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Why is Netflix splitting its world based on business models rather than users' mental models? They're being foolish. Where are movie ratings going to go? To the Qwikster website? Will it or won't it affect the streaming recommendations? ::faceplant:: And why the hell change the brand for the DVD delivery when DVD-only users are the least likely to understand what the changes mean? Wow for brand cluelessness. And OMG did the CEO's "apology" make him look even more out of touch:

http://blog.netflix.com/2011/09/explanation-and-some-reflections.html
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53 comments
 
Interesting that Netflix decided to brand its new "mail only" company with a name that already falls short of what doesn't have to be said in the name of the "streaming only" service.

Instead of "Qwikster" perhaps a name that focuses on the huge catalog or some other more exclusive benefit of physical media (special features, no buffering issues, higher quality audio, etc. etc.)? Other than already sounding unoriginal and from the web 2.0 startup scene of 10 years ago, the main issue I see is that this new name is a constant reminder of the one thing a "mail only" service isn't: quick.
 
I agree. But I feel since it isn't fast and instant like most things today are, they should drop that all together and focus on the streaming aspect. I was reading in this article that they lost a lot some key licenses that are needed for streaming and maybe they should put there efforts toward that. I canceled netflix because I didn't feel like waiting for dvds when I could go to a redbox. And the streaming selection of netflix is terrible. 
 
+lonnie garth What's weird is that this makes me feel like I made the right decision previously (a few weeks ago) when I decided to stop paying for both services. Netflix/Qwikster -- with a complete lack of integration of accounts, queues, and ratings -- has just made sure that I won't pay for the hassle of both.

Ironically, it's the "innovative" streaming model that I don't pay for. I have so many other instant access options with higher quality audio/video and without buffering issues. But what's the alternative for watching past seasons of eclectic TV shows? Netflix, er I mean Qwikster, really has no competition there (that I've found) even if that business model is now deemed old school.
 
Quikster? Seriously? Wow.

This isn't about the CEO's inability to communicate properly. You hit the nail right on the head: it's about their failure to understand my mental model. My model ultimately boils down to this: I want a lot of content for very few bucks. I don't want to be bothered with the content delivery medium. If I'm going to be, then I'll choose the company with same-day delivery: redbox.

 
This is stupid from about every angle that I can see. I only use the streaming so I don't really care much, but this makes life a lot more confusing for those using both. As +Jeremy Bornstein said, look for a sale. This can't last.
 
I agree with +Jeremy Bornstein - If they are splitting the two then one is for the chop or for sale. Whilst it is painful now, one assumes they have planned this in case it was a lot more painful later.
 
He doesn't care about the DVDs through mail business. He's packaging it up for a sale. The company will do a much better job on the streaming business (which is clearly the future) if it's 100% focused on that.
 
I cancelled my subscription. You are so right! They need a basic course in human-computer interaction. The CEO looks bad in this screwup. 
 
I agree with Jamie - they are planning to kill off the DVD business. First they started releasing rental versions of DVDs that had none of the extras people associated with DVDs (without stating clearly that these are not the DVDs you see in stores). Then they raised the prices. Now they are distancing the brand from DVD. After years of extraordinary value and positive image, they're just becoming another company you can't trust.
 
Whut? Wow. And yes, clearly getting ready to offer that part of the company up for sale.
 
I'd gladly toss the DVDs, if they provided their entire library for instant view. Sadly, nowhere close.
 
I've always been a huge fan of Netflix and I even defended their decision to raise prices because I felt that even with the increased price it still was an amazing deal for a huge amount of content and convenience. When you crunched the numbers it still was a considerably better value than trying to get the same amount of content via alternatives channels (short of pirate sites of course). And if the increased prices meant they would be able to purchase more content and make the service even better, then so be it.

BUT NOW.... now I'm finding it hard to defend them. The "apology" is too little too late and an obvious (and failed) PR attempt to cushion the blow on the ill conceived idea of splitting the businesses. I was willing to pay for both services when they were integrated. The recommendations and ratings are obviously more robust and accurate because they pull data from both streaming and dvd. I was more likely to put something in my dvd queue if it wasn't available in streaming. Now I would need to go to different site with a horrible name ("Qwikster"...? Really...?).

Though it hasn't been talked about, I'm sure this will also affect how many concurrent devices you can stream on from a single account. Up until now, if you were on the 1, 2, 3, or 4 DVD plan you could stream on up to 1, 2, 3, or 4 devices respectively. If they are splitting the company and not integrating the services, I'm sure this will go away as well.

Bottom line: Lack of integration, reduced convenience, eliminating value add... They have weakened the brand.
 
It does seem like a not very well thought out solution. Qwickster sounds like it was thought up by the guys who thought renaming Blackwater Xe would fix everything. I strongly agree with +Bill St. Clair about the lack of titles. All you have to do is subscribe to @queuenoodle on twitter to see what is leaving streaming and it's appalling. Good luck if you like BBC. That seems to come and go yearly.
 
I did a double facepalm this morning when I got the email. I am wondering if Redbox would not be smart to go and buy Qwikster? Amazing how a company which came from nowhere to destroy Blockbuster et al, and dominate the market, is able with a couple of quick moves (in succession!) lose just about everything they gained.

Sad really.
 
Boy this apology is the epitome of passive aggressive behavior. 
 
To quote someone else: When I heard about the price hike my first was: A rebranding! That's what'll make this ok for me.

What I don't get about people's reaction to the price hike is the deep emotional response. Either it's worth the value to you or it isn't. And, did you get this upset the last time your cable company (if you haven't cut your cord) raised its prices?

 
Saul - the reactions you're seeing are not just about the price.
 
I also doubt this "new" service is going to continue to stock appropriate numbers of new dvds resulting in longer wait times.
 
+Chris Adams This article from Business Insider talks about how this move by Netflix is bad for the customer, but good for the business ( http://goo.gl/ZMAJH ). It addresses exctly what you just asked:

"Gurley observes that the licensing for content for DVDs versus streaming is entirely different. To rent a DVD, Netflix need merely buy it: The company does not pay any per-view or per-customer licensing fee to the studios. To stream a show or movie, meanwhile, Netflix has to pay a direct licensing fee, which is based on its number of subscribers."

"Gurley believes that the Hollywood studios are now insisting that Netflix pay a per-subscriber-per-month licensing fee, whether or not its subscribers actually ever stream movies. This demand, Gurley reasons, may be forcing Netflix to pay per-month-fees on way more subscribers than it will ever recoup any value for (because many never use the streaming option)."

"By splitting the businesses in two, Gurley continues, Netflix will be able to negotiate streaming licenses on a much smaller subscriber base--say ~15 million, versus the ~25 million total subscriber base--thus reducing its streaming content costs."

"This, too, makes sense from a business perspective, and, if true, it explains a lot."

"But it still sucks for "hybrid" customers."
 
+Saul Tannenbaum Yeah I did get this upset and I switched to FIOS and now Cablevision is begging it's old customers to come back.

It's not only pricing in this case, but convenience. Two queues to manage with no compatibility with ratings? If I have a dvd in my queue, how will I know if it becomes available for streaming?

This seems like such a poorly thought out strategy that I fear NetFlix is being forced to make rash decisions because things are worse than anyone knows. If they don't add new content, this will be the end for them.
 
+Steve Anthony Herrera if the details of the article you quote are true, and they probably are, wouldn't it have been more honest to say exactly that on the letter to us subscribers, instead of what was perceived as basically crocodile tears from a CEO out of touch?
 
+Tom Paladino I get that this split adds insult to injury. It seems liking annoying customers has become the Netflix/Qwikster business model. But even before the split, people seemed outraged disproportionately to the amount of money involved, which is what I'm very curious about.
 
+Leo Campos I agree with you that for us as the consumer it would have been a much better approach to say "we're raising prices so we can buy more content and make the services better" along with "we're splitting the businesses to lower our costs, once again so we can buy more content and make the service better" and then cap it off with "we're forced to go at it in this uncomfortable/inconvenient way because of how the studios are charging us."

The above approach (or something like it) would have made it an "us against the studios" thing versus a "Netflix is screwing with us" thing. The flip side of that coin is that Netflix has to play the political game with Hollywood. If hey publicly blame the studios, the way cable companies do when they raise their prices, they begin to create an even more adversarial relationship with the people they are trying to negotiate with.

BTW, just because I don't want to misrepresent anything. The article I quoted is presenting the likely scenario/motivations behind what Netflix is doing based on how cable companies had historically been treated by Hollywood. There is no siting of actual first hand knowledge that this is the case. Though to your point, it is probably likely.
 
Getting angry at Netflix seems to be the wrong target. Netflix would love to expand it's streaming selection. The problem lies with other companies not wanting to give it to them. HBO will never give Netflix content because they have their own streaming service they want you to pay for.

 
+Saul Tannenbaum For me, it's because I don't actually want the DVDs. I want to be able to stream everything. If I have to get a DVD because the thing I want to watch isn't available for streaming, I'm already a little bit irritated at Netflix. So having to pay more for a service I'm already irritated at needing ups my irritation level significantly.

I did pull the plug on my cable company; I went with Netflix instead.
 
Why do we criticize companies who change their businesses as if we have a right to their old business models? I think Netflix is handling this poorly, but consumers have only one way to show their dissatisfaction, by not using their product. You don't have a right to have dvd/streaming.
 
ray -- no one said anything about "rights." i'm pissed because a company that I have supported for many years and have always recommended to others is kicking sand in my face since I value both discs and streaming. that's it.
 
I kept both services and am rewarded by having to go to two separate websites now?
 
+Steve Anthony Herrera good points. I figure that the geniuses at Netflix PR might have been able to come with a more subtle re-statement of purpose, though. At any rate it is disappointing. When I read the email this morning I just shook my head. It made me feel like they did not know where they were going.

As others have observed on this thread, the seamless blend of streaming and DVD content made it very appealing to me. There were a bunch of movies I wanted to watch on my DVD queue, but I spent most of my time watching "impulse items" (they have the complete Buck Rogers?! Wow! need a quick Mystery Science Theatre 3000 fix! Etc) when I had sometime to waste.

On a more technical side of the equation, what happens with their algorithm for predicting my preferences when the contents (and my ratings?) get split?
 
Seems to me Netflix held on more tightly to the shitty part of the business. By extension it's surely the more profitable one.

That said, I'm convinced it's probably better if we don't get what we want. Maybe we should all just mail order DVDs, that's where the worthwhile content is, and it flexes our patience muscles. The only thing that seems to result from instant gratification is fatter people who are better whiners.
 
HULK IS FINDING THE ENTIRE SITUATION TO BE IDIOTIC! THE SAME KIND OF IDIOCY THAT KILLED BLOCKBUSTER!
 
+Lisa Cronin One way I read this bonehead move is that Netflix, too, wants to stream everything and what they're (clumsily) trying to communicate is that, just because they have the DVDs doesn't mean that they can stream them. There's a smart article on forbes.com this morning reminding everybody about the doctrine of "first sale", which gives Netflix the right to buy DVDs and do whatever they wish with them. There's no such doctrine for streaming, so Netflix needs to negotiate rights packages. It's the studios who are reluctant to license, not Netflix who is reluctant to stream.
 
+Saul tannenbaum Exactly! It's not as though Netflix is simply not streaming everything just to be a dick. They want to, but are being prevented by content providers.
 
+Saul Tannenbaum Thanks for the link to the article; I don't have time to read it right this second, but I'll check it out in a bit.

Netflix has always rotated what is and isn't available for streaming; items that were available to stream are suddenly only available on DVD. I assumed they were deliberately doing that to keep some things in scarce supply and drive the DVD business, since it's obviously not a matter of permission.
 
I think they want to kill off the DVD segment and just stream
 
I think also separating businesses helps Netflix to monitor subscriber numbers more accurately. I also have to say, Danah, I thought the blog post was clear, reasonable, and genuinely apologetic. His most important point seems to be there are two different costs because these are two different businesses. Clearly Netflix thinks the future is streaming (thus retaining that brand for that business). I stopped using Netflix months ago, but I can't fault the CEO for his blog or his business sense.
 
I'm interested in the comments that suggest this is really about selling the DVD-by-mail business. If Netflix is moving in this direction, which seems reasonable given the poor user experience they are creating by splitting the sites, then Netflix has moved away from being in the "movies to your living room business" - agnostic to format and platform - and more narrowly into the "digitally streaming movies business." Unless there is some massive expansion into other kinds of media (books, music, etc) to compete with Amazon Prime, I don't understand the logic.
 
I personally love having both the DVD and streaming service since having only one is not even close to what I want right now. This action speaks of confusion and uncertainty as opposed to leadership. Also, due to the vastly inferior selection, Amazon is not viable as an alternative right now, let alone Google. However, what Netflix is doing is creating a huge market opening for them to move in and eat away at their dominance. Bad move all around, IMO.
 
Since Qwikster apparently has its own CEO, maybe this is really the start of forking off a different company? "We think it's time to kill DVDs." "No, I know I can make work." "Well... ok, but we don't our future tied to that hope. Go do your own thing." Maybe? Or maybe the other way around, if there's some hurdle for streaming we don't know about? Just seems like it has to be a divorce of some sort, no way that separate ratings could be seen as a boon for either half.
 
Hi Danah, don't forget there's also a large susbset of disc subscribers who are hardcore cinema lovers, mainly interested in the superior selection (and often quality) currently afforded by classic Netflix model. I wouldn't easily assume they're any less savvy - despite being newer I actually consider streaming to be the more casual method, I think the sway of the marketplace agrees. Overall I still echo your sentiments, just not that particular point. Cheers!
 
+Matthew Tong It's always about the money. The studios are finally realizing how much demand and money is to be made from streaming and they want to monetize that as fast as possible given decreasing DVD sales. If they would only realize that they could easily get people to sign up and pay if they permitted more titles to be streamed via Netflix, Amazon, whoever.
 
+Matthew Tong We may also see Qwikster vending machines to take on Redbox. They really are different business. Ultimately if Netflix can figure out streaming before Apple we should see ubiquity in titles that would benefit all subscribers.
 
If Redbox and Quikster were to marry AND the business model was adjusted to allow the return of mailed movies to the Redbox kiosks, I think Redboxster could be in business for a long, long time (at least in Internet years). Not all people have an ISP that will support streaming, and even those that do are settling for compromised video and especially compromised sound. The flat shiny plastic still holds the advantage (especially blu-ray) and will for some time given the current bandwidth bottlenecks. The only problem with this would be the sudden appearance of Criterion Collection movies, the occasional Preston Sturges comedy, and waaaaaay too much animé in the Redbox kiosks, but surely the people who restock the kiosks could pull these and get them back in the mailing circuit. Now I'm curious as to how often the Redboxes are opened and "tweaked." Ennybody know? Daily? Weekly?
 
This is inane. It would make sense if streaming were adequate but since it is not, it alienates those customers who chose to maintain both delivery systems despite the price increase. While I was willing to tolerate the increased price, now I have no reason not to investigate other vendors. It turns out that Blockbuster has a number of DVDs that Netflix has in the unavailable queue. I might as well try them out if I have to deal with two vendors anyway. Sheesh.
 
I disagree. Everything they are doing is right, except they should have kept Netflix as the name for the DVD company (target audience late-adopters) and given name Qwikiwhatamacallit to the company targeted at early adopters.
 
Although there has likely been a misstep in its implementation, I think Netflix is trying to brand itself differently moving forward. It came on the scene as a DVD rental service. Most probably perceive it as such and see the streaming service as a fun extra. But, as Netflix itself noted (http://tinyurl.com/3mubozf), it thinks the DVD rental service end of the business peak soon. This is a move to make the streaming service center stage (make it's fee separate and equivalent to the DVD service, ultimately breaking off the DVD service entirely), ultimately branding Netflix as a video-streaming service, which is arguably a business with growth potential, rather than as a DVD rental service, which is an industry that will likely shrink.
 
+Steve Anthony Herrera Oooh now a letter like THAT would have made me a very happy customer. The idea of classic.netflix as the DVD unit is very good.
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