Netflix / 2 = Netflix + Qwikster

September 18, 2011

Very interesting development at Netflix: CEO Reed Hastings just announced Netflix is separating into two businesses – Netflix will henceforth contain just the streaming video service, and the DVD-by-mail business will take on the new name “Qwikster.”

Also interesting is the general apologetic tone of Hastings’ blog post, starting with the decidedly un-CEO-like words “I messed up. I owe everyone an explanation,” and explaining the sour reaction to the fare hikes as miscommunication about where Netflix is fast heading in the future.

My cynical reaction: gee, a 50% stock fall has a way of instilling some humility in the best execs.

But no, there are two smart moves here: 1) get customers used to streaming and DVDs as two completely separate businesses with the former being the future and the latter the past – and you shouldn’t expect to get both for the same price anymore, and 2) extending an olive branch to subscribers to repair their previously stellar, now tarnished customer service reputation.

I give Netflix credit for those two moves. But I’m still waiting on the answer to the whole pay-more-for-less situation – meaning what’s going on with the loss of content (Starz, Sony) in the streaming service – I mean, “Netflix.” There better be some big content deals announced in the near future.

Comments

  1. Rob O. says:

    They could’ve eased customers into this split and it would’ve been much less of a big deal. But on the rebound after losing 40% of the stock value from their mishandled, needless price hike, this rightly comes off as a desperate move by short-sighted, greedy, leaders whose faulty management and slap-in-the-face customer service have just cost them the keys to the kingdom.

    They were embedded in, like, well… everything but my toaster and they blew that phenomenal – and utterly un-retainable – market lead.

    Consumer karma in action. Make room on the loser’s bench, TiVo & Palm!

    • Note I just got the same blog post in my inbox this morning, addressed personally to me. Guess we’ll see if this whole thing has any effect on subscriber retention or if, as you say, it’s interpreted as too-little-too-late damage control.

    • cwclifford says:

      Waaaaaaaaaaaaah! Netflix, why oh why did you do this to us?!??!?! Really?

      Jason Alexander puts things into perspective: http://www.funnyordie.com/videos/15be7bfd8f/netflix-relief-fund-with-jason-alexander

      I give Netflix the benefit of the doubt and appreciate that they don’t have to explain to its pampered base the “needless” price hike or restructuring of its product offerings.

      Now, I’m gonna write to Trader Joes about how mad I am that they don’t carry those 60% cocoa wedges anymore!

      • file under first world problems I guess. yet, I’m still annoyed!

        I liked paying less than $10 a month to get unlimited movies and the luxury of having The Kings Speech DVD sitting on my desk for weeks on end.

        Now with the price increases I have to forgo the Trader Joe’s pink Himalayan sea salt and just get the crap from the Northern California coast.