The online DVD-rental pioneer said Thursday that its second-quarter profit rose 22 percent on revenue of $408.5 million. It earned $32.4 million, or 54 cents a share, easily surpassing Wall Street’s expectations of 50 cents per share.

Netflix’s (NFLX) subscriber base finished the quarter at 10.6 million, up 26 percent year-over-year and at the high end of the company’s own forecasts.

“We continued to execute very well in the second quarter and are on track to deliver a record 2009,” Netflix CEO Reed Hastings said in a statement. “As our subscriber base and disc shipments continue to expand, and as we offer more opportunities to watch instantly via the Internet, we believe we are striking the right balance between growth, investment and earnings.”

If inking a video-on-demand deal with a declining DVR pioneer is one of them… well, that’s not much of a plan, is it? But when your financial statements look like Blockbuster’s, I suppose you cling to life however you can (Blockbuster shares have fallen about 80 percent over the last 12 months). And so, beginning in the second half of 2009, the company will make its Blockbuster On Demand service available to TiVo subscribers. The agreement also calls for Blockbuster’s brick-and-mortar stores to sell TiVo DVRs. “We are excited to be teaming with TiVo, the company that created the DVR, to make Blockbuster’s entertainment content readily available to their millions of subscribers,” said Blockbuster CEO Jim Keyes. “Ultimately, our vision is to work with TiVo so that their subscribers can access movies not only through our On Demand service but also from our stores and through our by-mail service as well.”

For Blockbuster (BBI), the deal is a means of capitalizing on the rising popularity of on-demand video. But to really do that effectively, the company needs alliances with more electronics manufacturers than just TiVo (TIVO). After all, the DVR pioneer isn’t in the greatest of health these days. And Netflix (NLFX) already delivers online video to TiVo and PCs, Macs, Xbox 360s, and selected LG and Samsung Blu-ray players as well. Clearly, Blockbuster is as late to on-demand as it was to DVD-by-mail.

I’d imagine so, if not more. The outage is an ugly blow to the Netflix (NFLX) brand and to its bottom line as well. Citi analyst Tony Wible estimates that the company is losing roughly $1.8 million to $3.6 million in revenue a day. And the reimbursement credits it’s promised to affected subscribers are certain to prove costly as well. Said Wible, “Assuming only one-third [of the company's subscriber base] is affected for one-to-two days, [Netflix] stands to forfeit nearly $1.8 million to $3.6 million in revenues (using a $13.36 average revenue per user), or roughly $0.007 to $0.015 in earnings per share.”

A costly misstep given Netflix’s Thursday afternoon shipping update:

We hope to bring the rest of our facilities back online overnight and be shipping from all of our distribution centers on Friday. But the issues we’ve faced over the last several days have been significant and there’s no guarantee at this point that our shipping operations will be fully restored by tomorrow.”

And with Circuit City (CC) refusing to allow the video-rental company access to its books until Blockbuster proves it can actually afford the acquisition, it would seem hostile is the only way to go. “The heart of the matter is that we still need further facts,” Keyes told The Wall Street Journal, referring to Blockbuster’s failure to gain access to Circuit City’s books. “With those facts, we can choose whether to proceed or get back to our continued success.”

Today brings news of the first lawsuit over the service and, oddly enough, it wasn’t filed against Facebook. It was filed against Blockbuster. Facebook member Cathryn Elaine Harris is suing the video chain Blockbuster (BBI) for its participation in the Beacon program. Her complaint alleges that Blockbuster violated the federal Videotape Privacy Protection Act when it shared information about her movie rentals and sales with Facebook without her consent. It seeks class action status and $2,500 for each violation of the 1988 statute.

In a Feb. 17 letter to Circuit City CEO Philip Schoonover, Blockbuster (BBI) offered to pay more than $1 billion for the chain. But, to date, Circuit City (CC) hasn’t fulfilled a request for due diligence necessary to make the bid definitive.

Why? In a conference call today, Blockbuster chief exec Jim Keyes described the offer as “simply too attractive to ignore.” But it seems Circuit City also thinks the offer might be too attractive for Blockbuster to finance. “… To date Blockbuster has been unable to satisfy Circuit City and its advisers that Blockbuster’s proposal could be financed,” the electronics retailer said in a statement. “In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price.”

Well, yes, there is that. And, of course, there are other issues as well. Like what, exactly, are the synergies between a foundering movie rental chain and a foundering electronics retailer–aside from the fact that they’re both, you know, foundering? If it’s Blockbuster rental kiosks in Circuit City stores, the alliance would seem doomed to failure. Wait. It is Blockbuster rental kiosks in Circuit City stores?

To be fair, Keyes says digital content is important too, and he seems convinced that Circuit City will provide Blockbuster with the infrastructure it needs to distribute video to TVs and mobile devices. “What this combination provides is the ultimate distribution channel for [digital] content,” he said this morning. “It’s not necessarily downloading content to the PC that will ultimately capture the consumer’s imagination. It’s the opportunity to get that content on your TV and your mobile device that is a game-changing opportunity.”

A game-changing opportunity for Apple (AAPL), maybe. But for a foundering, outdated video-rental outfit?

With the Apple TV Take Two, we think we have it right this time. I think we have a great product.”

–Apple Chief Operating Officer Tim Cook, Jan. 23

Promises, promises, promises … When Apple (AAPL) debuted iTunes Movie Rentals this past January, the company pledged to offer “over 1,000 titles by the end of February, including over 100 titles in stunning high-definition video with 5.1 Dolby Digital surround sound.” Well, today’s March 4 and, as best I can tell, Apple hasn’t kept its promise. Browse iTunes this morning with the software’s “Power Search,” and you’ll find just 411 films for rent–91 of them available in high definition. That’s 589 short of the promised 1,000–a discrepancy of nearly 60%.

Seems Apple may not have Apple TV quite right yet after all–the Hollywood licensing part of it, anyway.

UPDATE: At the Apple shareholder meeting yesterday, CEO Steve Jobs confirmed the discrepancy, saying the company’s goal of 1,000 rental titles on iTunes was short by around 600.