By now, you’ve most likely seen Reed Hastings' blog post on the official Netflix blog entitled An Explanation and Some Reflections.
In his entry, he outlines the plan for Netflix to split into two separate companies, operating two separate sites: Netflix, which will operate the streaming service; and Qwikster, which will operate the DVD-by-mail service. Of course, ripples are heading through the twitterverse and blogosphere in reaction to this – so I’ve decided to add my own.
Long-term, I think this is a almost certainly a good idea for Netflix. It allows them to have separate teams concentrating on their two core businesses (which have very different considerations around logistics, licensing, etc.), while using their brand recognition to drive the more future-facing one – streaming.
This would have been a great announcement to make… on July 12th. If this were announced at the same time as the price hike, it would have far increased the general understanding of why the price increases were occurring, and what they would look like to the consumers. Not only that, but if the hike itself were actually timed with the Qwikster launch (or, better yet, with a month or two grace period where Qwikster subscriptions were cheap for former Netflix DVD subscribers), they would have probably been able to cut a lot of their losses from total losses, to losses on one business or the other.
How they could miss this opportunity to better message the change is beyond me. Some might theorize that the separation move is in response to the huge drop in their stock last week. But that’s simply not possible. They’ve been planning this for a while – heck, they’ve even had the domain registered since May 2010 – and the price change is clearly associated with the longer-term goal of separating the services. It’s going to be monumentally difficult to explain to the average consumer why this is a good thing for them, and they made it twice as hard on themselves by announcing the company split after the price hike.
Of course, there are clear problems with the plan. Having to update billing information in two separate places is definitely an annoyance. The fact that ratings won’t transfer is almost tragic, considering how important user ratings and the recommendation engine is to the Netflix experience. Some Netflix users are already annoyed about the separation of their queue management – they’re worried about subscribing to both services and wasting their precious limited DVDs on things available through unlimited streaming
There’s also definite missed opportunities for Netflix and Qwikster here. The fact that games will be an add-on fee and that Blu-Ray will remain an add-on fee, instead of one or both being included with the DVD pricing, which doesn’t help ease the pain for their customers. The don’t own the appropriate social media account names. They’re not launching immediately (or even giving a precise timeline).
Oh, and for everyone who hates the “Qwikster” name, I will present the following list of names:
That’s just off the top of my head. If there’s not one in there that didn’t make you cringe at some point, you’re lying about disliking “Qwikster”. Either that, or disliking names is just the “cool thing to do” now.