When I haven't been raving about Game of Thrones or ranting at George Lucas on this blog, I've spent a lot of my time defending Netflix's price hikes, because, to paraphrase people smarter than me, it's a miracle from the future worthy of our appreciation even if it costs a few dollars more a month. My defense was based on the assumption that the people running Netflix are smart and rational, and that their subscribers would eventually come back because, really, what's the better option?
But maybe, to quote Louis CK directly, we all need a little time with a donkey that has pots clanging off the side of him.
Netflix has hemorrhaged 1 million subscribers since they announced their price increase earlier this summer, and its stock price has gone in a similar direction, but rather than weathering a temporary storm, they went and jerked their knee in the form of a long email to subscribers announcing dramatic changes, including a total partition between their streaming service and rentals by mail. The latter will now be called Qwikster.
Here's how Netflix CEO and co-founder Reed Hastings explained himself:
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.
Oh, mercy. In all seriousness, I do appreciate the attempt by Hastings to explain their actions. I just think the explanation is pretty weak. Some of us -- a lot of us is my sense -- actually like having BOTH the streaming and by-mail option. With the former, I get convenience, with the latter, I get an incredibly comprehensive selection (and Blu-Rays to boot), something that's very important to a cinephile like myself.
Rather than being patient, it seems like Netflix is panicking, and in the process they are alienating even more of their subscribers. Even the additional benefits of splitting off Qwikster are totally mitigated by the fact that the Qwikster and Netflix sites will no longer be integrated.
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.
I was stubbornly sticking by Netflix up until Monday morning because I've been incredibly happy with their service. Now, for the first time in my six years as a subscriber, I'm actually starting to consider other alternatives. I know Netflix is in a tough spot right now, but their reaction to customers' reactions has only served to turn me off. Now if you'll excuse me, I have to go research donkeys.