Netflix ditches the DVD business

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Netflix ditches the DVD business

Post by melancholy »

What is it with businesses and their self-destructive behavior lately?
Associated Press wrote:SAN FRANCISCO (AP) — The CEO of Netflix said he was sorry for mishandling a recent price increase that caused customers to cancel the service in droves. But the apology was drowned out by a decision that angered subscribers all over again.

The company will split into two services — one with an odd new name that offers the familiar discs in red envelopes and another for online streaming of TV shows and movies.

The DVD service will be called Qwikster, a name that is supposed to signify a commitment to fast service but quickly became an object of ridicule Monday on the Internet. The streaming service will keep the Netflix name.

It's going to be a painful transition, as Hastings acknowledged as he cut loose the DVD service.

"It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best," Hastings wrote on a Netflix blog. The CEO of the rechristened Qwikster service will be Andy Rendich, a longtime Netflix employee.

Hastings found little sympathy among the more than 10,000 people who commented on the blog posting.

Most of them lambasted him for making life more difficult for about 12 million customers who get both streaming and DVD rentals. Those people will have to visit two websites to make requests and update their billing information.
...
In addition to the split, Netflix will expand into an area Hastings had steadfastly resisted — video game rentals. Adding it to Qwikster may not make investors happy, though, because video games are more expensive and have a shorter shelf life than DVDs.

But video-game availability could win back alienated subscribers. Devine said he might sign up for Qwikster if the selection is good enough. Hastings seems confident he won't be the only one.

"Both the Qwikster and Netflix teams will work hard to regain your trust," Hastings wrote on the blog and a mass email to subscribers. "We know it will not be overnight. Actions speak louder than words. But words help people to understand actions."
So on the one hand, they are now going to offer video games, which is good. But it's now an entirely different company with it's own billing process and accounts. So if you are on the streaming section and see a movie that isn't available, instead of having the option to just add it to your DVD queue, you now have to go to a completely different website.

I understand why they are doing this, since ultimately DVD rentals are going to disappear completely and they are poised to just be able to shut down Qwikster and keep their Netflix name going. But the one-stop concept of their old model was extremely convenient for the majority of it's users, and this move is only going to force the demise of their DVD rental service much, much faster.
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Re: Netflix ditches the DVD business

Post by pixel »

melancholy wrote:... this move is only going to force the demise of their DVD rental service much, much faster.
That's what Netflix is hoping for.

The digital streaming business is about to get very cutthroat. Physical media prices are dictated by parallel suppliers. If Warner Bros. charges Qwikster too much for DVDs/Blu-rays of their movies, Qwikster can easily partner with Walmart or another distributor and reap the benefits. With digital distribution, movie studios hold all the cards because they're the only source. We've seen the tremors in Netflix's new pricing structure this summer. Those came about by studios requesting more money after their contracts expired. Right now, Netflix itself is trying to go full-bore into a digital-only model to remain the premier service, thus giving them some sort of bargaining at the table. There are plenty of other services who are more than willing to take Netflix on -- many of which are the studios themselves.
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Re: Netflix ditches the DVD business

Post by melancholy »

Like I said, I understand why they are changing. And it was an inevitable change. But the way they are handling it is quickly escalating into an extremely devalued company. They suddenly double their price with very little warning, which caused stocks to drop and customers to leave. Then they issue an apology email to everyone, followed by an announcement to split the company in two forcing users to use two accounts. In July, Netflix stock was sitting at $300. Now it's $140, wiping out half of the company's wealth. When they made the announcement, they expected to lose about 1 million customers. They ended up losing roughly 1.6 million. And almost immediately after announcing the price hike, Starz said they were pulling out of the service, who also provided content from Sony and Disney.

We all know the physical media service they provided was going to be dead soon, for many various reasons. But they have clearly shown that they did not know how to effectively pull out of the market, and now instead of moving forward with an ultimately better service, they are stuck doing damage control. it's going to be extremely hard to convince both customers and studios to stay with them during the transition.
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Re: Netflix ditches the DVD business

Post by Lartrak »

They're vastly overestimating the speed of the demise of the DVD part of their service. It WOULD have been a significant part of their business for probably another 5 years, maybe longer, but they're just killing it now. The instant selection is getting significantly better, but it's still not good enough... I'm seriously considering canceling now, as I'm one of the people who got the highest possible price hike. In the past six months it has increased by about $10 a month. Too much, added in with extra hassle after the split.

I understand the move, I just think it was very poor timing. They should have waited at least another couple years for their instant selection to become a viable replacement.
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Re: Netflix ditches the DVD business

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Lartrak wrote:I'm seriously considering canceling now ...
The one thing I've been wondering with those quitting Netflix, what are you going to use instead?
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Re: Netflix ditches the DVD business

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Probably nothing. I'd likely buy a lot more movies though. Occasionally Redbox new releases.

I may keep it though... Not 100% yet honestly.
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Re: Netflix ditches the DVD business

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This is just another step along the road to the eventual goal: no physical media whatsoever. I can see movie studios putting the squeeze on any company that continues to support the market going in other directions.
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Re: Netflix ditches the DVD business

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Yeah. Must piss off the studios when they can't continue to charge money to let people see their decades old pieces of property. They've probably hated it since CDs came out, which don't wear out like vinyls and cassettes.
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Re: Netflix ditches the DVD business

Post by Luriden »

pixel wrote:
Lartrak wrote:I'm seriously considering canceling now ...
The one thing I've been wondering with those quitting Netflix, what are you going to use instead?
Piratebay. Or Demonoid. Or PassThePopcorn.

I cancelled the day before I was supposed to get charged the new price for the first time. Streaming is alright if you want to watch something in a hurry and don't care what, but 99.5% of anything I'd want to watch is not available to stream, and they're removing titles as fast as they're adding them. It's a step above cable TV. You have somewhat of a choice of what you watch, but in the end, you're watching what they want you to watch.

If they want this to be the future of movie-viewing, they can just fuck right off. Instant streaming should have been kept a bonus feature to DVD rentals until they're able to get a better streaming library going. Basing their entire company around it now is fucking ridiculous.
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Re: Netflix ditches the DVD business

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Luriden wrote:
pixel wrote:
Lartrak wrote:I'm seriously considering canceling now ...
The one thing I've been wondering with those quitting Netflix, what are you going to use instead?
Piratebay. Or Demonoid. Or PassThePopcorn.

I cancelled the day before I was supposed to get charged the new price for the first time. Streaming is alright if you want to watch something in a hurry and don't care what, but 99.5% of anything I'd want to watch is not available to stream, and they're removing titles as fast as they're adding them. It's a step above cable TV. You have somewhat of a choice of what you watch, but in the end, you're watching what they want you to watch.

If they want this to be the future of movie-viewing, they can just fuck right off. Instant streaming should have been kept a bonus feature to DVD rentals until they're able to get a better streaming library going. Basing their entire company around it now is fucking ridiculous.
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Re: Netflix ditches the DVD business

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Yes, I realize I'm taking it up the ass from my ISP while talking shit on Netflix. Internet access is actually a very valuable tool for getting by in this day and age though. I can get by without Netflix, especially when I can use a service I'm already paying for to seek out the specific movies I want to watch for free. Netflix could be $2/month and still be useless when they don't have shit you want to watch.
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Re: Netflix ditches the DVD business

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I only get the streaming so none of this has affected me at at all. :P
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Re: Netflix ditches the DVD business

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LOL AMERICAN THINGS THAT DON'T EFFECT ME
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Re: Netflix ditches the DVD business

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not just souLLy now wrote:LOL AMERICAN THINGS THAT DON'T EFFECT ME
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Re: Netflix ditches the DVD business

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New York Times wrote:Abandoning a break-up plan it announced last month, Netflix said Monday morning that it had decided to keep its DVD-by-mail and online streaming services together under one name and one Web site.

The company admitted that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster.

“We underestimated the appeal of the single Web site and a single service,” Steve Swasey, a Netflix spokesman, said in a telephone interview. He quickly added: “We greatly underestimated it.”

Mr. Swasey said that the Netflix chief executive Reed Hastings declined an interview request. But in a statement, Mr. Hastings said, “Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”

Mr. Swasey declined to comment on any involvement by the Netflix board in the decision to keep the two services together. Initial reaction to the Netflix announcement was largely positive, and the company’s stock rose about 6 percent in early trading.

In an analysts note, Ingrid Chung of Goldman Sachs credited Netflix management for “listening to its customers (finally) and working to fix its relationship with customers.”

Richard Greenfield, a media analyst for BTIG Capital, said in an e-mail message that Monday’s announcement was the “necessary reversal of a bad decision.”

“The key remaining question,” he said, “is why did they make the Qwikster decision in the first place?”

Netflix said it never actually separated the services or started Qwikster. But the Sept. 18 announcement that it intended to do so stoked anger among Netflix customers, some of whom were already incensed by a price hike to $16 from $10 for those who receive both DVDs and streaming. (That increase will remain in place.)

In a blog post that day about the plan, Mr. Hastings wrote, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.” His implication was that Netflix had to act aggressively to expand its fast-growing streaming service by severing its older, slower DVD-by-mail arm.

In a sentence that now seems like a bit of foreshadowing, Mr. Hastings also wrote, “It is possible we are moving too fast – it is hard to say.”

Netflix said that day that the separation would take effect in a few weeks. But tens of thousands spoke out against the plan on Netflix’s Web site and others, and Netflix stock slid sharply.

Three days after the announcement, Mr. Hastings wrote in a Facebook status update, “In Wyoming with 10 investors at a ranch/retreat. I think I might need a food taster. I can hardly blame them.”

The planned break-up was rooted in Mr. Hastings’ and Netflix’s belief that DVDs and online streams have different cost structures and different consumer demographics.

In July, to address the structural underpinnings of the business, Netflix announced that it would start charging $8 a month for both its streaming service and its DVD service, a total of $16 a month for the combination.

Previously, DVDs were a $2 add-on to the $8 streaming service. Of course, subscribers who only wanted one service or the other — most new subscribers only want the online streams — saw no price hike, but that fact was drowned out by the outcry.

Netflix expected some of its 25 million subscribers to cancel in the wake of the price change, but the cancellation rate exceeded expectations. The company said in mid-September that it expected to report a quarterly decline of about one million in the third quarter, which ended on Sept. 30.

But that guidance was given before the break-up was announced; Mr. Swasey said Netflix would not comment on whether the quarterly losses would exceed the already-lowered expectations. The company will report earnings and subscriber figures on Oct. 24.

On Sunday night, Mr. Swasey sought to reiterate what Mr. Hastings tried to say last month when he announced Qwikster: that Netflix had failed to communicate effectively about the price changes. “We had to look at the reality of what it cost” to mail multiple DVDs to households each month, Mr. Swasey said, noting that the round-trip postage alone for one DVD cost almost $1.

Under the plan announced on Monday, the price change will remain in effect, but the two services will not be untethered. That means that subscribers who want both online streams and DVDs won’t have to manage two accounts and pay two bills each month, after all.

Netflix tried to be crystal-clear about it, issuing a press release that was titled “DVDs Will Be Staying at Netflix.com” and sending e-mails to subscribers about the news.

“Netflix said in a Sept. 18 blog post that its DVD by mail service would operate at Qwikster.com,” the press release read. “Instead, U.S. members will continue to use one website, one account and one password for their movie and TV watching enjoyment under the Netflix brand.”

A plan for Qwikster to rent video games may or may not move forward; Mr. Swasey said it was “to be determined.”

Netflix, meanwhile, still has to concentrate on its online streaming service, which is widely considered to be its core business.

Next February, it is expected to lose the right to stream films from Walt Disney Studios and Sony Pictures Entertainment as a result of a failed renegotiation with the premium cable channel Starz. But it announced a deal last month with DreamWorks Animation to stream that studio’s films starting in 2013. Last week, it announced a deal with AMC Networks to stream old episodes of TV shows like “The Walking Dead.”

Netflix also remains interested in paying for the production of new TV shows. Earlier this year it ordered its first original drama, “House of Cards,” which is expected to have its premiere in late 2012. Now it is in talks to distribute new episodes of two cancelled TV series, “Arrested Development,” formerly of the Fox network, and “Reno 911,” formerly of Comedy Central. The past seasons of both shows can be streamed via Netflix — and can be rented on DVD, too.
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