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Tuesday, September 20, 2011

Netflix and Qwikster

Subscribers of Netflix, past and present, received a lengthy email from Netflix CEO and co-founder Reed Hastings.

(If you don't want to read the entire email I've pasted below, the quick summary is that the company is keeping Netflix for streaming and introducing Qwikster for DVDs by mail - and adding video games. Basically, subscribers will have two accounts with two services and two separate charges on their credit cards, instead of just Netflix.)

Dear [subscriber's name],

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 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 and 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 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 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.

I canceled my Netflix account the last week of August. I live with someone who also has a Netflix account, and when the company announced the price increase, we decided to just share an account. After all, we watch several movies together, anyway, and keeping separate queues for our own TV shows and movies just didn't seem worth the price we would both be paying.

I initially didn't think much of the Netflix/Qwikster change, but now that I'm mulling it over (and writing about it), I'm getting more and more annoyed. I'm indifferent to the fact that there will be two charges on the credit card instead of just one; if it's the same amount, it doesn't really matter. However, the lack of an integrated website shows a complete disregard for the user. The company is making it more difficult for its subscribers to find the movies and TV shows they want. Sure, with the streaming service, it's easy to scroll through genres or your instant queue to find something to watch. But if something isn't available for streaming, you're going to make me look it up on another website? That's backwards. Search for something in any other service - Google, Bing, CLEVNET - and you'll see that it gives you the information you're looking for in a variety of formats - websites, blogs, videos, books, ebooks, movies, etc. One company forcing a user to search two different sites to get the same information? Get ready to say goodbye to a whole lot more of your subscribers.

One thing I do like about the change: video games by mail! I don't play enough video games to warrant a GameFly account, but there have been several occasions where I've wanted to play something before deciding whether to buy it. I'm glad this service is finally integrated into something I'm already subscribed to.

So will I keep my account? If I was subscribing by myself, probably not. But since I'm sharing a subscription, it's probably still worth it for now, even with the clunkiness involved. One thing is for sure: Changes in technology mean us current-and-recently-former Netflix subscribers won't have to wait long for an improvement to this service or an even better option. Companies like Hulu and Redbox have a great opportunity to grab Netflix defectors. I'm sure they and other current companies or start-ups are considering ways to sweeten the deal. Will Netflix go the way of Blockbuster?

If you have a Netflix account, what will your plans be when Qwikster arrives? If you're not a subscriber, do the new options entice you?

-- Cheryl Sadler | | @nhcheryl

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