Sunday, September 18, 2011

Netflix News: Netflix Jumps the Shark?

When I first heard buzz this evening that Netflix CEO Reed Hastings had posted an apology at the Netflix website for the way the company abruptly handled implementing a 60% price increase, I was pleasantly surprised.

Netflix has been bleeding customers in the weeks since the announcement, as a significant number of subscribers not only declined to pay the rate hike to maintain both DVDs and streaming, they refused to choose one service over the other. Instead they simply left.

I wondered if Hastings might even announce a new deal for subscribers to both services, perhaps lowering the monthly fee by a dollar or two.

What I found in Hastings' letter was something quite different. In fact, the further I read, the more I started to wonder if Netflix had fallen prey to hackers, because Hastings' letter felt like a parody at the Onion.

After the reader gets past Hastings' mea culpa and confession that he "slid into arrogance," he announces what comes next, and it's a doozy: Netflix is splitting into two companies, and the DVD side of the business will now be called...wait for it...Qwikster. Seriously? I mean, that name just says "Movies," now doesn't it? And such positive Napster-like connotations (not!).

Hastings: "We chose the name Qwikster because it refers to quick delivery. We will keep the name 'Netflix' for streaming."

I just can't believe this is for real.

Want to see at a glance if a title is available on disc vs. streaming? That information is integrated no more. Instead, even if you subscribe to both services, it will require a visit to two separate sites. In a few weeks your DVD queue will be moving to Separate credit card bills, too.

What was once a smoothly operating high-tech system, with all the necessary information available at a few clicks of the keyboard, is now sliding backwards towards the analog era.

The separate billing is sure going to make the plans of some subscribers to switch back and forth from DVDs to streaming on a monthly basis a little more complicated...but maybe that's by design.

My oldest daughter is so appalled at the idea of her beloved red envelopes turning into "Qwikster" envelopes that she's talking about cancelling. And she's one of their most loyal subscribers. My husband, on the other hand, thinks they're going to sell off the DVD business.

The bottom line is none of this inspires consumer confidence. Indeed, Adam Jahnke of the Digital Bits Tweeted me "That's just about the strangest mea-culpa solution to a problem I've ever seen." Indeed. He later wrote "Anybody else get the feeling we're watching Netflix implode in slow motion?"

I can't think this is going to go over well. It will certainly be interesting to read reactions this coming week -- and then to see how this latest move impacts consumer choices.

I've mentioned here previously that I was actually in the studio audience for the filming of the infamous HAPPY DAYS episode where Fonzie jumped the shark (although to be completely clear, the shark jumping itself was filmed outdoors at another time). Tonight, I think I may have witnessed another "jump the shark" moment. And this time the experience is not nearly as much fun. Just the opposite.

This feels like a death knell for Netflix. The part of the business that formed the foundation of the company -- the red envelopes in the mail -- no longer exists as Netflix. And the future's looking very uncertain.

Monday Morning Update: A few additional thoughts in the cold light of day: the genius of Netflix has always been offering its customers products they want in an ultra-convenient manner, whether by mail or streaming.

Because of the convenience and years of good will, over recent months customers have tolerated decreased DVD availability and the reduction of services such as DVD reviews posted by reviewer name. Customers also overlooked titles unavailable via either disc or streaming because of the way the two services complemented each other; what isn't available via one service can be seen via the other.

Now, suddenly, customers are being clearly told that our convenience no longer matters; what matters is that customers adjust to the company's needs. Some might say this new attitude is necessary for the company's long-term survival (or should I say companies). Yet, trying to survive as technology evolves and the postal service declines, Netflix is undoing the very features that made it so loved by busy movie fans everywhere.

Suddenly if we rate a movie in the instant queue, it will have no impact on our recommendations for the DVD queue. We'll now need to search two databases for films, instead of one. And the list of inconveniences goes on. This is not the Netflix I've known and loved for the last four and a half years.

Beyond that, it's very clear -- if it wasn't already when Netflix adjusted its pricing -- that Netflix wants out of the DVD business. Many companies treat their best customers appreciatively by offering discounts for buying multiple services or products. But Netflix's best customers, those who continue to subscribe to both discs and streaming, are being told they're not really wanted, with disc customers treated as an inconvenience to be passed off to an entirely different company.

And it must be added that the name Qwikster is so ghastly, it's almost as if Netflix is thumbing its nose at its longtime subscriber base, attempting to drive DVD subscribers away by giving the DVD service a trashy, unappealing name.

I thought Ryan Lawler of Gigaom had very good analysis last week about the impact of the pricing changes. Here's his take on Qwikster and the future.

Among Lawler's perceptive comments: "But what happens when you create a separate website, with separate queue management and a separate billing mechanism? If you’re Netflix, you lose the power of the existing customer relationship and much of the goodwill that you’ve built up over the last several years. Regardless of the miscues in handling the price change and the separation of the DVD business, the Netflix brand still carries tremendous value to a number of existing and potential new subscribers. You also lose the power of the bundle..."

There's more analysis from A.V. Club, Engadget, and Beta News.

Comments are coming in fast and furious at Hacking Netflix and the official Netflix blog, which at this hour has logged nearly 12,000 comments since late last night.

Update: Adam Jahnke has filed a post at The Morton Report.

Comments continue to pour in at Netflix, which has now logged over 14,000 comments in a matter of hours.

Chris Taylor asks in an excellent column if this is "The worst product launch since New Coke?" It's definitely way up there, and the stealth midnight rollout tends to indicate to me Netflix knows it and doesn't care. Learning why Netflix doesn't care will answer a lot of questions.

Chris has some excellent fresh analysis about problems with the rollout, including breaking trust with subscribers.

Wednesday Update: Please visit my new post Netflix News: A Qwikster Roundup.


Blogger Rick Moore said...

I've never used Netflix, mainly because I'm not that big a movie buff and I found their pop-up ads on websites very annoying.

My son, however, just subscribed to their streaming service which he uses via his Xbox in his dorm room. He loves it, but he's also getting the good end of this new pricing schedule. For the real movie buff...or movie blogger...I imagine this whole thing is a real pain.

9:56 AM  
Blogger Cliff Aliperti said...

So our last announcement didn't quite kill our DVD by mail service, we figured we'd go all out, make it tougher to access and give it a name that turns people off.

Seriously, I don't know how this is all going to be implemented, but reading the letter my first thought was that they were breaking them apart in order to make it a little more of a pain for people to switch between services month to month.

12:03 PM  
Blogger Sammy Finkelman said...

The explanation for this, I understand, is that Netflix intends to sell the old DVD business. (They may expect it to go the way of BBSs, record albums cassette tapes and Western Electric telephones, but think a greater fool will buy it.

It's all completely stupid. They would not even be gettinbg the best price.

2:02 PM  
Blogger Sammy Finkelman said...

It's not only government which is mismanaged, but if a business is mismanaged, there may be competition, and it doesn't keep on doinbg what it's doing. It shuts down.

We do get the occasional business destroyed by mismanagement, often after a merger.

2:04 PM  
Blogger DKoren said...

Noooo! How completely and utterly lame, particularly coming after the price hike, which I was prepared to weather! But this? Why??? Quikster? Really? *sighs* I guess I need to start looking for alternatives. What a shame they're ruining what has been a good thing for so many years.

4:03 PM  
Blogger Laura said...

I can't believe they chose a name that hard to spell, for one's a real bummer!

Best wishes,

4:17 PM  

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