more restrictive would drive away even more subscribers than Netflix is likely to lose this month with the new rates that kick in during the September billing cycle.

There is a real opportunity here for Netflix to expand its money-making potential, but it has also never been this vulnerable. If there was ever a time for Amazon.com (NAS: AMZN) , DISH Network's (NAS: DISH) Blockbuster, or Coinstar's (NAS: CSTR) Redbox to make a move on the Netflix streaming model, this would be it.

We'll see how this plays out. Regardless of how many movies can be watched at the same time, we know that both what Netflix and Stop the Cap! are saying can't be true concurrently.

Will Netflix lose more subscribers than it gains this quarter? Share your thoughts in the comments box below.

At the time thisarticle was published Motley Fool newsletter serviceshave recommended buying shares of Amazon.com and Netflix and buying puts in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.Longtime Fool contributorRick Munarrizhas been a Netflix shareholder and subscriber since 2002. He owns no shares in any of the other stocks in this story and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.