Netflix to Remain Whole - Another Change in Direction - The UpStream

Netflix to Remain Whole - Another Change in Direction

posted Friday Oct 14, 2011 by Scott Ertz

Netflix to Remain Whole - Another Change in Direction

Netflix seems to have lost their mind. First, they raise their prices, splitting DVD and streaming into two packages. Then, they announce they are splitting the DVD business into its own brand - Qwikster. This week brings us even weirder news - they have decided to axe the Qwikster brand even before it launches.

In a letter from the CEO of the company, directly to customers, he writes,

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password. In other words, no Qwikster.

While the July price change was necessary, we are now done with price changes.

So, they are still planning to keep the services as separate packages, as well as keep the prices higher, but the two websites and separate brand names will be discarded. I'm not entirely sure about their reasoning here, but I'm pretty sure they don't quite understand it.

Why are they really doing this and will it help? Hit the break to find out.

Netflix has been the only guy in town offering value for a while now, with Blockbuster filing bankruptcy, and then everything changed. Hulu became a major player in the streaming market, and then Dish Network purchased the failing Blockbuster, starting a new streaming service, with DVDs.

This puts a lot of pressure on Netflix, and they were trying to either raise profit margins or kill off their DVD business. What happened after these announcements was rage from customers, with people leaving in droves. Stock prices have dropped significantly and consumer confidence is lower than ever. After listening to consumers, they reversed the decision, but it seems to be too little, too late; those who left are not coming back and even more people are leaving every day.

How can Netflix fix their problem? My guess is that the only way to regain consumer confidence is to fire their CEO, Reed Hastings, and bring in some new blood. It is clear that people do not like or trust him and his decisions at this point. People are comparing him to former HP CEO Leo Apotheker, which seems like a good comparison at this point. It has been a few months of nonsense coming out of the CEO's office - I would not be surprised if we see a similar exit from Reed.

With more choices than ever for streaming (Hulu Plus, Amazon Prime, Cackle), plus Xbox LIVE's expanded options, now is the worst time ever to make bad decisions, and that is all that has happened.

What do you think? Has Netflix screwed up their obvious market lead, or will they be able to weather the storm? Also, should Reed step down/be fired? Let us know in the comments!

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