Amazon EC2 has a Service Level Agreement (SLA)[1] that guarantees 99.95% uptime in a rolling 365 day period, and provides for service credits. Of course, a huge customer like Netflix can and probably did negotiate their own SLA terms.
I was wondering if they'd pay damages and how would that be calculated.
I don't think free service for a while would cut it with a contingency of this sort. Maybe someone has first-hand information of their contract (or any other big player) and can answer to this publicly.
I don't know the Netflix contract but I've been involved with a few big (telco) SLAs. The penalties are usually calculated with a points-system and a multiplier that raises according to the duration/impact of an outage.
E.g. the first 15 minutes of an outage may cost 1 point per minute, 15-60 minutes 2 points, and so on. You also have multipliers for the severity (partial or full outage, customer impact, affected countries, etc.), time-of-day, and so on.
Collected points may then later be traded in for dollars or a nice lawsuit.
Corporate lawyers love to go nuts on these things, an enterprise SLA can easily span a hundred pages of legalese.
