Netflix, Qwikster and Your wallet


Okay, so you have a Netflix account.  You do the whole streaming thing AND the DVD thing (or BluRay if that’s your flavor).  And all is good.  You watch a DVD, put it into that little red envelope and eagerly await your next red envelope to arrive.  And in between DVD’s, you stream thousands of shows to your TV.  Ahhh, that’s the life, isn’t it?  *Screach*

“Not so fast there movie-buff.  We need more money.”

About a year or so ago, Netflix raised their prices… just a little.  Many could care less – it’s still an awesome service.  And then, just a couple of months ago, it was announced that they were splitting their streaming and DVD departments into two tiers.  You will have to pony up $7.99 for the streaming only service as well as $7.99 for their DVD service.  And then if you had their BluRay option, tack another $2.00 to the price tag.  Hm, now things are beginning to get interesting.

I was paying roughly $4 more per month for the same thing, but I could imagine how the studios were price gouging, so I didn’t raise a stink about it.  And now, just weeks after that announcement, we have yet ANOTHER announcement.

I received a letter from the CEO and Co-Founder of Netflix, Reed Hastings.  Here’s the letter in it’s entirety:

Dear Lyn,

I messed up. I owe you 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. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. 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 hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

Let’s be honest here, Netflix is there to make money.  End of story.  Most businesses DO start out with a couple of guys and a dream.  And their passion is to provide this phenomenal service for the people.  Sure dollar signs are in their eyes, but there’s a passion that’s unrivaled there.  And then corporate greed takes over.

It happens to all companies, big and small.  But that’s capitalism.  In order for them to remain competitive, they need to do exactly what they’re doing.  They’ve split their no longer compatible services into two very different companies.  We all know where the market is going.  Everyday we’re reminded of how technology is pushing our life into the “cloud.”  The future is not DVD, or any other “hard” medium for that matter.  Information will be shared over the air.  So can I completely blame Netflix for seeing that trend and doing something about it?  I don’t think so.

Let’s see how this plays out.  If it’s bad, turn to another service; I’m certain more will begin springing up if history is to be trusted.  But iff you like what you see, keep watching.  I will most definitely keep my service in the short and hold out for the long.  Everyday is different in the world of technology.  One day you’re hot, the next you’re not.  Keep your ear to the ground folks, capitalism is on a warpath.

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About Lyn May

Designer, engineer, producer; I haven't really decided yet. Maybe I'll keep it that way - it's much easier to be undecided any way. I love graphic design, writing, photography, video production, animation, playing guitar, singing, engineering and pretty much any other medium that allows me to express my self artistically/logically.

Posted on September 21, 2011, in Business, Culture, Entertainment, Gaming, Lifestyle, Movies, Tech, Television and tagged , , , , , , . Bookmark the permalink. 3 Comments.

  1. Netflix has faced a revolt ever since dividing its DVD-by-Mail Serve and Video Streaming Service into two different cost plans. I asserted at the time that this split was necessary to maintain the company aggressive and that people were free to leave if they felt priced out of the support.

  2. Agreed. Think about it. They began when DVD’s were still very big. Blue Ray had not even won the war yet with HDDVD. So cut them some slack. Actually, give them praise for being able to keep up with innovation. The tech sector changes so rapidly. They’re able to keep up. Bravo, in my opinion.

  1. Pingback: Netflix, Qwikster and Your wallet (via Rants & Rage) « The Cineaste's Lament.

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