It’s hard to find a company that seems in as muchlf-inflicted chaos as Netflix — one of my own personal favorite companies. In recent months it seemingly has not just shot itself in the foot but bit itself in the lower proximities. Is that an exaggeration? No. Just look at this story about a massive corporate about face:
Netflix Inc. is abandoning its widely panned decision to separate its DVD-by-mail and Internet streaming services because it would make them more difficult to use.
Subscribers will be able to use both services under one account and one password, CEO Reed Hastings said Monday in a blog post.
Investors saw the reversal as an Oscar-worthy move, sending the stock up $11.24, or 9.6 percent, to $128.45 in premarket trading.
Less than a month ago, the Netflix said it would split the DVD rental business off on a new website, to be called Qwikster.
Subscribers howled at the move, saying they saw Netflix as a destination for movies in general and didn’t want to manage two accounts.
“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,” Hastings said in the blog post.
In July, the company said that customers who want streaming movies and DVDs will have to pay for them separately. The “Qwikster” announcement was a follow-up to that change. Analysts saw it as a way for Netflix to distance itself from the older DVD business, which has less future potential than Internet streaming.
Netflix has a more profound problem, if my own little, modest personal experience is any reliable indicator. The videos it offers via streaming are far more limited than its DVDs, and many of them are outdated or less attractive selections. Here’s why I say this:
I LOVE Netflix. I live in San Diego and would order the DVDs and not watch streaming that much. I’d watch an entire TV series (The Wire, Homicide Life on the Street, The Beast, comedies, foreign films) mostly at night with a little portable DVD player resting on my stomach when I was in bed. I’m now on a national trip that will keep me on the road and almost constantly on the move all but 7 weeks between now and the end of May. So I couldn’t use the DVD service anymore, as much as I like it.
I called and told them that as of Sept I would drop the DVD service and do only streaming under their new pricing but it would have nothing to do with the pricing. Since moving to streaming I have been sorely disappointed. YES I can watch through the first three seasons of Breaking Bad. But most of the DVDs I used to like are not available in streaming. If I find that I can’t get the selections I want too often I’ll cancel that, buy DVDs and sell them on Amazon Marketplace after while on this trip. I mentioned this to a customer service rep when I called and he read what seemed to be a prepared statement about how to stay tuned, Netflix will be expanding its streaming. I take them at their word but for now I find the streaming service far inferior to the selection I had when I did the DVDs. Almost to the point where I will cancel.
Netflix has faced a virtual melt down since changing its pricing. It lost customers and its stock has seen as many ups and downs (early on some downs) than a rollercoaster. If it loses loyal customers like me because its streaming selections often border on lousy Red Box is looking better and better) they will have stripped themselves of a good chunk of their customer base.
Also:
—Brian Stelter:
Abandoning a break-up plan it announced last month, Netflix said Monday morning that it had decided to keep its DVD-by-mail and online streaming services together under one name and one Web site.
The company admitted that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster.
“We underestimated the appeal of the single web site and a single service,” Steve Swasey, a Netflix spokesman, said in a telephone interview. He quickly added: “We greatly underestimated it.”
Mr. Swasey said that the Netflix chief executive Reed Hastings declined an interview request. But in a statement, Mr. Hastings said, “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.”
Mr. Swasey declined to comment on any involvement by the Netflix board in the decision to keep the two services together. Initial reaction to the Netflix announcement was largely positive, and the company’s stock jumped 10 percent in pre-market trading.
Netflix said it never actually separated the services or started Qwikster. But the Sept. 18 announcement that it intended to do so stoked anger among Netflix customers, some of whom were already incensed by a price hike to $16 from $10 for those who receive both DVDs and streaming. (That increase will remain in place.)
In a blog post that day about the plan, Mr. Hastings wrote, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.” His implication was that Netflix had to act aggressively to expand its fast-growing streaming service by severing its older, slower DVD-by-mail arm.
“I messed up” is Netflix CEO Reed Hastings’s new mantra. He announced three weeks ago that he’d made a mistake in raising prices and his harebrained solution was to split the company in two: Netflix for streaming video online and something called Qwikster for receiving DVDs through the mail. At the time, everyone said “Huh?” and attempted to justify the inconvenience for customers with business-side speculation. But this morning, they’re walking the whole thing back: “We underestimated the appeal of the single web site and a single service,” says a Netflix spokesperson, who will never have to tell anyone he works for a company called Qwikster. “We greatly underestimated it.” Netflix, with one name and website, will continue to be the place for both DVDs and streaming; Qwikster is dead before it ever existed.
A Netflix spokesman told the New York Times that the company “underestimated the appeal of the single web site and a single service.” As a result of the announcement, the company’s stocks got a bump.
The Qwikster brand name couldn’t be reached for comment, but we hear it’s currently parked on its couch with a gallon of butter pecan ice cream and watching old VHS tapes in protest. Poor thing never even got a chance. Unlike the percent price increases, which will remain in effect.
From the beginning it was obvious that Qwikster was a ill considered stopgap measure. Netflix tried to pivot away from its original DVD by mail business and focus on streaming video only. But they did so by raising prices, which infuriated subscribers and hurt their quarterly numbers.
It took Coca-Cola 77 days of New Coke to bring back Coke Classic. It took Netflix co-founder and CEO Reed Hastings less than three weeks to shelf the idea of splitting Netflix (NSDQ: NFLX) into two brands—Qwikster to sell DVDs, Netflix for streaming; 23 days in all to admit publicly that the right strategy can turn out very wrong and to cancel the move before it kicked in.
Instead, while the businesses will split operationally, everything will stay under the Netflix brand and subscribers who get both services will keep one account. The company is sticking to one major change: the 60 percent price increase for those subscribers that was announced in July and took effect Sept. 1….
….Streaming is the company’s future; subscription DVD is a shrinking part of its present. Over the past year Netflix has moved further away from DVDs as confirmed by its streaming-only international expansion to Canada and Latin America, while its emphasis on streaming in the U.S. has come at the expense of DVD marketing. Hastings contends a split would give the DVD business the a chance to make the most of the its remaining lifespan, while allowing streaming to grow more quickly.
Retreat!
In a rare demonstration of a company listening to its customers, Netflix this morning killed off its plan to divide its DVD rental and streaming video businesses into two Webs sites. Qwikster.com, which was to be the new name of the DVD rental business, will never see the light of day.
If Netflix CEO Reed Hastings was running for office, this would be the time to call him a flip-flopper. After last month’s announcement that Netflix would split into two companies — Netflix for online streaming and Qwikster for DVD-by-mail service — Hastings said on Monday morning that those plans have been scraped. “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,” said Hastings in a statement on the Netflix blog. “This means no change: one website, one account, one password… in other words, no Qwikster.” Certainly @qwikster must be heartbroken.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.