Earlier this year Netflix announced that it was going to be splitting fees for its rental services into two charges, one for streaming and another for physical delivery of DVD's. There was a tremendous uproar about the announcement, and Netflix has had to adjust its guidance to investors because they underestimeated the number of subscribers who would leave because of the announcement.
Sunday night Netflix CEO Reed Hastings announced via email to subscribers that it was spinning off its physical delivery operation into a seperate service called Quickster.
Hastings explained that he felt the move was necessary because he did not want the company to remain stuck in the model that made it successful (physical delivery of DVD's) and fail to evolve with the times into a new more successful model (streaming). He cited companies like AOL and Borders as companies that failed to move based on the times. He also cited that "streaming and DVD by mail are becoming two quite different business, with very different cost structures, different benefits that need to be marketed differently." He also announced that Quickster would start offering game rentals in addition to DVD's.
In comments on Netflix's blog, Hastings revealed that due to the split the Quickster and Netflix websites would not be integrated. This means that customers will need to have two queues, and will have to search in two places for movies to add to queues.
Comments quickly filled up on the blog announcement - as of the time of this writing there are over 6000 of them. Many users expressed frustration with the move - a comment by customer Jeremiah Cohick is indicative:
You're continuing to make a classic mistake: thinking you're something different than what everyone believes you are. You're not a DVD company and a streaming company: you're where I go to watch movies. That's it. The future clearly is streaming, but by separating and charging more for access, you're wildly less valuable to me. I'll likely cancel. You haven't listened to customer feedback. You're delusional and you're lost.
I feel very conflicted about this announcement. On the one hand, I'm amazed at how tone-deaf Hasting has been to how its moves would be perceived by its customer base. I'm also amazed at the lack of integration between two services - as another customer pointed out on the blog, The Gap companies (The Gap, Banana Republic, Old Navy) manage to provide a level of integration. On the other hand, Netflix has been backed into a corner on this by the content deals it has been forced to sign by the major media companies.
Perhaps the split will enable Netflix to eventually abandon physical media and focus on providing the best-possible streaming experience on the web. I am nervous however that instead we will see Netflix spiral into irrelevance in the face of its competitors and the loss of good will. It would be a shame to see such a beloved icon pass away.
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This is pretty sad stuff to be honest. Forcing customers to have 2 queues for their movies is completely backwards thinking. The only reason I can see of making a separate entity is so that they can possibly sell it off at a future point. I don't use NetFlix but I know a lot of people haven't been fans of their latest moves. Who knows, maybe Blockbuster will beat NetFlix in the end (not bloody likely).