Why Netflix has become customer-hostile

21 September, 2011 by Lex Friedman, Macworld
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I was irked when Netflix announced its pricing changes back in July. My family was on the one-DVD-at-a-time plan, which included streaming from Netflix’s Watch Instantly catalogue; our monthly rate would jump from US$10 per month to US$16 per month. I was frustrated enough by the ‘spend more for the same features’ approach that I researched a slew of Netflix competitors. Eventually, I decided I would stick with Netflix’s US$8 streaming plan, and get my new releases via Zediva – until Zediva was sidelined by a court order. Though I wasn’t convinced Netflix was worth the extra US$72 per year, I decided to stick with the service through its price hike. Now, thanks to Netflix CEO Reed Hastings’s latest message to customers – and Netflix’s split into two separate companies – I’m more inclined than ever to jump ship.

Here’s a quick recap of Netflix’s latest announcements: The company is sorry that it didn’t better explain its reasons for raising the price of combined streaming and DVD plans. And basically, it raised those prices and now charges separately for DVDs and streaming because they’re two different businesses. And since they’re two different businesses, Netflix is literally splitting up into two unique entities: Netflix will become a streaming-only enterprise; DVDs-by-mail will become the purview of a new, separate entity called Qwikster.

Why I’m unhappy

I object to Netflix’s latest announcements on a couple of levels. I felt that the email Hastings sent customers was pure pandering, and found his overdramatic self-flagellation excessive: “I messed up. I owe you an explanation… I offer my sincere apology… I should have personally given you a full explanation… [I] apologise again to members… who felt we treated them thoughtlessly.”

Hastings is a smart guy, and I find it impossible to believe that he thinks customers would have reacted more favourably to Netflix’s July price hike announcement, had the company only included a note from him saying that DVD mailing and digital streaming are two different businesses. The customers who complained did so because they don’t like paying more for the same service.

But my deeper objection – and the one that has me questioning whether I’ll continue my Netflix memberships at all – is this Qwikster nonsense. Set aside the fact that the name, as many before me have said, looks like an artifact from an abandoned 1990s-era startup and carries none of the brand pedigree that Netflix has cultivated since 1997. (If Netflix will now be a streaming-only service over the Internet, shouldn’t the analogous DVD service be called Mailflix?) And it says something that I haven’t spelled Qwikster right on the first try once yet.

Like I said, though, I’m willing to look past the (awful, awful, awful) name of Netflix’s new, wholly-owned subsidiary. What I can’t look past is how foolish and customer-hostile Netflix’s self-imposed schism really is.

Hastings and Netflix suggest that the Qwikster/Netflix split (yup, spelled it wrong again at first) is really ‘just a new name’; the Qwikster site will match the old Netflix DVD experience feature for feature, and even add in a new one – video game rentals. But, as Hastings does acknowledge: “A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.”

What? Why?! Actually, scratch that: Let’s instead look at all the reasons that leaving the two sites in separate silos is a terrible, horrible, no good, very bad idea.

A very bad idea

Before Qwikster, I could add a DVD to my Netflix queue – say, the second season of Breaking Bad – and then, if that show became available for streaming, Netflix automatically added it to my instant queue. I could also look at my DVD queue and see, at a glance, which queued titles were available to watch via streaming.

Once Qwikster is upon us, that magic will go the way of Microsoft Bob. Netflix says that the sites will maintain entirely separate databases. If you want to watch a movie, I suppose you’ll first search for it on Netflix. If it’s not there and available for streaming, you go over to Qwikster and search for it there and then add it to your DVD queue. If the movie ever becomes available for streaming back at Netflix, you may or may not notice that and watch it there. If you do watch it there, you may well get an unpleasant surprise when your Qwikster envelope arrives a few days later with the same content enclosed.

Less frustrating, but still frustratingly lousy, is the fact that your Qwikster ratings won’t influence your Netflix suggestion, and vice-versa. For a company that prides itself on its recommendation engine – and indeed awarded US$1 million to developers who beat Netflix’s recommendation algorithm by a mere 10 percent – ignoring this personal rating data makes no sense.

There is no customer benefit to these two sites not talking to each other. None. The Netflix/Qwikster split will only makes things worse for Netflix’s customers.

So, why do it?

The only explanation that I can come up with is that someone at Netflix believes that these moves will benefit the company’s long-term health and profitability. (I don’t necessarily agree with this hypothetical someone.) Raising prices was clearly a strategic move to offset rising costs, and even if I don’t like it – and I don’t – I understand it. But splitting the two sites apart in ways that make queue management more difficult for customers who want both DVDs and streaming, I can’t quite understand.

Some have suggested that Netflix’s DVD service has peaked, and that the Qwikster move is an initial step towards dumping the DVD-by-mail service completely – perhaps by selling it off. There’s certainly some logic to that theory. But by making its combined offerings worse to use together, Netflix is convincing me to consider using neither.

Hastings concluded his email to customers as follows:

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.

Not Hastings’s words – at least not in this message. Netflix’s bungling of its price hike, this subsequent messaging and its unwanted DVD/streaming split is the kind of self-defeating behaviour I expect from companies like HP. It’s much harder to watch Netflix flail like this, since it’s a company I’ve loved for so long.

2 Comments

2 people were compelled to have their say. We encourage you to do the same..

  1. Blake says:

    Beautiful stated. Between Netflix and Google (see link below), this has been a depressing week for me.

    http://www.zdnet.com/blog/foremski/is-google-stuffing-search-pages-with-paid-links-senate-hearing-coming-up-on-wednesday/1963)

  2. keepitsimpleengineer says:

    Netflix can be truly weird. I recall when Reed Hastings complained not enough people were renting Blu-ray discs, while my in my queue they would take weeks to be sent. I finally canceled the Blu-ray option because I could buy outright 4 a year, which was more than I was receiving via Netflix, for what that option was costing.

    However, I was glad they split the services, it is saving me money as I find the streaming stuff markedly inferior and had long since abandoned that “service”.

    Regards to Qwikster⋯I suspect they will keep improving it until it’s worthless.

    ⋯Netflix subscriber since Oct ’99

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