Why Reed Hastings Should be Applauded for Netflix Split

Posted on Sep 19, 2011 | 259 comments


By now you probably know that Netflix is splitting its business into two parts: its digital streaming business (retains the name Netflix) and its DVD mailing business, which was its original business (to be called Qwikster).

If you haven’t read Reed’s explanation of this split make sure you read it (of course, after you’re done with this post ;-)) —> here. It’s simply brilliant.

1. He acknowledged mistakes in his past communications and apologized
2. He offers a transparent explanation of his business and;
3. [most importantly] – It’s a great strategic decision.

With nearly 25 million customers using Netflix it’s clear that everyone will have an opinion on this. And many short-termists will think it’s a bad idea. Indeed, my Twitter stream tells me so. I find much of the criticism so far fairly reactionary. I would like to take the opposite side of that debate.

If you haven’t read my post on the Future of Television and the Digital Living Room you might enjoy that as a primer. In it I talked about how I believe that Netflix has a very strong lead in the battle for the “head end” of the digital living room. Right now they’re the leading platform for streaming movies. Hulu is the leading player for streaming television.

Frankly, I’m surprised Netflix doesn’t buy Hulu. In my opinion it’s the most natural fit and it would give Netflix a very strong presence in Los Angeles and in TV (obviously subject to getting the right rights from the studios).

So why on Earth should Netflix split into two businesses?

1. Innovator’s Dilemma – In his seminal book, “The Innovator’s Dilemma,” Clay Christensen talks about why industry leaders almost always fail to act when “disruptive change” enters their business. He defines this as new products that are dramatically cheaper, lower quality, lower margin but larger markets. Incumbents can’t react.

If you haven’t read his book please do yourself a favor and buy it. It’s the most profound book I’ve read on thinking about how the Internet is changing business. Period. But for now feel free to read my short summary of the key principles.

The reason that incumbents can’t react is that their revenue and defensibility are continued by serving the high-end of the market for which it would take too much time & money for any competitors to effectively challenge. In Netflix’s case this is their DVD distribution business. It’s hard to imagine somebody else being able to effectively compete with that.

But the real threat comes from the change in technologies that rule the old business obsolete. Streaming. It’s clear that in the future movies & TV will be delivered to our homes from the cloud. Indeed for many this is already the case.

To win the future he needs to attack his core assets by building new ones. Very few companies ever do this. It would be like if Microsoft undermined its Office franchise by aggressively pursuing a Google-Docs-like strategy. Yeah, I know they did, but too little, too late, too lame.

2. Focus – By having two separate businesses, each with its own CEO and own teams, they can focus on their two very different businesses and develop the right strategies for each. The Qwikster team can’t make any excuses for not hitting their numbers and can’t argue that their resources are being funneled onto streaming projects.

The execs of Qwickster have got to continue to sell the merits of that DVD business – the most notable of assets is the much deeper library than the streaming business.

Equally, the streaming business has got to accelerate content acquisition, focus on customer retention, improve streaming technologies to make it better for users / worse for competitors, and they’ve got to continually improve the UI.

3. DVDs won’t die quickly – As Mark Twain would say, “The reports of my death are greatly exaggerated.” We all predict that technology change will cause obsolescence of previous technologies much more quickly than they actually do.

MapQuest was (and is) a much shittier product than Google Maps yet people used it for years. It defied logic. People still pay for AOL dial up years after they no longer need to. And many people actually still use Evite. Crappy. Old. Evite.

Many people are happy to receive their regular DVD mailers and for these people (still 14 million subscribers!) this service will continue.

4. Charge the right prices for the right services – But as fewer people take the DVD service over time, there will be less revenue to cover the relatively high fixed cost structure of the mailer (Qwikster). So it wouldn’t be a surprise to see price increases in Qwikster in the future. No time soon. But eventually. It seems logical.

And what about streaming? This business will adapt, too. Who says that “all you can eat” pricing is the right one for a streaming service? Maybe it is, maybe it isn’t. In the DVD world they could always limit you because you could only have a certain number of videos outstanding and any time. With streaming, this is harder to enforce.

Plus, content rights are harder to secure for streaming. If you haven’t followed this check out what’s happened with Netflix’s biggest content partner who has withdrawn from the service.

It’s possible that the best structure in the future is PPV (pay-per-view) or different tiers of content pricing (i.e. new arrivals plus library versus just library) or even create channels (i.e. kids movies priced as a separate package). Who knows?

Separate businesses allow them to play around with different pricing models without affecting the other business line.

5. Transparency for investors – I also love the transparency that is created when you have two businesses that will move in opposite directions, have different strategies and different economics. For investors this is huge. As Dan Frommer pointed out, all of the news reports on Netflix said that they had lost 1 million customers from their recent price increase. In fact, they are projected to only lose 200k streaming customers (800k DVD).

6. Positioning for the Future – It’s rare in business to see somebody like Reed Hastings tackle the massive changes happening to their businesses and deal with them before they’re too late. Imagine if the record labels had been as bold. By making the separation Reed can now point the Netflix business squarely at the future. Netflix can stop having to answer questions about its DVD business.

A note for industry

I argued ages ago that Yahoo! should have come out early and say, “we lost the search war to Google but we still have a have a great media business and we’re going to focus on that.” They dithered for years. Imagine if Carol Bartz or the Yahoo! board had had Reed Hasting’s clarity and boldness.

When Fox first hired its triumvirate of CEO’s to run MySpace after the founders’ departure, I argued the same.  Announce you’ve lost the social networking battle with Facebook and that you’re now focused on a narrower business for gamers and for music. In stead the press story for 2 years was about how they were losing to Facebook and continuing to hemorrhage revenue and people.

Reed is showing the cojones that so many others haven’t.

Any Hollywood studios taking notice?

==> What do you think about the Netflix decision?

  • http://hirethoughts.blogspot.com Donna Brewington White

    “What entrepreneurs do is make decisions when they don’t know.”

    Yes!

  • http://hirethoughts.blogspot.com Donna Brewington White

    “delightfully aggressive”
    Love it!

  • http://hirethoughts.blogspot.com Donna Brewington White

    One thing to disrupt.

    Another to self-disrupt. 

    (Just hoping it’s not self-destruct, but don’t think it will be.)

  • Anon

    Thanks for your reply Mark, certainly there is no hard feelings. I think my initial reaction to the Netflix developments was one of total and utter shock at how the situation was being handled  – so that probably came across in my first comment. 

    This scenario certainly seems worthy of a Harvard Business Case: against all odds Netflix becomes a multi billion dollar company, rapid ascent and darling of Wall Street, then losses $8 billion in market cap during in 60 days due to strategic reasons. Then the apology, 80% dislike rate on youtube, the 22k blog comments on Netflix.com, the epic @qwickster twitter marketing blunder and competition from some of the biggest tech companies including Apple. 

    I shall continue to follow it with great interes. Let’s hope Reed can navigate the company back on the road to success. No doubt the outcome will be well documented and widely discussed. There is nothing quite like an education in business strategy in real time. 

  • http://hirethoughts.blogspot.com Donna Brewington White

    My kids have taken over the DVD portion.  They have it down to a science.  They are going to love that there are now games.  And they’ll probably even relate to that awful name – which now that I think of it is pretty kid friendly.  They just hate that I reduced the discs from four to three with the price change.

  • http://hirethoughts.blogspot.com Donna Brewington White

    There is no way that I can think they named a company Qwikster that they intended to see survive.  Just no way.  

    Unless they are planning to market to kids or turn it into something else over time.  A video game site, maybe?  

  • http://hirethoughts.blogspot.com Donna Brewington White

    Mark, how come we can’t do real time updating here?

  • http://kpwriting.com/ copywriting career

    This is a good article and offer some helpful information for me,thank you!

  • Keel

    This was badly handled by NFLX management.  Keeping customers happy is important in a service business.. they have failed due to the company focus on rapid change without proper consideration of customers’ reaction to the change.  Negotiating for streaming content is the company problem. Forcing the dual customer into two data bases makes no sense from the customers viewpoint. I canceled and enjoying books on my Ipad. I also made some money shorting the stock.

  • http://www.victusspiritus.com/ Mark Essel

    I hope at least two companies pull off successful streaming media companies. The more competition, the better the value.
    I first signed up for Netflix because of their streaming. We used the DVD service a few times but swapped out of it for the lower price streaming only plan as soon as it was an option.
    There’s little doubt that the majority of media consumption will be streamed, it’s only a matter of who we buy it from, and how we pay for it (ala carte, subscription). The old cable model of high priced content plus interruptive commercial time was ripe for a change.

  • http://www.repeatablesale.com/ Scott Barnett

    Mark – a little late to the game here but I just read your post and Reed’s email to me as a Netflix subscriber.  I believe this is your first post EVER that I disagree with you.  It’s certainly obvious that the original strategy would ultimately lose money for Netflix and they needed to pivot.  However, they asked their most loyal users to share the pain of the pivot, did not look for the voice of the customer during all this, and I can NOT understand breaking the company up like he did.  They could have recognized the revenue internally as they needed and logically broke up the teams, but the argument that people want to have a single movie provider is very powerful, and Netflix just screwed the pooch on that.  So, I now need to manage 2 queues?  And check to see if it’s on streaming first, and when it’s not (80% of the time!) add it to my Qwikster queue?  Baloney.  

    I don’t see anything good about this move – other than they had to do something to survive and picked what was best for THEM – not their CUSTOMERS.

    Now, to be fair, at the end of the day, we’re talking about $16/mo.  Folks spend more on latte’s in a day or two, so the anger and frustration seems a bit misplaced.  Perhaps due to the low cost they can recover.  But I am very likely switching off Netflix/Qwikster to Amazon/Redbox.  Less convenient for me (at least the Redbox piece), but not by much, cheaper, more streaming content, and no less convenient (still 2 sites).

    I don’t see the rosy end zone that you see…. I could be wrong too (well, one of us certainly is :-),
    but for me personally they have lost their allure.

  • JamesHRH

    No, made an admin error! That feels better….

  • Anonymous

    I agree that the future is in streaming but Netflix has to be able to keep up with the movies they offer. Currently they are very behind on  streaming movies and TV shows and could easily become irrelevant. Another company offering new streaming movies faster could render Netflix irrelevant. Also, “rebranding”  (Qwikster) what made Netflix a home movie hero just does not make business sense. Losing your core competency when you don’t have a relevant replacement you will lose! When customers are disgusted with a company that they fiercely evangelized for, the company is in deep trouble no matter how strategic thinking they thought they were! I being one of them feel that their arrogance is palpable. Yes – I down-graded my service. 

  • Anonymous

    This was an awesome idea!!!!! Thank you so much for your courage.

  • http://about.me/austinlac Austin Clements

    I’m not ‘Anon’ or ‘Anon2′ but I wanted to follow up on the point you’re making here. After I read Reed’s post I felt it was a very well written article for investors to read, but not necessarily in the best interest of the customers. 

    The foresight of his strategic direction is undeniable, but it in no way does this benefit the customer in the short run. I’m sure this whole transition to a new structure would have been a bit less abrupt if there wasn’t as much friction with content partners deals.

    But this whole thing reminds me of a year ago when people were really up in arms about Facebook’s privacy settings. There was a lot of noise because it was en vogue to hate facebook, but it (obviously) didn’t do anything to hinder the growth of the company. After the dust settles with customers and content partners, people will get used to the new Netflix and the company will be right back on track. 

  • Finn

    Please Don’t.  This is either greed or just stupid management.  You are about to loose another customer.

  • http://twitter.com/davidhhendricks Dave Hendricks

    Mark – you’re off on this one. 

  • Asdf

    Too clever a move by half for NFLX. They got way too smart with “strategy” and lost sight of the customer. Happens all the time when companies spend more time talking to analysists and consultants than actuals users.

  • Asdf

    P.S. What is the benefit of Netflix? Fast easy movies. Nobody cares about their business model. You want to have one bill. One service. One queue. One solution. And a good flick. That’s it. 

    I wonder if they made some content deal with the devil that required them to separate the businesses.

    In hindsight couldn’t they have used their incredible share price to buy content or even create it the way HBO did? Wouldn’t that have been a much smarter move than firing customers and killing shareholder value?

  • http://twitter.com/#!/georgelbowen George Lucas Bowen

    Agreed, it is a smart move on his part and a great example of being nimble BUT horrible execution.  First the pricing changes then this.  Consumers hate change and these are 2 huge changes.  They should have happened together.

  • Anon

    re: losing millions of customers. 

    30% of Netflix users consider leaving per subscribers responding to a survey

    http://t.co/CiLmzclI

  • pradeep

    Mark, you are probably thinking of this too much as a “strategy guy”.  IMHO strategy is pointless if you are losing consumer confidence.  How does this change help the consumer, it just doesn’t.  Why is this being applauded as cojones, when he is significantly eroding all the good will he has garnered from users over the years?  And also, one would hope that it would be possible for them to “walk and chew gum” at the same time – i.e., handle both businesses under one umbrella.  By splitting them off, if anything, he has really shown that the organization is incapable of handling the nuances of two different products.  This is anything but courage.  Sorry, I read your stuff with avid interest but on this one, don’t agree.  Your analogies about Yahoo just don’t work either.  Entirely different ball game…

  • Ravi Dronamraju

    Well said Jonathan

  • Ravi Dronamraju

    Donna, 
    The combo product was better than parts (either streaming only or dvd only) and at the marginal upgrade price it was a no brainer to combine them, Not that there are other superior products in each category. 
    However, a lot of people might feel that the no-commitment relationship with Coinstar is superior to subscription business. It would be interesting to see how that part would play out. 

  • Ciaopubs

    Wish I believed that there was any actual apology in the letter.  That came off so fake  — “I’m sorry you people got offended, so here’s another heaping pile of crap while you’re still steaming from the last one” — that it set a negative tone for reacting to the rest of the announcement.  Classic way of *not* being apologetic.

  • Anonymous

    After Reed Hunt explain I instantly understood what he was doing and forgot all my misgivings. As a founder of a startup and observer of business model understood that Innovator’s Dilemma that is a challenge and opportunity for Netflix.

    All is forgiven. It takes guts and vision to do what Reed Hunt is doing. History is littered with companies that never make the transition to a new business model or technology.

  • Star Zagofsky

    I applaud your ability to take the other side in this case, but I’d point out that one of the major failures in this announcement isn’t the decision but, once again, how it was delivered. 

    The announcement email focused way too much on what Hastings wanted and not what the users want or care about. It missed the mark on every level. In my blog post, I identify the top five screwups:
    http://sfcopywriter.wordpress.com/2011/09/20/netflixs-big-goof-5-blunders-in-its-recent-announcement/

  • Guest

    Backlash alone is a valid argument against any action. That was Anon’s point. His method of emphasis made it sound like a rant. And that was my point.

    As for anonymity, identity is over-rated. You, Mark, and anyone else who is willing to be public online is lucky enough to be at the point where they feel they are investing in their online presence and their brand. You are public because you have an identity you are proud of. Others are not so lucky or not so there yet. But that shouldn’t stop anyone from participating in a discussion. And I will say it again, but Anon isn’t that anonymous. He is actually playing on the whole concept. At least he doesn’t pretend to be someone else. In fact, one should never trust any online identity anyway.

  • Guest

    … and trusting an identity is where the pitfalls are, both online and offline. The worst people are not anonymous, they are someone else.

  • Anon 2

    And note that 12 million is half of the customers.

  • JamesHRH

    I caught that and was surprised to see it that high.

    Everyone seems to agree that streaming is the future. Producers want to charge big $$$ and customers want to pay little $. 

    Netflix is the only brand that comes to mind as actually making it happen.

    I get that there are other services – but if I stopped 10  people on the street and said Netflix and then said the names of the other services, Netflix would come away as the ‘order movies online brand.’.

    If they can build on that – while placating their currently unhappy customers, who may or may not vote with their feet (check back in 180 days) – they will have done an amazing job.

  • Anonymous

    How hard would it be for them to have a “streaming only” filter for search? (I assume they already do/did, but I cancelled long ago when Hastings was up in Canada insulting Americans)

  • http://www.bankaim.com Bank Aim

    We just put our account on hold during this time because Netflix has very few great online streaming shows. We were getting most of the newer shows on DVD. If Netflix wants to grow, they need to be able to offer newer tv shows and movies. Its not worth their almost $16/month to watch old movies.

  • Noam

    I think a potential program is that they just gave up, in the streaming business, the competitive advantage they had in DVD distribution.  There’s no readily ascertainable durable competitive advantage in streaming alone when companies like Google and Amazon have dramatically more customers and resources, and when Netflix’s distribution agreements are non-exclusive.  For all the hurrah about bold decisions, it seems left with a more difficult execution challenge: no moat.

    Moreover its streaming business is pretty pathetic: for customers who care about image quality, HD (high definition) is a “genre” within which it’s impossible to further sort by genre.  For a multi-billion dollar company, it’s absurd.  But I’m a customer at least until I get through my current queue: they have a fighting chance.

  • JRutt

    I thought some of the reactions made in the “comments” of Reed’s post show some great insight from the audience.  For example,  the comment
    1. Pricing: Offer a combo DVD/Streaming deal that is cheaper than both
    services separately.Ask any Cable/Internet service, they know about
    this. I think you’ll find less customers dropping individual services.

    2. Lost/Loyal Customer Program: Offer a 20% discount for those loyal
    customers that stuck through the price-hikes, plus 2 months free as an
    apology (yes a real apology). Offer the same to those who have left to
    get them back.

  • Christopher Doherty

    What competitor is netflx in danger of losing to? Its suppliers. That’s an entirely different proposition from which leverage is the key to success. Ask Steve Jobs.  So to me it doesn’t make sense to pivot your business in a direction that effectively reduces your leverage. Reed should have waited to make this move. The content providers don;t want Netflix to succeed so now they will be even less willing to negotiate fair.

  • http://twitter.com/kevinberk Kevin Berk

    It was a brave decision, but a rushed one.  The pricing strategy was also overly speedy.  I posted an article to Seeking Alpha outlining my thoughts on it – the conclusion of my article was: 

    I admire Reed’s efforts in communication and business clarity, but these rapid changes to the customer experience are detrimental to Netflix’s usability and brand. Perhaps these changes will pay off with better margins, more clarity, strategic focus and CEO accountability over the long term. These changes may have been inevitable, but I would have advocated a slower rollout, better communication, more user testing and ongoing site integration.

    http://seekingalpha.com/article/294902-netflix-missteps-creates-a-hobbled-dinosaur

  • Zealot

    3. A customer could subscribe to both services – but they will now have to search both sites for movies – leading to a very poor customer experience. 
    Which is what I do now. I put all the movies in my streaming and dvd Que.(Since some movies leave streaming) Whatever pops up first thats what I  get and delete the other one. Whats the problems here. I check for streaming using my Wii so I do not need to login to two sites only one,which would be for DVD’s only.

  • http://twitter.com/civisidedotcom Ken Seville

    Yesterday I agreed with you, but Fast Company has made a very compelling case why it is now Blockbuster vs Qwikter, advantage Blockbuster: http://marker.to/FdNXnh

  • Anonymous

    I found out what great deals Blockbuster has for there customers. With
    Netflix price increase and now them forcing there customers that have both
    streaming and disc rental to receive to bills is just in real! Blockbuster
    customers have access to over 100,000 titles and unlimited access to games, TV
    shows, and movies. Many of there new releases come out 8 days before Netflix
    and Redbox does plus a co-worker at DISH told me that new DISH customers can
    now get 3 months free of Blockbuster by mail rentals. Check this link out http://goo.gl/wuMrN.
     

  • Anonymous

    If this is case then Hasting’s communication isn’t just clumsy, but disingenuous. And worse it misses an opportunity to recruit users to lobby the studios. Had he said “We are splitting off the DVD business because Hollywood will not make more streaming titles available so long as a DVD of the title is easily available. We are making this move because it is required by Hollywood for us to give you the most streaming content.” the customer base would have risen up with a hew and cry against “Hollywood” instead of against Netflix. 
    To see how this has worked in the past, cf. Steve Jobs hanging every product shortcoming of the iPhone on AT&T. But Hastings is clearly no Jobs.

  • Patrick

    I’m fine with just the streaming. I canceled the dvd part. I can just get a redbox every now and again. No big deal.

  • Patrick

     I think they named it that on purpose so it will die off quickly, like napster or friendster. lol.

  • Anonymous

    YTD:
    NASDAQ: -1.97%
    NFLX: -26.37%

    If you are an investor and you look at Reed’s performance, it’s very poor.

  • Anonymous

    I wonder if buying this parked domain:
    http://quikflix.com/
    and getting this unused twitter account:
    http://twitter.com/#!/search/realtime/%40quikflix
    was more expensive than a 27% drop in market cap.

  • http://twitter.com/Valdarez Valdarez

    The only problem with this analysis is that Netflix has continued to lose content providers this year in it’s streaming business, which is why the split is mind boggling. The content is shrinking, and they split it now?

    If there were continued growth for each platform, I would agree 100% with your analysis.  Netflix needs some big wins on the streaming content side and they need them sooner rather than later.

  • http://www.cindyalvarez.com cindyalvarez

    But consumer backlash is short-lived.  It’s painful for a matter of weeks or months (I guarantee you some product managers out there feel kicked in the gut each time they read an angry customer email or comment), but people have a short memory.  

    Every time I’ve done a product or website redesign in my career, the immediate response is a ton of complaints… and then 6 months later when you change again, the SAME PEOPLE who complained last time say “but it was perfect, why did you change it?”  Meanwhile usage goes up, revenues go up. 

    Complaining is cheap.  Changing behavior permanently is (mentally) expensive.

  • Scs_68

    Like many Netflix customers, my initial reaction to Hastings’ announcement was anger. I have long enjoyed Netflix and have no desire to see it change in any way that will negatively affect my enjoyment. I took the price increases in stride and I have come to see that there are some benefits to separating the DVD and streaming businesses. Nevertheless, I do take umbrage with several of the points made in defense of the split and Hastings behavior, including many made here.

    1. There was no apology. While Hastings does acknowledge that he made mistakes, the statement is ultimately self-serving and patronizing. In short, he repeats his mistakes. Rather than addressing customer anger and concerns, he dismisses them as confusion and lack of foresight (a point of view repeated here in this blog and the subsequent comments). I submit that treating customers like petulant children is no way to earn trust and bolster your brand. The “apology” then quickly morphs into a marketing campaign touting the virtues of Qwikster and Netflix, including the justly ridiculed separate web sites, separate queues, separate billing, etc. Again, this simply was not an apology.

    2. Preparing for the future need not, and should not, require dismantling the present. As you say, the DVD is not dead yet. Far from it. And with over 14 million DVD subscribers, Netflix surely knows this. I rent DVDs primarily and have always regarded streaming as a fringe benefit, as I suspect most DVD subscribers do. The discrepancy between the DVD and streaming catalogs only serves to support this sentiment. But I have benefited greatly from the integration of DVD and streaming. It’s always a rare treat (and a surprise) to find the DVD I’m looking for also available via streaming. But I’m not going to waste time searching two sites for a movie. I know it’s available on DVD, so that’s where I’ll search. This seems to undermine the notion that splitting the business will somehow aid customers in transitioning to streaming. Quite the opposite.

    3. The future direction of Netflix is not innovative. If the analysts and commentators (including you, Mark) are correct, then Netflix is transitioning into something as ubiquitous as electricity and running water: cable TV. We’ll pay a base rate for content of marginal quality (hello, reality TV), and then pay additional fees for high value content, a la HBO, Showtime, and the like. This business model isn’t even innovative among traditional competition from cable operators like Comcast, let alone Apple and Amazon, who already offer this service.

    4. How about a little transparency for the customers? This has already been discussed here so I won’t belabor the point, but how about a little honesty from Netflix. They didn’t split the services and raise rates to give customers more flexibility. They aren’t cleaving the business in two to improve marketing or simplicity (seriously, that doesn’t pass the straight face test – not even close). Their doing it because Hollywood has them over a barrel. So enough with the dismissive and disingenuous blog posts. Give it to us straight.

    I love the service I get from Netflix, so I hope it can survive this brouhaha. But I used to loved my local video store, too. And when they didn’t have the movie I wanted, I went to another store.

  • Bart

    As a long time (from almost the beginning) Netflix user, they have done all they can in the last couple of years to lose me as a customer.  To give some context to my opinion, I am admittedly more of a ‘niche’ user for whom the viewing experience is very important – so high bitrate video encodes and lossless surround sound are important to me.  Back before DVD, I drove well out of my way to get to the Blockbuster that had Laser Disk rentals instead of settling on VHS.

    The initial concept around Netflix was an extensive current and back catalog of DVD content.  This was later supplemented by BluRay and HDDVD, and I was a perfectly happy customer with 3 or 4 discs out at a time plans as needed.  We had 2 separate user queues with separate ratings and suggestions for me and my wife.

    Then they started charging more for BluRay/HDDVD access without doing anything to increase availability of HD content (miss getting that new BluRay on day one and you will be waiting months at times to get one while they have DVD versions sitting on shelves).

    Next they decided to end the separate queues, a decision that they only pulled back after a larger than expected backlash.

    Next they added streaming as a ‘free’ add on.  Only problem, the streaming was only tied to the primary queue – now instead of having separate ratings for movies with separate suggestion lists – the heavy power users were forced in to the single queue structure anyway.  Separate queues still existed but were made useless if you wanted to use streaming.  First move that made the service less convenient and less user friendly.

    Recently they increased prices stating that the reason being increased costs in the previously free DVD service I got with my streaming account.  I’m sorry, I thought I had a DVD account with free streaming – at least that is what I had signed on for and what I was paying for.

    Now they are making Netflix a streaming only service while the quality of the video is still very sub par (about the same quality as cable or really good satellite) and the audio on most of their streaming stuff is still not even 5.1.  Their streaming selection is still very weak to boot.  Check out their own top 100, a whole 6 out of 100 titles are available for streaming.  For us, Netflix streaming is a nice way to get caught up on TV series but that is about it.  It may be the ‘future’, but at the moment it is still that – ‘future’ not present.

    On top of this they are splitting the disc rental to a completely separate site with completely separate queues and no way to search for both at once.  Second move that makes the service less convenient and less user friendly.  My one-stop shopping where I can choose between streaming and disc based on content is now gone.

    Every move they have made recently seems to be focused on where they want to be 5 years from now (which is a good thing), but with complete disregard for what their customers want today (as is shown by the larger than expected exodus).  Streaming is NOT ready for prime time with lack of content, low quality, and ever shrinking bandwidth caps (causing a further reduction in quality in Canada).

    As of this week, I am giving Blockbuster a shot at my disc rental business again.  They are currently cheaper than Netflix (now that the disc portion is being separated) for the same level of service, they already have games in that price, and I can exchange movies at my local store (where new releases that Netflix doesn’t even have yet are sitting on the shelf for me to pick up).  Unless Blockbuster is horrible, I will be switching to them and dropping my Netflix/Quickster account.

    My limited use of streaming from Netflix does not justify the cost, so I will be dropping that for now too.

  • http://about.me/mikeschinkel MikeSchinkel

    Hi @cindyalvarez:disqus :

    You may have misinterpreted my comment, surely because of poor wording on my part if so. I think we agree 100%; lost of people just get their feathers ruffled when you move their cheese.  My comments were really to say that most of the people who complain are frequent complainers and they can typically be ignored. 

    But sometimes “non-complainers” complain because they have a legitimate concern. Wouldn’t it be nice to know who the (frequent) “complainers” are so you can ignore them and who are typically non-complainers so you can pay close attention when they do complain?

    For me, it’s the kind of thing that makes one go “Hmmm…”  :-)