Netflix doubles-down on the derp

@DrewDad,

A friend of mine told me of this news. I'm not too happy with this deal. I think they're going to slowly back away from and abandon their DVD mailing business while alternatively being incapable of keeping the studios from abandoning their streaming business by pulling their works from Netflix's streamable inventory.

Lose/lose for everyone I think.

1 Reply

@tsarstepan,

Changing Your Business Name

Quote:

4. Do you still have low brand equity? A name change can work if your company still has low brand equity-that is, the estimated monetary value added to your brand because people know who you are. On the other hand, if your local brand equity has grown greatly, a name change could end up costing more than it's worth.

Why on earth are they taking a well-known service and giving it a new name? It's just dumb, IMO.

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@DrewDad,

As I'm currently a subscriber to Netflix, I got this newsy little e-mail this morning from Reed Hastings, Co-Founder and CEO, Netflix

Dear Russ,

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.

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Dear Reed,

Two words. Red Box.

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Raising prices 60% in a recession/depression PLUS degrading the quality of your product??!! Netflix is getting credit for being proactive in trying to place their bet with streaming, but they are pissing off their customers who can decide to stream with someone else at two clicks of the mouse.

I cancelled the DVD side, which I had pretty much stopped using anyways....I have a feeling that it will not be long before I opt out of Netflix all together, and that will largely be a result of Netflix opting out of the DVD business and of how they bungled the move. When they lose Starz in a few months there will be little reason to keep them, as their streaming content with out Starz is not very good, and now that Netflix has pissed me off I dont intend to keep paying them $9 a month or what ever it is and wait to see if they find some good content from someplace.

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Quote:

SAN FRANCISCO (AP) -- The CEO of Netflix said he was sorry for mishandling a recent price increase that caused customers to cancel the service in droves. But the apology was drowned out by a decision that angered subscribers all over again.

The company will split into two services -- one with an odd new name that offers the familiar discs in red envelopes and another for online streaming of TV shows and movies.

The DVD service will be called Qwikster, a name that is supposed to signify a commitment to fast service but quickly became an object of ridicule Monday on the Internet. The streaming service will keep the Netflix name.

Netflix, which had 24.6 million U.S. subscribers at the end of June and is the nation's largest video subscription service, redefined home entertainment over the past decade with its DVDs by mail. Now it's trying to prepare for the day when watching movies on a disc goes the way of driving to the video store to pick up a VHS tape.

http://finance.yahoo.com/news/Netflix-says-its-sorry-then-apf-1912482126.html?x=0&sec=topStories&pos=main&asset=&ccode=

Quote:

NEW YORK (AP) -- Netflix is trying to boost business by chopping its services into two separate parts. Unfortunately for investors, the company's stock price is what's really been cleaved.

The company that once seemed like it could do no wrong has seen its stock lose half its value in the last two months. Netflix tumbled another 7.4 percent to $143.75 on Monday, on the same day that chief executive Reed Hastings sent an email to Netflix customers, announcing that the DVD-by-mail business that defined the company for much of its history will become a separate, renamed service called Qwikster. Customers who subscribe to both streaming and DVDs will soon see two separate charges on their credit card statements and have to log on to two different websites.

It's a hard landing for a company that made many investors rich while remaking the way that households watch movies. It was only ten months ago that Netflix's success prompted Standard and Poor's to add the company to its S&P 500 index, a broad measure of the stock market that is the basis for most U.S. mutual funds. Since then, Netflix shares have dropped 26 percent. Some analysts now think the stock's best days are behind it, beset by increased competition and its recent corporate blunders.

http://finance.yahoo.com/news/Are-Netflixs-best-days-behind-apf-2518554568.html?x=0&sec=topStories&pos=1&asset=&ccode=

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@DrewDad,

I love the NetFlix streaming service, and I have absolutely no interest in their DVD service at all.

If anything, the streaming service needs to have more titles available. But their pricing structure is fantastic and the service very good.

With a combination of Internet, AppleTV and NetFlix, I have given up watching almost all forms of broadcast television (local news is the only thing I can't seem to find through other resources easily, and whenever I watch it now I'm appalled at the percentage of time devoted to commercials. It's unbearable.).

It's my bet that NetFlix wants to move out of the DVD by mail market and devote itself to streaming. And I think that's the right business choice for them. DVD's will be as dead as VHS in less than 5 years. Network television is about to collapse into a whirlpool of commercials and network censorship while Internet streaming blossoms into a giant library of film available for pennies at the flick of a mouse.

What I would really like if for the IMDB to start selling downloads like NetFlix does, or for NetFlix to buy IMDB and make every movie and show in the IMDB available for streaming.

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@rosborne979,

Quote:

If anything, the streaming service needs to have more titles available

That is their main problem....and the water looks choppy ahead. They lose Starz in March and Hulu is for sale, there is a strong chance that someone like Amazon or Google buys them, and with their deep pockets Netflix is going to have a rough go getting content agreements.

Netflix can't afford a streaming content war

Quote:

NEW YORK (CNNMoney) -- Netflix's move to rebrand its DVD-by-mail service as Qwikster sets that business up for a spin-off and underscores Netflix's longtime desire to go all-in on streaming. But it's a high-risk strategy: Streaming video has become a very expensive game -- and Netflix's rivals have much fatter wallets.
Studios now want millions more for the content they're providing, and if Netflix won't pay them what they want, they can take their business to a competing service. Google, Amazon, Microsoft and others are all looking to expand their content catalogs, and each has billions on hand to play with.
Amazon (AMZN, Fortune 500) had $6.4 billion in the bank at the end of its last quarter. Google (GOOG, Fortune 500) held $39.2 billion, Microsoft (MSFT, Fortune 500) had $52.8 billion and Apple (AAPL, Fortune 500) held a whopping $76.2 billion. Even Yahoo (YHOO, Fortune 500) could dive in big if it wanted to: It's got $2.6 billion in its cash coffers.
By comparison, Netflix had just $376 million in cash at the end of the quarter.
The big wildcard right now is Hulu, which is on the block and expected to fetch a sale price in the $1 billion to $2 billion range. All of the big players are circling, drawn to Hulu's catalog of current TV series.
"The Hulu sale could prove a catalyst," Barton Crockett, entertainment analyst at Lazard Capital Markets, wrote in a research note Monday.
A Hulu buyer could potentially score exclusive streaming TV rights from current Hulu owners Disney (DIS, Fortune 500), NBC and Fox, Crockett said. That would block Netflix's ability to ink its own TV deals with those studios.

http://money.cnn.com/2011/09/19/technology/netflix_cash/

1 Reply

@hawkeye10,

NetFlix is included in the AppleTV product (the only streaming service of its type there). Do you think that's any indication that Apple may buy them?

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@rosborne979,

I doubt that to be the case. I hear that Apple wants its own streaming service and since its Apple, they're likely to develop their own service from the ground up.

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@rosborne979,

Quote:

What I would really like if for the IMDB to start selling downloads like NetFlix does, or for NetFlix to buy IMDB and make every movie and show in the IMDB available for streaming.

No way in hell will Amazon.com would sell IMDb.com to what it sees as its direct competitor. Amazon.com has its own streaming business under its Amazon Prime program.

1 Reply

@tsarstepan,

tsarstepan wrote:

Quote:
What I would really like if for the IMDB to start selling downloads like NetFlix does, or for NetFlix to buy IMDB and make every movie and show in the IMDB available for streaming.

No way in hell will Amazon.com would sell IMDb.com to what it sees as its direct competitor. Amazon.com has its own streaming business under its Amazon Prime program.

I was speaking in a general sense. What I want is a streaming source that is as extensive at the IMDB in its coverage of everything.

I'm not familiar with Amazon's streaming offerings. Is it a functional system? Are the prices reasonable?

1 Reply

@tsarstepan,

tsarstepan wrote:

I doubt that to be the case. I hear that Apple wants its own streaming service and since its Apple, they're likely to develop their own service from the ground up.

Apple certainly has their own ideas about how best to sell Movies/Music (entertainment data), but I'm not sure they will want to reinvent the background architecture.

NetFlix is using the Cassandra architecture for provisioning and I think it's probably the back-end of choice for this type of system. Apple might just like to acquire it. They can always rebrand and remarket everything once the system is in place. But I'm just guessing. I really don't know much about the back-room politics of the movie industry or how these deals are made.

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@rosborne979,

I tried it a couple of times when I 'rented' a few movies via streaming. The new pricing arrangement is quite reasonable at a one time fee of $79 a year. Plus you get free shipping for most anything you buy at Amazon.

1 Reply

@tsarstepan,

tsarstepan wrote:

I tried it a couple of times when I 'rented' a few movies via streaming. The new pricing arrangement is quite reasonable at a one time fee of $79 a year. Plus you get free shipping for most anything you buy at Amazon.

I'm not sure what you mean by "shipping", but in general, for me personally, the idea of receiving any type of data in physical form is now anathema to me. I readily admit that I'm a first-adopter of technology trends, so I'm not surprised that many others don't feel this way, but things will almost certainly move in this direction.

$79/yr for streaming content seems reasonable (that's similar to the $9/month for NetFlix), but I can't accumulate too many sources at $79/hr for unlimited streaming without running into a budget problem, so I would be looking for the most all encompassing source (that had most of the content I prefer) as my primary source.

Last year my costs for Media Entertainment and Internet connection was near $200/month and I was annoyed with the loads of crap that surrounded the content that I was interested in (in other words, I was paying for a lot of stuff that I never used). Now my costs for Media and Internet combined are under $50/month and I am MUCH happier with the content available to me. And I almost never see a commercial any more.

So far I've been very happy with the evolution of the Internet/TV/Cable merger that's been happening.

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@rosborne979,

In order to subscribe to Amazon's subscription streaming service, you have to join Amazon Prime ($79/year). Amazon Prime includes free shipping for most items ordered from Amazon.

I think only certain titles are offered through the subscription service; you still have to pay to view new releases.

1 Reply

@DrewDad,

DrewDad wrote:

I think only certain titles are offered through the subscription service; you still have to pay to view new releases.

Thanks for the info. I guess it would depend then on which/how many titles were included in the subscription service. Maybe I'll check it out sometime.

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@rosborne979,

Shipping... buy a book or CD or vacuum cleaner. They mail (ship) the item from their warehouse to your home.

1 Reply

@tsarstepan,

tsarstepan wrote:

Shipping... buy a book or CD or vacuum cleaner. They mail (ship) the item from their warehouse to your home.

Ok. Just wanted to make sure you weren't including streaming as a form of "shipping" Smile

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Netflix doubles-down on the derp

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