Category: Netflix

Last month, Netflix CEO Reed Hastings announced that Netflix would be splitting into two companies: Netflix (which would handle streaming video) and Qwikster (which would handle DVD rentals).  The move was near-universally panned, especially coming off the heels of an unpopular price increase.  At the time, I called it shooting one foot, reloading and shooting the other.

Yesterday, Reed announced that they’ve scrapped the split concept.  Netflix will remain one company.  Users won’t have to manage two different queues in two different accounts on two different sites just to differentiate between Streaming and DVDs.  Still, I have some concerns.

Moving Too Fast

Reed released a statement in which he said: “there is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”  That “too fast” line concerns me.  Does he still think splitting the company was a good idea?  Were all the customers’ shouts of “No! Don’t do this!!!!” interpreted as “Hmmmm….. Maybe try this a little later, perhaps?”  Is Qwikster really dead, or is it just waiting in the wings for a better release opportunity?

Granted, I’m not going to write off that a DVD-Streaming split can’t be done well.  The current “let’s split things up” plan seems to have been as detailed as, well, “let’s split things up.”  Basic user questions in the comments of his initial split announcement were answered with “not sure about that”-type responses.  Perhaps if they go over the plan again and fully flesh it out, they could succeed.  If they decide to do so (or even if they don’t), here are five pieces of advice that might help them repair their image.

1. Get a focus group

I’ve made my share of jokes about focus groups, but when they’re done well, they can help a company avoid a fiasco like this.  Problems with ideas could be hashed out in a small group instead of on an Internet-wide level.  If your entire plan needs to be scrapped after major modifications, nobody will see you turning left, right, left again and then just canceling the whole thing.  You’ll actually look like you know what you’re doing.

2. Focus on the customer

Yes, you need to make nice with the studios to get content.  I appreciate that.  Still, keep in mind that we are your customers (either current or prospective).  If our experience is significantly impacted, even for something that you consider to be an improvement, we might not react well.  Think about what you can do to make us enjoy using your service more.  After all, us using your service is what earns you money, not us canceling because we see less value in your service.

3. Change isn’t always good

People are creatures of habit.  Small changes, even ones for the better, can often face significant resistance just because “It’s always been done the old way.”  Don’t introduce too many radical changes at once.  If you need to do a major overhaul, let people “preview” it as a stable beta and gradually make it live after people have gotten (somewhat) used to it.  If possible, give users the option to use the cool new feature or fall back to the older, but more well-known way of doing things.

4. Customers like bundles

If you want a Streaming Only plan, you pay $7.99.  If you want 2 DVDs at a time, you pay $11.99.  If you want both plans, you pay the total of the price of both plans ($19.98).  Take a page from the cable companies and phone companies and offer bundling discounts.  Got a Streaming plan?  Add 2 DVDs at a time for 10% off ($10.79).  A 2 DVD at a time subscriber getting the same total price for adding Streaming would see Streaming being added at a 15% discount!  Sure, this is only a $1.20 a month savings, but people will see “10%” or “15%” and think “What a great deal!”  It will act as an incentive for people to add DVDs to their Streaming plans or vice versa.

5. Limits are bad

There’s an issue with Streaming plans: They are limited to one stream at a time.  In a world where people stream Netflix shows via Roku boxes, smartphones, iPads, XBox 360s, Nintendo Wiis, and more, why are we limited to only one show at a time?  Why can’t my wife stream a movie in one room while I stream a completely different one in another room while my kids stream some cartoons in a third room?

Currently, the only way around this 1 Device At A Time restriction is to buy the DVD plans.  2 DVDs at a time gets you 2 streams.  3 DVDs buys you 3 streams, etc.  Wasn’t the Streaming-DVD plan split supposed to address this issue?  If you must impose limits, provide us with reasonable ways of increasing those limits.  Paying $11.99 a month more just for 1 more stream (assuming you don’t want DVDs) isn’t reasonable.

Why not let us pay $1 extra per month to add additional concurrent streams to our account?  I realize that there’s a problem with people sharing their streaming account with family and friends, but don’t punish your good users to get at your bad users.

What We’re Doing

Over the course of the price hike and split, we went back and forth as to what to do.  Canceling completely was never really an option.  We’ve all grown too fond of streaming via our Roku boxes to go Netflix-free (for the moment).  DVDs were on a short leash, however.  What began as a fun way for all of us to quickly get movies and TV shows morphed into a way for *ME* to get movies and TV shows (sometimes to share with the boys).  B had a limited amount of shows she wanted to watch and, once those were through, the queue was pretty much all-me.

Another strike was when I realized that I didn’t have much time to watch the DVDs.  They would sit unwatched for a week or two before I watched them.  I would then forget to return them for a week.  Two DVDs at a time is nice, but not if it winds up being 3 DVDs a month for $12 a month.

The third strike was our local library.  They have a decent selection of DVDs to choose from.  The ones they don’t have, I can either get from RedBox or perhaps find elsewhere.  (And no, I’m not talking about piracy.  I meant legally get elsewhere.)

In the end, our DVD plan was an expense with little return.  Though it pains me, since I still love the depth of content there, we’ll be cutting back to Streaming Only on our next billing cycle.  Netflix, the ball is in your court to win us back as well as keep us from ditching Streaming as well.

A couple of months ago, there was an uproar over Netflix pricing.  Netflix decided that they needed to separate their DVD and Streaming offerings.  Thus, people would need to pay for each plan separately.  The net effect for most people, though was a price increase up to 60%.

Needless to say, folks were *NOT* happy.  Many people talked about cancelling one of their plans or leaving Netflix entirely.  In fact, the loss was projected to hit one million users.  It didn’t help when they announced that they’d lose the Starz titles on streaming.

I myself toyed with cancelling.  We love both their streaming service and their DVD-by-mail service, but it was just going to be too much money.  Still, I couldn’t give up access to that many titles.  Plus, there was another issue.

I heard rumblings that the Streaming Only plan was limited to one stream.  I contacted Netflix about the limit and they confirmed this.  They added that I could get more streams by paying for DVD plans.  2 DVDs-At-A-Time got me 2 streams.  3 DVDs would get me 3 streams and so on.  I questioned how this gelled with the claim of separating the DVD and Streaming offerings and didn’t get a clear answer.  (Just a “we’ll ask our manager and get back to you” that never materialized.)

I figured that perhaps this was an “on paper only” limit that wasn’t enforced.  This hope was bolstered by reports from my Twitter followers that they had watched much more than 2 streams at the same time despite being on Streaming Only.  Then, it looked like Netflix decided to enforce the restriction.  They claimed that users weren’t restricted, but people kept seeing errors when they tried to view more than 1 stream.

Clearly, things were not heading well for Netflix.  They had shot themselves in the foot and were bleeding profusely.  It was time for quick and decisive action.  In a blog post, Reed Hastings, Co-Founder and CEO of Netflix, apologized for the pricing snafu.  At this point, I was ready to forgive him.  He could have made it all better, addressed the problems, and I would have gone back to being an avid Netflix supporter.  I might have even forgiven the price increase.  Instead, he shot his other foot.

You see, Netflix is going to be dividing into two different companies.  Netflix will handle all of the streaming services.  Meanwhile, a new company called Qwikster will handle the DVD-By-Mail services.  This makes no sense for a few reasons:

Queues Will Be Separate

Currently, if you want to find a movie to watch, you load up Netflix, type in the title’s name and you can see whether it’s available via streaming or whether you need to add the DVD to your queue.  Once the split occurs, you’ll have to log into your Netflix account to check whether it is available via streaming.  If it isn’t, you’ll have to log into your Qwikster account to add the DVD to the queue.  This is two separate searches that used to be one search.  Customers don’t like having more work added to perform simple functions.

User Accounts Will Be Separate

Since they will be separate companies, billing and account information will be separate.  Need to update your credit card number?  You can’t just sign into Netflix and do it there.  Now you need to sign into Qwikster as well.  Like before, more work = unhappy customers.

Bad Social Media Planning

As Gizmodo points out, Netflix doesn’t own the @Qwikster name on Twitter.  This would be a problem if it was just some average person.  Unfortunately, the person who owns it is a “foulmouthed pothead” (Gizmodo’s words).  Netflix now must either pay the guy a lot of money to get the Twitter handle or get another handle and deal with constant confusion caused by someone who was there first.  This could have been solved by a free search on Namechk.com or any other similar service.  You don’t announce a service until you have all of your ducks in a row.

Where Do We Go From Here?

So what am I going to do?  Well, it really pains me to cancel the DVD-by-mail, but I think that’s what I’m going to do.  I don’t want to.  I really value the service.  However, at every turn, it seems Netflix is trying to tell me that they intend on making it harder for me to be a customer.

So focusing on just the streaming, I have two main questions for Netflix going forward.  First of all, will the streaming limit still be in place?  If my kids are watching a streaming movie on the Roku in the living room, will my wife and I be unable to stream to our bedroom Roku?  Will additional streams be available as a purchased add-on?  If so, how much will they cost?

In addition, the blog post claims that more streaming selection is on the way.  Honestly, I won’t mourn the Starz loss that much.  I went to look at the Starz content and the first 10 pages or so only revealed a handful of movies I’d like to see.  If Starz is demanding tons of money for a poor selection of content, then Netflix was right to ditch them.  The problem will be what they do with the saved money and how they negotiate for streaming rights.

You see, in the past, Netflix has used their DVD rentals as leverage.  They agreed to withhold DVD rentals for 30 days in return for lower DVD prices and more streaming selection.  With the offerings separate, though, they can’t do this.  They will need to negotiate for streaming offerings on their own.  If history is any guide, the studios won’t want to play ball.  In their mind, streaming reduces DVD sales.  (Never mind that I would have either rented or done without all titles I saw via Netflix.)

If this separation is for real, they’ve weakened their studio negotiating position.  If Quikster-Netflix will still negotiate as one unit with studios then this split is purely a matter of making customer’s lives harder.

Either way, it’s a bad move by Netflix.  Now they have two feet bleeding.  They need to act fast because they have little time to turn this around.  I’m not sure they can, to be honest, but to have any chance, they need to start making intelligent, customer-friendly decisions and FAST!