Netflix cans Qwikster
DVD rentals pulled back into streaming biz
Netflix has canned Qwikster and will be bringing in the spun-off DVD rental operation back into the company's main business.
"We are going to keep Netflix as one place to go for streaming and DVDs," CEO and co-founder Reed Hastings blogged today.
"This means no change: one website, one account, one password… in other words, no Qwikster," he said.
Back in July, Netflix yanked its streaming and DVD businesses apart.
Previously, punters paid $10 a month for both, but from July had to pay 60 per cent more: $16 in total, $8 for streaming and, as a separate fee, $8 for DVDs. The latter would be handled by a new site, Qwikster.
The notion was to give users the choice and to help Netflix drive forward its streaming operation as the DVD side of things slowly falls by the wayside as consumers turn their backs on optical media.
But Netflix's subscribers really liked having both, and the move was widely seen by them and analysts as a major customer relations screw-up. The result: rather a lot of subscription cancellations, which Netflix allows users to do at any time. Netflix's share price took a pummeling too: down from a July peak of $300 to around $120 now.
Of course, while Qwikster will soon be no more, the price rise will stay, though subscribers can at least look forward to the promise that that rate being maintained for some time to come.
"While the July price change was necessary," said Hastings today, "we are now done with price changes."
Price rises were always on the cards: streaming rights are costly to acquire, and the process is far more complex than buying in DVDs, often requiring negotiations with film producers directly.
Buying more streaming content, from an ever broader array of suppliers, is going to cost Netflix more than it can afford from DVD rental fees, which have been subsidising streaming.
DVD costs will fall over time as fewer users take them - so Netflix needs to buy fewer discs - but clearly not enough to cover the rising expensive of licensing movies for streaming.
At least now punters are not being forced to choose between DVDs or streaming - they get both. Will they be willing to pay so much more for a re-integrated service? Hastings and Netflix shareholders must be praying they will. A proper apology for the summer's mess - absent from Hastings' blog post - might go some way to ensure they will. ®
COMMENTS
Business education
Any pointers to a site like groklaw, but with more focus on the purely business side mistakes? I'd love to see analysis of Nokia, HP, Netflix, Borders and the like, with "where they went wrong". Right now it's looking like far too many managers having been sneaking peeks at "Capitalism for Dummies".
They finally got the right idea, the customer didn't like where they were going, it was a burden on the customer, and the customer can just as easily go to someone else for entertainment.
I'm a NetFlix customer. I rent DVDs, not movies on demand. While MOD is the way, some of us simply do not have the bandwidth to get our movies that way. If I did, I would be getting them from Dish or some other means. So, the cost increase didn't effect me in the least. But, making me get my DVDs from some something called " Qwikster", well, I can just as easily go to BlockBuster or one of the Dollar per movie places local to me instead of dumping me to another name.
Hell, if your spinning off the the means by which to get movies, name the MOD Qwikster and leave the DVD portion alone. The person making these decisions is just an idiot and I'm sure by the loss of customers he's staying up late at night regretting his decisions.
RIP NetFlix. There's always something better and if you make it difficult, everyone will notice. Nice job of boosting your competition, he should have bought stock in BlockBuster and RedBox first.
hmmmm....
"Price rises were always on the cards: streaming rights are costly to acquire, and the process is far more complex than buying in DVDs"
Ye-es, but that credits Netflix with too much altruism. Realistically, they want to push people away from the DVD model, as the overheads (postal costs, say 10% losses of discs etc) are much lower with streaming. Of course, while they are encouraging people to stop renting DVDs, they're also encouraging people to stop using Netflix altogether. Mission... accomplished?
I dunno.
I think if they had been sneaking peeks, they wouldn't have done nearly as badly as they have.
