A few weeks ago, the blogosphere was abuzz with commentary on Netflix's impetuous decision to split into two companies: Netflix for streaming TV shows and movies, and Qwikster for home delivery of DVD and Blu-ray movies. Seems that Netflix thought better of it too.
On the company’s blog, CEO Hastings posted this comment: “Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”
Whoa there, Reed. Are you calling your customers slow? They can’t keep up? Really, what a backhanded way to back down. The reality is that your customers - you know, the people paying the bills - spoke up, and you actually listened. In a show of true democracy, the people have spoken and voiced their disgust. Who knew that Facebook and Twitter could change a corporate decision so quickly? Imagine if we could have tweeted our distaste about New Coke back in the 80’s. Instead of taking over 2 months to get our old “Classic” Coke back in business, it could have taken just weeks.
We speculated that Netflix would dump the Qwikster company, putting it out of its misery perhaps years before its time. Now that they’re taking it back into the fold, we can speculate that they’ll just let it die a natural death. . . if it dies at all. Who says that the physical media business will die our completely any time soon? It’s easy to talk about streaming as the way to go, but the reality is that not everyone in America has a high-speed connection.
While the move should remain invisible to customers (who'll continue to use one account and one password to deal with what seems a single seamless company), internally, Netflix will still split. The Qwikster division will be moving to new offices in San Jose. In another quote from Hastings, “It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs. This means no change: one website, one account, one password. . . in other words, no Qwikster.” Sadly, there was a change; that 60% price increase announced last July will still be in effect. Wall Street hasn’t been happy with these developments either. Shares of Netflix have plummeted 58% in the last three months.
Amid the carnage, there might be some good news. All of this hype can’t be bad for Netflix. Honestly, as cool as some folks think the company is, Netflix had probably slipped from the minds of some potential customers, and this recent fiasco has certainly put Netflix back in the headlines. Any PR is good PR, right? Once again, we have to ask: Is Netflix dumb as a rock, or diabolically clever? Or perhaps, they’re just trying to win back the million subscribers they’ve lost since they began monkeying around with a proven success.
Reed Hastings really does reflect the mentality of a lot of "forward-thinking" people. It's faster and cheaper (especially for Netflix) to do without physical media. It's slicker and definitely cooler for hipsters. But the problem is that even people with fast connections don't necessarily have a TV or BluRay player that is new enough to have built-in Wi-Fi streaming capabilities. Try getting someone who isn't technically inclined to even think about getting a wireless router and a streaming media box then hooking it all together. I had to do this for a relative weeks ago, a relative who is actually more representative of your average consumer.
The message I got from Reed was, "Let's try to make the biggest profit by raising prices, getting rid of physical media (DVDs) to save money (another profit-enhancing tactic), and for the consumers who can't adapt (either for lack of technical savvy or lack of their ability to follow trends), let them drop off (since our price hike will compensate for it). He's a CEO, but like a lot of others, not a very smart one. Why get rid of physical media if it's still very profitable?!