Earlier quoted context omitted.
The gear isn't the problem: the dependency on a single data center is the problem. It requires a lot of software engineering effort to maintain a service that works when a data center suddenly goes away. To be fault-tolerant, Netflix has to do this engineering regardless of whether or not they own the servers. But if they use Amazon, they don't have to actually fix the servers when they break, freeing up engineering…
You're blowing this a little out of proportion. Replicating a few petabytes of static videos is not rocket science nor cost prohibitive for a company the size of Netflix. Nor is engineering a system that can withstand a datacenter outage. Especially one as trivial as Netflix which is largely read-only. Thousands of systems of higher complexity are engineered to that standard, many of them are much larger than netflix…
To me, this makes perfect sense. Google products are almost always designed to tolerate data center failures, and so you don't hear about data center failures affecting Google products. On the other hand, Joe's Random EC2 app is not designed for the same high availability, and so it's down whenever Amazon is. (This, incidentally, is a reasonable trade-off for most people. A few hours of downtime a year is often much cheaper than paying engineers to ensure that those few hours are five minutes or less.)
So the flaw here is not Amazon. The flaw is relying on one cluster of computers to handle all your computing needs. Amazon could make their product high-replication by default, but it would be so slow and expensive that nobody would use it. So the task is kicked to the application developers instead of the platform developers, and you should consider holding them responsible for the downtime.
(Incidentally, you can compare EC2 to AppEngine here. How often is your favorite AppEngine app down? Less than your favorite EC2 app, probably, because AppEngine pretty much forces the high-replication datastore, even though the semantics are strange for developers used to traditional single-homed or master/slave architectures. And if you read the AppEngine discussion groups, you'll see that users raise most of the concerns that I describe here: "Why is AppEngine more expensive than EC2?" "Why is AppEgnine slower than EC2?", and so on.)
Now, why does Netflix's video serving go down when an EC2 cell does? I have absolutely no idea. I do know that they do more than just stream bytes, though; they have to authenticate users, track what they're watching, and apply DRM to the streams. So there's that.
If you want fault-tolerant video distribution, look no further than the Pirate Bay. Although their servers are frequently seized, the video bits keep flowing. That's by design, not by accident.