Since my daughter started preschool, we watch much less TV. In addition to her actual time in school, she is more independent now and would rather do crafts and activities than watch television. However, we do watch some shows from time to time, especially when Daddy needs to get some quick chores done. Regardless, we have used Netflix much in the past, and have come to regard the streaming option with some affection. But now we have grown concerned about our old friend. Netlflix has made some questionable business decisions, and according to reports has lost about one million subscribers recently. It is always sad when you see the writing on the wall, and realize when a “go-to” resource will no longer be there when you need it someday.
Oddly enough, this morning we received an email from Reed Hastings, CEO and Co-Founder of Netflix. It is titled, “An Explanation and Some Reflections.” Obviously this went out to their entire subscriber base. The first line reads, “I messed up. I owe you an explanation.” It kind of just goes downhill from there. Hastings basically apologizes for how they handled their recent decision to divide out the DVD and streaming services, while raising prices without warning customers beforehand. But it’s one of those “non-apology” apologies. Like when people say, “Oh, I’m sorry if you’re feelings were hurt…I’m sorry you’re that sensitive.”
The email, which is also available in more detail on their company blog, does contain news about changes coming in the very near future. They will be changing the DVD service to a whole new brand, called Qwikster. So those who have both services will now see two separate charges on their credit card statements. They are, of course, keeping the Blue-ray option. However, now they will be adding a new video game upgrade option, offering game rentals for the PlayStation 3, Xbox 360 and the Wii. Subscribers will have to use the completely separate Qwikster website for this and their DVD queue, which will be available soon.
This looks like “Bad Idea Jeans.” It just reminds me of that scene from Arrested Development, when Gob Bluth took over the company and introduced his new plan for the business.
Michael: Do you have a business model?
Gob: I’m so happy that you asked me that, Michael. Because I just happen to have a business model…right here. [CUE MUSIC] Meet Starla! The new Bluth Company business model, for our Phase Two campaign!”
Adding video games is a good idea in theory, but in order to compete against GameFly the option will need to be cheaper and have many more copies available of all the newest games. One wonders why didn’t they just invest all that capital into getting better movie licenses and adding more newer titles to the streaming option.
“The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service…So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”
It’s disconcerting when Hastings says the streaming service does not need “to be compatible” with the DVD side, since what everyone wants is to have all of those movies available for streaming. He did also say, “There are no pricing changes (we’re done with that!).” But we all know this can’t last. If they don’t increase streaming choices, more subscribers will leave. If Netflix does get better (but more expensive) movie licenses, the service will have to cost more. It’s basic math. To be fair, the blog does state, “The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further.” However, there are no details about what this additional content will be. It doesn’t help that according to reports, they will soon be losing everything from Starz, which is a lot.
Netflix needs to understand DVDs are going the way of the dinosaur. The whole idea of physically mailing a DVD is becoming archaic, fast. Besides, you can now stream an HD movie over broadband, and the quality is better than DVD. Well, that is if you can find a movie you want to watch.
Reed Hastings ends his video apology (available on The Netflix Blog) with the following:
“To wrap up, I just want to say how sorry I am…”
We’re sorry too, Reed. We’re sorry, too.
Source: The Netflix Blog