Sep 19, 2011

Netflix CEO attempts to make life even more difficult for customers

Ugh. Ok, so you know how Netflix pissed off millions of their customers a few months ago when they announced a 60% price increase? Yeah well, it seems like they've figured out a way to screw people even further. They're splitting their streaming and mailing services into two separate companies.

Initially, this may not seem like a bad idea. The blog post from Netflix co-founder and CEO Reed Hastings started with, "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. " Oh, finally, I thought, here it comes. He's going to apologize for his ridiculous marketing strategy. The thing is, that's not really what we got. What we got was a "sorry we did it this way" explanation instead of a "sorry we did this at all all" type of thing.

I've been a Netflix customer since January of 2009. I never had a complaint about the company until they jacked up their prices drastically and unexpectedly. For those who aren't aware, on Netflix you can have a streaming-only account, a physical DVD-only account or a combination of the two. Before the big change I was paying around $10 for unlimited streaming plus one DVD at a time. If I hadn't downgraded my account, I'd be paying around $16 for that plan after the changes took affect. That price is still not a lot considering the service you are getting but a 60% increase all at once took me and countless others by surprise. I expect incremental price jumps from companies due to inflation etc. but this seemed egregious. Not just that, but there was the fact that the price you were paying for the combo service was the same price the services were being offered separately cost. Any other service or product would give you a deal for choosing to get both. Not Netflix.

So, months later we get this statement from Hastings, not scaling back the price increase but saying he could have gone about it better. Fair enough but then he goes on to explain they are now splitting the streaming and DVD services into TWO DIFFERENT COMPANIES. The streaming will remain branded as Netflix while the DVD service will be known as Qwikster. W.T.F?


You might think this meant hastening the demise of the DVD service. Well there's one addition to the separated service that will prevent that. "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," writes Hastings. "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."

Oh you genius marketing bastard.

"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," writes Hastings. So basically, all those folks who have been waiting for Netflix to offer video games? If you chose to go only-streaming like I did, you'll now have to join Qwikster if you want that specific fix. Ergo, the 1 million subscribers Hastings lost with the price increase? He may get a good portion of them back.

"It is merely a renamed version of the Netflix DVD website, but with the addition of video games," wrote Hastings. There's no specific explanation of which games will be available (i.e. new releases) but the new Qwikster CEO, Andy Rendich, said the site should be up within a few weeks.

It gets better/worse. Hastings continued, "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."

Remember what I said about providing your customers with a deal incentive? Definitely no chance of that now. And if it's a negative, why are you doing it? What exactly is the advantage of two different and completely autonomous websites? I don't see any for the customer. Why would it have been so difficult to offer this new addition to their overall service on the Netflix website but have different teams operate them? To that Hastings writes, "Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail."

Uh huh.

Well you can obviously I think this was a dumb idea. What are your thoughts?


11 comments:

Andres said...

Netflix already killed Blockbuster, so there is no need to keep the promotions going...

Anyway, Netflix just arrived to my country, around USD$8 for unlimited streaming, no DVD deliveries so it might explain the split into two companies now that they are expanding to new markets where the DVD delivery might not be a suitable strategy

Anonymous said...

NERDRAGE!!! I didn't throw a fit when they jacked up their prices so ridiculously, because I still felt that you where paying for what you got. But on the heels of such a PR blunder, for them to essentially say, "Thanks for sticking with us, here is some inconvenience for your troubles.", seems egregious and ill-conceived.

John Keegan said...

This will just make it easier for them to raise prices on each service in the future without it being as obvious. More expensive licensing = higher streaming prices rates. Postal issues = more expensive disc-mailing service rates.

James E. Carlisle said...

I'll stick with Red Box at the local Kroger.

Oh, and the movie industry can now probably thank Netflix for any increase in illegal Bit Torrent downloads... just sayin'

Peregrine John said...

He starts this morning's news headlines with an apology, but the whole thing still makes my head hurt.

Monkey said...

I didn't bitch about the price increase. I've been a Netflix subscriber since it first started, so I've seen prices go up and down. Not as drastically, mind you, but it happens. But then they got rid of the social thing and since the Netflix equation seems to think I hate all movies, looking at what my friends and family recommended played tremendously in what I added to my queue. So that sucked something major. I've never bitched about streaming selection either, cause I always saw that as a bonus service. But this split into two services? How the hell is that supposed to make things better? And the name Qwikster is lame as all get out. Now that I think about it, I guess things HAVE been getting worse rather than better.

Mike said...

Personally I think it's a business move that will help them surge, and really how bad of a deal is it for any of us? Do we know what their overhead was? How many DVD's a year were "lost" in the mail? I'll keep streaming, and will remain happy with that. It's funny how this is what enrages people when we only know a small part of the story. Business is business that's the moral here.

gespenst said...

When the price increases emails went out a friend of mine called to complain (as I am sure a LOT of people did). She then asked why they would do that, and their reply to her was, "We didn't realize how lucrative streaming would be." That kind of irked me, just the way they phrased it.

worldcrafter said...

I wasn't pissed when the prices went up, I own a business so I get it.

However now I am pissed.. more hops to jump through! Oh and they added games, little late. Those of us that wanted that already have two accounts.. Netflix and Gamefly...now I get another? No thanks.

Not sure if I am mad enough to leave both services.. but I am a lot closer than I was.

Anonymous said...

My thought(s) is that I'm sure glad I never bothered with NetFlix. I have a well-stocked local library, a wide movie & TV collection and free Hulu. All I don't have is decent local news.

Mummbles said...

Seems to me they just want to eventually have everyone go to the streaming since it costs less (no mail needed!) hence that is why the keep calling that Netflix and change the mail to home dvd site to a new name.