The co-founder and CEO of Netflix, Reed Hastings, and head of DVD operations, Andy Rendich, caused quite the riot this past summer. That pair’s joint decision to split the Netflix unlimited streaming and DVD mail plans, thus significantly raising costs for consumers who utilize both services, did not go over well.
Netflix stocks have dropped significantly since then; just this past week, the company also cut down its subscriber forecast for the current quarter to 24 million – about a million less than originally predicted, at the beginning of this month.
Hastings has released a statement that not only serves as an apology for the manner in which Netflix handled the changes, but also reveals that the DVD mailing service is now being restructured as its own brand – complete with a new name and additional item options.
On the topic of the logic behind the Netflix service division, Hastings offered the following:
Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.
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 feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service.
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.
The Netflix Mailing section – now renamed Qwikster – will feature Rendich as its CEO and offer both DVDs and video games as part of its services. Here is Hastings’ description of the new brand:
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, and now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow.
Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.
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. The total will be the same as the current charges.
So, does the new Netflix setup sound better now? Or has the company shot itself in the foot, once again? Be sure to let your feelings be known in the comments section below.
Source: Reed Hastings
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