Monday, September 19, 2011

What's Going On With Netflix

I read today that I probably have an email, buried somewhere in my inbox, telling me that Netflix is cutting itself in half.
For those of you just catching up, Netflix CEO Reed Hastings sent out an email early this morning announcing that the DVD and Internet Streaming services in the Netflix plan would be split off into two separate companies. Netflix will now be all streaming, while DVD’s will be delivered via a new company called Qwikster.
(The changes are scheduled to occur on April 1? Whose idea was that?)

Okay... So I subscribed to Netflix to get DVD's, they added on a streaming service "whether I wanted it or not," revised their pricing to make it less appealing (IMHO) to continue to get DVD's, and are now telling me that if I want what I purchased from them to begin with I will have to do so through the new company? To me, this smacks of a company telling consumers, "Don't worry about what you think you want - we know what you really want." No, you actually don't.

Across the Internet, I see that all's not well at Netflix. Their stock market valuation is half of it was at its July peak, and they're expecting to lose about a million subscribers over the short term. I suspect that the change has a lot to do with their vision of a future in which streaming dominates the market, and that they perceive their continued DVD offerings as complicating their anticipated business model, both in their pricing model and in their efforts to obtain content.

Right now, I don't find the streamable content on Netflix to be particularly compelling, but they have quite a few kids' TV shows and movies such that there's always something that can entertain my daughter in a pinch. I occasionally scan through their streaming options, including the films available in my queue, and typically find that the most compelling content is either stuff I've seen or falls into the broad category of, "That looks interesting... Maybe I'll watch it some other day."

What do I expect from the "new" Netflix? I expect that they'll offer a basic streamed subscription and premium streamed content. I expect that they'll offer pay per view choices that, unlike their DVD service, will be able to offer movies for viewing the same day they're available through other pay per view providers. Why spin off the DVD side? Because you don't really want to have your customers see in their queue that a movie will be available starting in three weeks, at which time they will have a "long wait" before it is mailed to them, if you're going to be offering the same movie by instant streaming for $3.99.

I expect that the past - once Netflix's entire business model - is being pushed into the new company for two reasons: First, all of Netflix's existing customers will be subscribers to the new all-streaming service and, second, the company sees the DVD business as part of the past. Spin it off and let it turn into a boutique-level service on somebody else's watch.

2 comments:

  1. netflix sucks anyway. i have been waiting on movies for up to 5 months.

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  2. That's apt to happen if the movie has not yet been released on DVD. I can think of only one film in which "very long wait" turned into several months and, ultimately into "unknown", I suspect because Netflix only had one print of the DVD and that it was damaged by a customer after it went out of print. Otherwise even a "very long wait" has typically been no more than a few weeks.

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