Since my daughter started preschool, we watch much less TV. In addition to her actual time in school, she is more independent now and would rather do crafts and activities than watch television. However, we do watch some shows from time to time, especially when Daddy needs to get some quick chores done. Regardless, we have used Netflix much in the past, and have come to regard the streaming option with some affection. But now we have grown concerned about our old friend. Netlflix has made some questionable business decisions, and according to reports has lost about one million subscribers recently. It is always sad when you see the writing on the wall, and realize when a “go-to” resource will no longer be there when you need it someday.
Oddly enough, this morning we received an email from Reed Hastings, CEO and Co-Founder of Netflix. It is titled, “An Explanation and Some Reflections.” Obviously this went out to their entire subscriber base. The first line reads, “I messed up. I owe you an explanation.” It kind of just goes downhill from there. Hastings basically apologizes for how they handled their recent decision to divide out the DVD and streaming services, while raising prices without warning customers beforehand. But it’s one of those “non-apology” apologies. Like when people say, “Oh, I’m sorry if you’re feelings were hurt…I’m sorry you’re that sensitive.”
The email, which is also available in more detail on their company blog, does contain news about changes coming in the very near future. They will be changing the DVD service to a whole new brand, called Qwikster. So those who have both services will now see two separate charges on their credit card statements. They are, of course, keeping the Blue-ray option. However, now they will be adding a new video game upgrade option, offering game rentals for the PlayStation 3, Xbox 360 and the Wii. Subscribers will have to use the completely separate Qwikster website for this and their DVD queue, which will be available soon.
This looks like “Bad Idea Jeans.” It just reminds me of that scene from Arrested Development, when Gob Bluth took over the company and introduced his new plan for the business.
Michael: Do you have a business model?
Gob: I’m so happy that you asked me that, Michael. Because I just happen to have a business model…right here. [CUE MUSIC] Meet Starla! The new Bluth Company business model, for our Phase Two campaign!”
Adding video games is a good idea in theory, but in order to compete against GameFly the option will need to be cheaper and have many more copies available of all the newest games. One wonders why didn’t they just invest all that capital into getting better movie licenses and adding more newer titles to the streaming option.
“The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service…So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”
It’s disconcerting when Hastings says the streaming service does not need “to be compatible” with the DVD side, since what everyone wants is to have all of those movies available for streaming. He did also say, “There are no pricing changes (we’re done with that!).” But we all know this can’t last. If they don’t increase streaming choices, more subscribers will leave. If Netflix does get better (but more expensive) movie licenses, the service will have to cost more. It’s basic math. To be fair, the blog does state, “The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further.” However, there are no details about what this additional content will be. It doesn’t help that according to reports, they will soon be losing everything from Starz, which is a lot.
Netflix needs to understand DVDs are going the way of the dinosaur. The whole idea of physically mailing a DVD is becoming archaic, fast. Besides, you can now stream an HD movie over broadband, and the quality is better than DVD. Well, that is if you can find a movie you want to watch.
Reed Hastings ends his video apology (available on The Netflix Blog) with the following:
“To wrap up, I just want to say how sorry I am…”
We’re sorry too, Reed. We’re sorry, too.
Source: The Netflix Blog
jeffsilvey.com 
Our DVD player broke over the summer and this is one of the reasons I haven’t fixed or replaced it. It just seems that DVDs are getting obsolete. But then again, my kids don’t really watch movies other ways either.
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Sounds like an example of a company trying to do too much: that is, compete in too many markets, and consequently suffering in all of them. Entering the streaming market was of course necessary as apparently that is the way of the future. Getting into gaming seems unnecessary and perhaps unprofitable as they’ll have to do it better and cheaper then competitors in order for it to work, much as you suggest. However, I’m unclear as to what the actual problem is as I haven’t used Netflix since 2007, well before the advent of a streaming market… Well, a legitimate streaming market, that is. You allude to some of the issues but a brief summary would be nice for those of us living in caves and probably for others too, just to be sure we’re all on the same page.
I used Netflix for a few years and greatly enjoyed the service. For one, suddenly the mailbox, the actual physical one outside one’s residence, became interesting again. I enjoyed access to titles one could never hope to find in a video store, in particular foreign films, 60s and 70s cinema and so on. One could think of a film and two days later be watching it. Of course, streaming accelerates this process exponentially but I feel something is also lost. The ‘queue’, after all, was a unique phenomenon, especially if it was a long one. Eventually, DVDs would arrive that I’d forgotten I’d ordered, some I wondered why I’d ordered. Instantaneous gratification removes all reflection, all speculation as to past frames of mind, not to mention ones anticipation, or perhaps apprehension, of a trip down to the mailbox.
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True. But I want it now!! Seriously, everything comes Netflix streaming enabled now: TVs, set top boxes, game consoles: both the PS3 and 360 can stream movies in HD.
Basically, here’s the deal: before Netflix divided out the two services, everyone had the option of both streaming and DVDs. They had one integrated website for it all. Now they will have two completely separate sites. So, if I did have both services, I would have to log in to Qwikster to see if they have a particular DVD. Then if I want to see if it is available for streaming, I would have to log in to a separate website to check. The word on the street is “that’s a pain.” Look, Netflix purposely did things (admittedly) to steer people to the streaming service only. That’s way they divided out the two services to begin with. They stated as much at the time. But they have done nothing to beef up the streaming movie options. It’s pretty abysmal right now. Also, for the kid, it’s extremely useful to be able to change viewing habits on the fly, since kids always want something different from day to day.
Most people are just upset that they basically raised prices 60% or more (if you kept both services) in the middle of such a poor economy.
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And, oh yeah, being forced to subscribe to a service called ‘Qwickster’ would piss me off.
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Seriously. And it sounds like Friendster, not a smart move. Somebody wrote that they should have just called it Qwikflix, which would have made more sense and would have kept with the overall brand.
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I could live with Qwikflix and you’re right: Qwikster seems derivative of Napster, Friendster and a host of other internet dodos. After reading this, I saw an article on Yahoo which spelled out the issue quite plainly but thanks for your follow-up synopsis. I see a trend here of large internet based companies arbitrarily making decisions without consulting or warning their customers. We just saw the very same happen on Facebook this week. These companies seem to think their customers are captives but as you’ve amply pointed out on numerous occasions (your piece on cutting off cable service comes to mind), this is hardly the case. Much as Netflix killed off the video rental store, streaming video may well kill off Netflix and its own arrogance may well perform the coup de gras.
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It’s like that scene in the movie “The Social Network,” and it’s in the book by Ben Mezrich as well: originally, Zuckerberg and crew tried to hard to keep the servers going, because they knew that if anything happened, people would just jump to something else. People are fickle and have short attention spans. If you build a momentum, you have to keep it going, or risk losing it forever. That’s why he was so upset when Eduardo did his shenanigans. And that must have played a big part if Eduardo’s getting ousted.
There’s too much going on in this day and age. If people/customers don’t get what they want, they simply move on to the next thing. And there will always be a next thing. Just like Pandora. Now we have competitors to choose from, with Spotify- and now there’s this new thing called iHeartRadio. There’s always something new around the corner waiting to take away your market share if you slip up.
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Well with Facebook, the user is not the customer, they are the product. As for Netflix, I will miss the blu-ray discs (Missy is right, DVD’s have been obsolete for years) but I will be just fine. Less stuff = better in the new world order…
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Yes, less is better. I think we’re all going to be learning that (some the hard way) in the coming days. I could do without Netflix, and PlayStation if I had to. That’s a start.
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Ha, ha, Chad! The user is the product. I guess you are correct. I only wish the folks at FB had more respect for their product.
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Ha. There’s a Yakov Smirnoff joke in there somewhere.
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As always.
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