Two months after it announced that it was separating DVD rentals and streaming into separate plans (and automatically raising prices for customers who did not act to cancel one or the other), Netflix CEO Reed Hastings has finally admitted the company did a poor job handling the announcement.
In a blog post and in a email sent out to subscribers, Hastings tried to provide some context for the company’s decision to raise prices and separate plans, explaining the company is trying to redefine itself around what it does (provide home entertainment) as opposed to being defined by how it does that (DVDs vs. streaming). In Hastings’ words:
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.
Apparently Hastings and the Netflix board don’t think each business can “grow and operate independently” if they share the same name.
So they’re renaming the DVD rental business “Qwikster” – which just sounds to me like a cheesy name picked out by a conceited marketing consultant. Qwikster is getting its own website, which will presumably launch within a few weeks. The streaming business, meanwhile, will still be called Netflix.
If you ask me, turning the DVD rental side of Netflix into “Qwikster” makes about as much sense as turning the streaming side into “Streamster”.
Hastings’ announcement is just further proof that he and his executives don’t understand their own customers. Launching a new brand isn’t going to mollify upset Netflix customers (I know I’m still going to call the DVD rental service Netflix, no matter what domain name they use or what the envelopes say).
The reason Netflix customers were upset to begin with is because management forced everybody to either cancel part of their subscription – or be automatically subjected to a sixty percent price increase beginning September 1st, 2011.
It used to be that streaming was a free add-on to DVD plans. A year or two ago, Netflix opted to sell streaming service as the base package and make DVD rentals an add-on. Now, there are no add-ons at all.
There’s streaming and there’s DVD rentals. You can subscribe to one or the other, or both, but there’s no discount if you subscribe to both (streaming costs $7.99 a month, and the cheapest DVD plan is $7.99 a month).
What Hastings should have done is announced a credit for customers who accepted the price increase and encouraged the customers who did cancel part of their subscription to come back and bundle at a lower rate. If Netflix offered even a small bundling discount it would win back some customers.
What about a streaming + DVD rental package for $12.99? That’s about $3 more than what Neflix was charging before the price increase, and $3 less than what it costs to subscribe to both the streaming and the base DVD plan now.
Hastings could have soothed a lot of upset people by doing something along the lines of what I just suggested. But instead, he’s just announced a pointless cosmetic change that is probably just going to alienate more customers.
POSTSCRIPT: The comments I’ve seen on Netflix’s Facebook page reinforce my suspicion that this name change isn’t being received very well.
Doug Beall writes:
You have got to be kidding? Whoever thought up this idea needs to be canned…and those who approved it! Already canceled DVD service but lack of streaming selection isn’t worth $8 either. Canceled both now and go[ing] with Redbox at $1 ea, coming out ahead for me.
Bethany Hanan writes:
I wasn’t thinking of canceling the DVD plan, but now if I can’t integrate the two queues… I might just cancel the DVD service and just rent movies as-needed from iTunes or Amazon.
Greg Edmonds writes:
I am a recently new member (several months) and was likely to subscribe to the DVD by mail portion after starting with streaming only. I’ve ditched cable tv service so this was to be my only source of video entertainment. Thanks a lot, Netflix. I certainly will NOT be subscribing to the DVDs…I’ll just go to RedBox instead.
And finally, Samuel Todd says what I said, but in fewer words: “Netflix – if it ain’t broke don’t fix it. Just keep what you got going!”
POSTSCRIPT, KEN, 9:17 PM: Let’s be clear that now Netflix/Qwikster customers will have to log in to two different websites, using two separate logins (though we can probably assume that the user name and password can be the same for both sites) and face two separate charges on their credit cards. Not only did Reed Hastings wait too long to address the problems created two months ago, but now his company is making it more difficult for customers to get what they want. You don’t need a business degree to know that if you hassle your customers then they go elsewhere.
Echoing Andrew’s comments about the new name, Qwikster is such a poorly thought-out name it evokes images, for children of the 70′s and 80′s, of a bunny that drank a certain beverage by Nestle, or that pre-MySpace social networking site that never really took off called Friendster. It’s a terrible name and bound to fail.
Clearly, streaming content is the future. It’s not necessarily what Netflix is doing, but how it is doing it. They already shot themselves in the foot once, and now Reed Hastings shoots the other foot. In the case of the gang that can’t shoot straight, the best thing you can do is just get out of the way. As a Netflix customer I’ll definitely be looking at other options.