There was a brief period where Netflix worked so well that it was like magic. For a small fee you could consume as many movies as you wanted from a gigantic library, through DVDs sent back and forth in the mail between you and the service. Then the company launched their Watch Instantly service, and suddenly you could watch a portion of their library even more easily by streaming them right from the website. At first that was a free option, built right into your subscription, but eventually the pricing structures switched around so that you were paying a bit for both.
Not a problem, Netflix was still a near magical service that allowed film enthusiasts, even those who lived in the country and not in cultural epicenters, greater access to more movies than they’ve ever had in their lives. Eventually use of Watch Instantly exploded, it was a hugely popular service that had lower overhead costs than shipping DVDs through mail, Netflix seemed to have two huge cash cows in their hands.
But that’s where the problems started.
In recent times Netflix has stumbled a bit in figuring out how to handle being a streaming business and a movie by mail business at the same time. Watch Instantly is hugely popular, and offers the highest profit margin for the company. But getting the streaming rights to films is expensive, and a lot of work, and the Watch Instantly service hasn’t been able to come close to matching the size of the DVD library. Clearly Netflix sees that their future is in Streaming, and they would like to ditch the less profitable mail service as soon as possible, but they just haven’t been able to get a large enough streaming catalogue to make customers forget how much they love those little red envelopes.
To wean customers off of their DVD addiction they first offered a streaming-only package, making that the centerpiece of the service and keeping additional DVDs by mail as an add-on for a couple bucks a month. This didn’t change the price of a Netflix subscription by much and kept the service they were providing mostly the same, so people were okay with it. But then, two months ago, Netflix made a decision that has had huge repercussions for them. They separated their Streaming and DVD services entirely, and started charging a full price for each of them. This meant that customers who use both services were getting their Netflix bills almost doubled overnight. In addition to that, they made it harder to search for physical copies of movies and manage your DVD queue from their various mobile, Blu-ray player, and video game system apps.
Despite the fact that Netflix was still the cheapest, easiest way to consume a ton of movies every month, they had raised prices and cut services at the same time, and people didn’t like it. Since the announcement they’ve lost a million or so subscribers and their stock price has taken a huge hit. Something needed to be done.
In an email sent out to subscribers, and in a post on the official Netflix blog, Netflix CEO Reed Hastings has issued an apology about how he handled the service split and a look at how Netflix is going to improve things for their customers going forward. Hastings has a plan so drastic that it will probably take a lot of people by surprise. He’s going one step further in separating the streaming services and DVD services by not just making them separate subscriptions, they’re now going to be separate companies. The Watch Instantly feature is now just Netflix, while the DVD by mail service will be called Qwikster. Hastings says that this will allow them to better manage each service. He has named longtime Netflix employee Andy Rendich the new CEO of Qwikster, and he says that with the new company, “We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.” Already improvements to the DVD by mail service have begun under the new management, as Hastings also announced that Qwikster will soon be shipping video games as well as movies. Sounds Great! This move should wrap everything up in a nice little package.
Except, wait… how does that solve any of the complaints customers had about the services getting split and the prices getting hiked? It doesn’t at all.
Hastings’s talk about Qwikster being a “great option” is just corporate speak for what’s really going on. What they’re really doing is ghettoizing their DVD by mail service into its own company so that they can slowly focus on it less and eventually shut it down completely without the failure affecting the price of the Netflix stock too greatly. Don’t believe me that they plan on killing their DVD by mail baby? Think that they really want to keep shipping DVDs “as long as possible”? Well, already they’ve begun further cutting services for the DVD subscriptions. Not only will former Netflix, current Qwikster customers have to maintain a separate account on a separate website, but also the Netflix and Qwikster services will no longer work together to make your experience easier. All of those ratings that you’ve done on Netflix? They’ll be gone on Qwikster. That handy service that lets you know when something in your DVD queue is available to Watch Instantly? That no longer exists either. Have fun bouncing back and forth between the two sites to see what’s available where.
Once again Netflix is making it harder to get DVDs through the mail from their company, so I would say that is a pretty clear indication that “Qwikster” is nothing more than a corporate spin on the announcement that the killing off of the DVD service has begun. They didn’t even bother to pick a name for the new company that had an open Twitter account. Currently it’s a pot smoking Elmo. I was one of the people saying that Netflix was still a great deal after the price hike, but this new “apology” has definitely given me indication enough that I need to start looking elsewhere for my movie watching needs. How about you? Do we have any future Qwikster customers in our ranks?