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.

About the author

Andrew Villeneuve is the founder and executive director of the Northwest Progressive Institute, as well as the founder of NPI's sibling, the Northwest Progressive Foundation. He has worked to advance progressive causes for over two decades as a strategist, speaker, author, and organizer. Andrew is also a cybersecurity expert, a veteran facilitator, a delegate to the Washington State Democratic Central Committee, and a member of the Climate Reality Leadership Corps.

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

  1. One thing is cer­tain about Net­flix: When the Chief Exec­u­tive Offi­cer put out that note attack­ing the short-sell­ers, it was a major red flag.

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