Netflix announces its DVDs-by-mail business will now be called “Qwikster”

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.