On Sunday Netflix CEO Reed Hastings posted an apologetic blog entry on the official Netflix Blog and uploaded a similarly themed video to the company’s YouTube channel to announced some big changes. First and foremost, in the coming weeks Netflix will be split into two separate entities: Netflix is being kept for streaming, and the new brand Qwikster will incorporate the DVD-by-mail service. Additionally, subscribers will be able to rent video games (Xbox 360, PlayStation 3, and Wii) from Qwikster; this will be available as an upgrade option at an additional charge, just like how the Blu-ray upgrade is handled.
So why is all this change happening? Hastings blames his own “arrogance” on it all. He believes that his lack of communication with customers before, during, and after the recent price hike is to blame for the negative backlash the company has witnessed from subscriber outrage, cancellations, and the plummeting of their stock on Wall Street. According to Hastings, the decision had to be made: “So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
Though the decision to break up Netflix into two pieces might make sense for the company, there really aren’t any benefits for the customer that I can think of. Netflix and Qwikster will each have their own domains and they will not communicate with one another. This means that queues and ratings will not carry over from one service to the other. That’s a major bummer. Every time you want to change billing information or your password, these things will have to been done twice since the two services are totally separate. All of these extra steps on the consumer end of things is going to make matters worse (read: not better) for subscribers. I get that Hastings thinks that by separating streaming and DVD-by-mail will help the company innovate faster, but in the long-run I cannot see this shift in branding working at all. And isn’t that name just plain stupid…Qwikster, ugh. Reminds us of failed Internet ventures like Friendster and Napster. Is the introduction of Qwikster a step in the wrong direction for Netflix? Time will tell, sooner rather than later I bet. It’s funny. Hastings admits that “DVD by mail may not last forever but we want it to last as long as possible.” This move to disintegrate DVD and streaming services, I think, will speed up that process leading to the demise of physical rentals.
Other tidbits to come out of the announcement… Hastings claims, “There are no pricing changes (we’re done with that!). Members who subscribe to both services will have two entries on their credit card statements, one for Qwikster and one for Netflix.” …Andy Rendich, the man in charge of DVD-by-mail for the last four years (he’s been with the company for twelve years), has been appointed CEO of Qwikster. …The DVDs will continue to ship in ” that distinctive red” envelope but branded with the Qwikster logo. …Hastings hints that, “The additional streaming content we have coming in the next few months is substantial.” (Good news there!) Watch Hastings’ video titled “An explanation and some reflections” after the break.
[Via Netflix]