Monday, September 19, 2011

Netflix Turns DVD Service In To 'Qwikster' & Adds Video Game Rentals

I'm not really sure what is happening over at Netflix HQ.  Tonight comes the surprising news that they have split off their DVD service in to it's own entity called 'Qwikster'.  'Qwikster' will also be adding video game rentals to their service.  In this split the Netflix name will only be applied to their streaming service.  

Splitting the services and creating 'Qwikster' means something else.  If you are one of the customers that are using both their DVD and streaming service, in a few weeks you will have to access two separate web sites to manage your queues.  You will also have two (2) separate credit card charges now.  They will still total up to what your account is supposed to for the level you have chosen.  

These changes come on the heels of a lot of bad press for the company recently.  First their huge price hike for combining DVD and streaming services.  This led to a flurry of complaints from Netflix users.  While the company is trying to make streaming their priority, it's not looking so good.  The largest complaint for the streaming option is that not everything is available through this.  

Then after the price hike, Starz announced that they will be pulling their licensed titles from Netflix streaming after a new contract couldn't be reached.  (Earlier this year Sony also pulled their titles from Netflix streaming.)  

It doesn't end there.  Last week Netflix revealed that they lost a million more users than expected, and their stock price took a huge hit because of that.  Losing customers, clients and money means that Netflix needs to win the trust of their customers, and prove that they should remain with them.  

Tonight Netflix claimed, via Twitter, that they've been listening (to customer complaints) and decided to announce 'Qwikster' and the addition of video games.  I'm not sure who they were listening to, but they didn't address customer complaints, though they claim they have.  

According to Netflix CEO Reed Hastings, 

I messed up. I owe everyone an explanation.
It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology.

It is nice to hear a CEO admit that they messed up, but I'm not sure he still understands why their customers have been upset lately.

When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong.
In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, “Actions speak louder than words,” and we should just keep improving our service.
But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.

While they feel that they are doing right by adding video games and splitting things up, communication is not what people were complaining about.  

Everyone understands that prices will always increase for any type of service.  Most feel that the giant leap that was taken at one time was too huge.  At the same time they are now making it more of a hassle for those customers that have stuck with both the DVD and streaming services.  Adding video game rentals is nice, but I don't see it making that big of a difference for them right now.  

If Netflix is unable to re-open contract negotiations with Starz, they'll be losing a lot of new titles.  Losing that library could then lead to another mass exodus of customers if they don't feel it's worth the time.

What say you?

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Source: Netflix

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