Feeds

Netflix: How to completely screw up

DVDs-by-email success story is losing customers...

The Power of One Infographic

As recently as June, Netflix looked like one of the biggest consumer success stories in digital media. The company was already synonymous with DVDs-by-email, an idea imitated worldwide, and was bundling on-demand TV and movie streaming at an incredibly low price. By May, Netflix traffic had overtaken Bittorrent volumes in the USA. accounting for a quarter of US IP packets. After years of prattle, somebody had persuaded the mass market to pay for video on demand over the internet.

Netflix even announced a move into financing original drama – buying the rights to the UK political thriller House of Cards.

Then Netflix decided to unbundle its bundle – hiking prices 60 per cent. What previously cost $9.99 (for most new users this was presented as $7.99 for streaming plus $2 for the DVD option) now cost $16. Compared to physically renting discs from Blockbuster this is still a bargain, and Netflix's catalog is still far superior to the chainstore. but the size of the price hike stunned customers. Netflix's growth has flattened, and the company admitted last week that it was revising subscriber numbers downwards. Shares have fallen 45 per cent.

But it's the breaking of the bundle that is hard to fathom. Netflix not only said it would be presenting its customers with two plans, it would separate the two businesses. This weekend CEO Reed Hastings issued a grovelling apology.

"We lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology," he wrote.

But Hastings also announced that the strategy would continue unchanged. The DVD business will be rebranded with a forgettable new name: Qwikster. Netflix and Qwikster sites aren't integrated, so if you can't find a movie to watch on streaming you have to search all over again for the DVD. If you rate a DVD, the rating will register on Qwikster, but not Netflix. And vice versa.

While it succeeds in signalling to the investors Netflix determination to make streaming its core business, the consequences of confusing and alienating customers may be high. What made Netflix feel attractive was price and choice - but also the bundle. If felt like a bargain. Now it feels like a curse.

Hollywood's ambitious idea – and Netflix is a supporter and member – is to sell licences rather than one-time admission fees to a stream, or plastic discs. For an UltraViolet member, it doesn't really matter. You'll buy a Blu-Ray disc and never take it out of its box – watching it through UV-compatible TVs.

It's potentially a huge, and positive change in the way we get stuff. But it's utterly mystifying to see NetFlix getting ready for this by irritating its customers, and making them painfully aware of the annoyances of digital media.

Is there some masterplan here we've missed? ®

Mobile application security vulnerability report

More from The Register

next story
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
Want to beat Verizon's slow Netflix? Get a VPN
Exec finds stream speed climbs when smuggled out
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
US freemium mobile network eyes up Europe
FreedomPop touts 'free' calls, texts and data
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Mobile application security vulnerability report
The alarming realities regarding the sheer number of applications vulnerable to attack, and the most common and easily addressable vulnerability errors.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.