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Netflix and...Qwikster?

Discussion in 'Off-Topic' started by illram, Sep 22, 2011.

  1. illram

    illram Deity

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    NB: Thread may not be relevant to non USians...

    Recently I received an email from Reed Hastings, CEO of Netflix. No I am not special. Every Netflix customer got this email. In this email, personally addressed to me from Reed Hasting's own personal "info@netflix.com" email (ha) Mr. Hastings apologized for their recent price hike and told me I am owed an explanation. After explaining something I had honestly stopped caring about weeks ago, Mr. Hastings then told me something very, very odd.

    Netflix is dividing itself into two separate websites: Netflix streaming, and "Qwikster." OK, I think. Stupid name, no reason for this, but whatever. Then it gets annoying. I have to go to Qwikster's separate website to set my "Qwikster" queue, and Netflix's website to set my Netflix streaming queue. Now this, actually, is very annoying and pisses me off, unlike the minimal price hike that really blew over after a day or two, and that I would have forgotten about had Netflix not gone and rekindled that episode by doing something even dumber.

    Needless to say there were a lot of stories about this. E.g., from Reuters:

    Spoiler :
    Netflix's Qwikster Move: Hard-Headed Business, Not Greed
    5:42am EDT

    Netflix subscribers are reaching for the tar and feathers over the company’s decision to split the business in two: a streaming model and now a separate DVD-by-mail service.

    But furious customers ought to know: the man with the red envelope had no choice.

    Also read: Netflix Chief Dogged By Miscues But Still Counting the Stock Profits

    The price hike and corporate splintering wasn’t a case of greed-- it was a hard-headed business decision, however clumsily executed.

    If Netflix continued offering an all-in-one package of streaming and DVD at a steep discount, it would be joining Hollywood Video in the home entertainment graveyard.

    Netflix was bleeding money because of higher content and postage and costs, studio executives and analysts tell TheWrap. The company was shelling out as much as $1.50 in fees to the studios each time it mailed out a disc.

    That figure doesn’t even account for the money the company was spending to mail its films to customers; a cost that will likely rise while the postal service continues to hike up shipping costs as Americans grow ever more comfortable with online shopping.

    Also read: I'm Quitting Netflix

    For the former all-inclusive price of as low as $9.99 per month, that could quickly turn into a losing proposition.

    While streaming licenses used to be a relative bargain for Netflix , those days are gone as content providers extract what they see as their rightful share of the digital pie. Whereas a deal to stream films from Disney and Sony via Starz had formerly carried a tolerable $30-million-a- year price tag, the cable company just walked away from a pact some pegged as worth $300 million annually.

    For the privilege of carrying movies from Lionsgate and Paramount, Netflix pays out $200 million a year to the cable channel Epix, and that doesn’t even take into account the service's recent move into original programming – beating out HBO and Showtime for a costly little curio called "Game of Cards," that sports the combined and expensive pedigree of Kevin Spacey and David Fincher.

    Also read: Netflix Apologizes, Renames By-Mail Unit 'Qwikster' -- But Keeps Price Hike

    Though streaming is no longer cheap, it is clearly where the future lies. To enforce the logic it now must pursue—building the subscriber base online and slowly choking off the mail model—Netflix’s painful and much-loathed decision was probably necessary.

    There’s another upside. By spinning off the DVD-only subscribers from the streaming users, Netflix is cutting down on the amount of money it shells out for digital content. The fees it pays to stream movies are calculated on a per-subscriber basis, much as they are for pay-TV companies, so treating the groups separately will drive down costs.

    Wall Street has been brutal in its assessment of the manner of move: Michael Pachter, an analyst with Wedbush Securities, told The Wrap, “it’s the dumbest thing I’ve ever seen.” But studio executives say not to bet against Netflix, its co-founder and CEO, Reed Hastings, or the underlying rationale.

    “Reed’s brilliant,” a studio executive told TheWrap. “It could be he’s hastened the demise of [Netflix’s] DVD business and it works out for his shareholders perfectly.”

    That’s not to say that Netflix didn’t misstep in the way it rolled out its new subsidiary. Mixing the launch with a mea culpa to consumers about price hikes robbed Qwikster’s debut of sizzle and was evidence that Netflix has a major messaging problem.

    “You want to introduce a new product with great fanfare, not a dated name and an apology,” Howard Belk, co-president and CEO of the global strategic branding firm Siegel + Gale, told TheWrap.

    Belk said the moniker dredges up unpleasant memories of dated Internet brands. Other analysts groused to TheWrap that Netflix should have experimented with a riff on its current name such as NetflixDVD or Netflix By Mail, instead of striking out in a new direction.

    “It harkens back to Friendster and Napster, things that are passe,” Belk said. “To me Qwikster connotes a slipperiness.”

    Also, as the recent blow-up with the pot-loving owner of the Qwikster Twitter handle shows, it’s probably best to have all the ducks, or in this case profiles, in a line prior to launch.

    Here’s the good news.

    Even as Netflix struggles to get costs under control, studio executives tell TheWrap the subscription service still stands a chance of expoliting a number of potential new revenues. In particular, video-on-demand offers enormous upside for a company that boasts one of the best platforms for online video and millions of movie-loving users.

    To work, it would require studios to loosen the 30-day delays many have imposed on Netflix for new releases, but some of the majors are willing to lift the restrictions for the right price.

    “There’s lots of stuff they can still be doing to broaden their film offerings,” one studio executive said.

    In some respects, the fault lies with Netflix, which the executive said has been more focused on building its subscriber rolls and less intent on breaking into the VOD business.

    There’s also more the company could potentially do to piggyback on UltraViolet, the cloud based video anywhere platform launching in the fourth quarter of this year. There’s no reason Netflix couldn’t integrate titles its customers already own onto its platform and make recommendations based on subscribers’ film libraries.

    Like Pandora, the company could also potentially integrate UltraViolet sales into its site, creating a one-stop shopping experience for cinephiles and adding both value and profits to the service.

    If the company can finally get control of the mounting public relations disaster, all that red could quickly turn to green.
    Related Articles: Netflix Chief Dogged By Miscues But Still Counting The Stock Profits Netflix's Qwikster Announcement Leaves Subscribers Angry and Analysts Cold


    What do you guys think? Is this part of a move to actually kill off Netflix's apparently money-losing DVD by mail albatross? It certainly made me think about canceling my "Qwikster" subscription that I will be automatically enrolled in once the split happens. I mean the name is dumb enough, but I really don't want to have to go to two web sites to deal with what is essentially the same activity--my wife and I are bored and want to watch a movie, and plan for what we want to also watch later.

    And the other dilemma--in my experience Netflix's streaming content has been less than desired. Unless they substantially beef up their offerings with this move I fail to see how this makes any sense whatsoever, unless Mr. Hastings is actually some sort of Judo-business master using his mad CEO skillz in a totally genius way that flies right over my little pea-brained head.

    What are your thoughts? Annoying? Awesome move? Re-opening old wounds and then pouring salt on them?

    By the way, "his" email to "me:"

    Spoiler :

    Dear ******,

    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.
     
  2. bhsup

    bhsup Deity

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    I only have the streaming subscription, so it's not a huge deal for me, though I absolutely agree with what you said above about the streaming. I still find myself going to a local Redbox booth a few times a month (gotta hop on tuesday before noon and reserve it so the local yahoo's don't snag them before I get to the booth!).

    That may be a solution for you. Pay the $7.99/mo and then a few times a month spend a buck on a specific new movie you're wanting. Still at only about $11-$12.
     
  3. Skwink

    Skwink FRIIIIIIIIIITZ

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    That's cool, but I got OnDemand.
     
  4. mangxema

    mangxema I

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    This is basically my thoughts on this. I understand why they did that, but I still think it's a bad move. I personally don't know if I'll keep both accounts, just because like you say, it's going to annoy me. Looking on two sites is annoying. They should be able to link the accounts such that one can tell me if the other has what I'm looking for. I know in the future that may not be sustainable, but for the moment they're still owned by the same company and everyone whom this would concern already has both accounts.
     
  5. Thoughtful Thug

    Thoughtful Thug Deity

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    Still an outdated business model. Besides, it's inevitable that culture will eventually be free. Can't stop decentralized file sharing.

    If they really want to save themselves, they better start implementing a back up plan of some sort - a "pay-as-you-like" fee as some indie gaming companies do ( Humble Indie Bundle ), and what RadioHead has done; because more people are indeed getting smarter about using bittorrent protocols to obtain movies that in are in a sense a better quality than what Netflix and their new offshoot, Quikster have to offer.

    They are not going to last any longer than the old days of video rental industry did.:lol:

    Live streaming will get better and easier for people to share with others online. Why go to a middleman anymore?
     
  6. Disgustipated

    Disgustipated Deity

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    Never underestimate the power of big business. Look what the RIAA has done. Common citizens stuck with lawsuits over $100,000. They will bribe the politicians to invade our privacy and ensure we will not be downloading any movies illegally (although they may cover it up and say they are invading our privacy to protect against child porn- yeah right). Soon the government will be able to look into the files of every citizens computer. Only people with good computer knowledge will be able to escape the government's reach.

    As for quickster, I hate the name, but I will use quickster, but not the streaming service. I tend to watch lesser known movies, and some foreign movies, and Netflix (I will still call it netflixn, not qwikster) can provide obscure movies that video stores, or redbox cannot. I can care less about blockbuster movies, I never watch them. So I will cancel streaming service if they try to charge me with that.
     
  7. Mise

    Mise isle of lucy

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    Ehh, plenty of firms have started in one business, branched out into another business, then abandonded the business it started in. Sometimes those vestigial spin-offs end up being bigger than the business they were abandoned in favour of. But I doubt that this is true of mailing DVDs to people's homes. It just doesn't sound like the future is going to involve mailing DVDs to people's homes.

    What the hell did he call you that it triggered the autocensor?!
     
  8. Maniacal

    Maniacal the green Napoleon

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    Weird and not very user friendly. However at least you HAVE Qwikster and Netflix still has a substantial library in the USA. Netflix Canada doesn't have mail order DVDs and the internet selection is much, much smaller than it is in the USA.
     
  9. illram

    illram Deity

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    I used Redbox for the first time while on a short vacation down in Southern California. Convenient and cheap, I admit, but here in SF there are not many Redboxes. It is slightly different than Netflix as you have to actually physically go somewhere but I think they put them in grocery stores so that they are somewhere you would go regularly anyway, so the idea is actually the same.

    I think this is why many conspiracy theorists see this as an intentional move to starve and eventually kill Netflix's mail DVD business. I agree that streaming is the future. But, I think this is too soon and not executed properly. First, from a PR standpoint it seems to be universally confusing and/or annoying customers. I think it's better to let the DVD business die a natural death rather than intentionally drive people away who still might want mail order DVDs for a few more years. Second, and somewhat related, like I said earlier Netflix's streaming library is really thin. Unless they are planning some major increase in that library (and they must, otherwise I think this is a catastrophic move) I think they are going to lose even more people who don't see the benefits of streaming when there is simply nothing they want to watch.

    Netflix is simply not the king of the streaming media hill right now. Amazon has a large library, iTunes has one too, Blockbuster is gearing up for its own streaming service---there are competitors out there who would love to take Netflix's customers. I was always a loyal Netflix customer and was usually satisfied with how they worked, but now they are even pushing someone like me, a casual customer who didn't even care about the price raise, away.
     
  10. Disgustipated

    Disgustipated Deity

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    I'm curious why you all think the mail dvd service is doomed? I can see it going another 10 years easily. The fact, is you'll never have a full selection of every movie ever made available for streaming. How else am I going to watch foreign movies, or obscure older movies other than Qwikster?
     
  11. warpus

    warpus In pork I trust

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    I think they are changing their business model to better adapt to the changing times.. which means more streaming and less physical media.

    Maybe they'll sell off Qwikster or eventually kill it, but I think that they are separating the two to shield the streaming side from any bad financial stuff that might happen to the dvd shipping side.
     
  12. jtb1127

    jtb1127 Deity

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    On demand is a ripoff compared to Netflix or what ever it's called.
     
  13. Skwink

    Skwink FRIIIIIIIIIITZ

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    Not really, it comes with the Comcast service. I've watched about four things today already, and they were free.
     
  14. Andrei_V

    Andrei_V King

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    The future of movie business is where I can watch 1) what I want, 2) where I want, 3) now, and 4) for a flat monthly fee. I don't really care if it's gonna be Cloud or Myst or Galactic Dust. Whatever they may invent in the future.

    So far the best approximation is DVD by mail. It somewhat sucks at #3, but beats everything else at #1 by a large margin. Streaming is perfect for #3, but it really really sucks at #1. The quality is not exactly great either, and with Netflix it has deteriorated lately -- now I get constant hiccups and freezes when I watch HD with subtitles on my TV hooked to a Win7 laptop with HDMI cable.

    These two options taken together represent a far better approximation to my vision of the future than either one taken alone. Divorcing the two was a serious mistake of Netflix -- instead of complementing each other they are now competing against each other. For me personally the winner is DVD by mail, since I happen to value #1 way above #3.

    So, I guess, I'll kiss goodbye to Netflix and stay with Qwakster or whatever is the name. At least until Netflix becomes competitive enough in the #1, then I'll switch.
     
  15. bhsup

    bhsup Deity

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    You mentioned blockbuster earlier, which makes me want to touch on a point for them. Since Netflix is splitting the service, you may well want to consider Blockbuster for your DVD mail delivery. One huge plus for them over Netflix in that regard is that they don't charge more for BluRay access. It's built right in to their service.

    Of course, that still leaves you with two separate services you have to manage, but I just thought I'd throw that out there.
     
  16. MjM

    MjM Deity

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    Most on-demand services are free, and most definitely not a ripoff.
     
  17. Andrei_V

    Andrei_V King

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    Comcast asks to subscribe for "XFINITY TV", which is not exactly "free". I only have their Internet, so their on-demand is not an option for me. I'll better stay with Netflix for $8/mo.
     
  18. Skwink

    Skwink FRIIIIIIIIIITZ

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    If you subscribe to XFINITY TV for your TV viewing, it's not a ripoff at all, it's a puton.
     
  19. Andrei_V

    Andrei_V King

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    I don't watch cable TV. I never did and I never will. It's a ripoff.

    Besides, if I want, like, Disney Family movies on-demand, I'll have to pay an additional $5.99/mo for 10-12 "unlimited and commercial-free" titles. Definitely a deal-breaker for me...
     
  20. Birdjaguar

    Birdjaguar Hanafubuki Retired Moderator Supporter

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    I canceled my streaming Netflix account on Monday and am sticking with the dvds by mail. Since the change doesn't take effect for two weeks, I'm watching all the streaming movies in my queue that I can.
     

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