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  • The Netflix Report: Qwik Who?

    September 20th, 2011

    So the news came this weekend that Netflix is not just increasing your monthly fees by some 60%, but basically dividing streaming and DVD distribution operations into two separate Web portals. In an email to members, CEO and co-founder Reed Hastings said, "I messed up. I owe you an explanation."

    Well, the mess up wasn't this ill-considered decision, but the way it was originally explained. Talk about failing to own up to the consequences of one's actions. All this means is that you will not only have to pay more if you want both services, but deal with separate sites, separate content queues, and separate billing entries on your credit card. Is that supposed to be something better?

    If you care, the DVD/Blu-ray distribution operations will be rolled into a service called Qwikster over the next few weeks; you'll also be able to rent games for some of the more popular gaming hardware. I don't presume to guess why they chose that curious name, except, perhaps, to pay homage to one of the original digital distribution services, Napster. Then again, until they mended their ways in the face of an onslaught of lawsuits from the entertainment companies, Napster was a repository for pirated content, while Netflix/Qwikster is profoundly legal in every respect. Or maybe they were inspired by the word "gangster." I don't pretend to know why company or brand names are selected, except that Qwikster doesn't quite deliver the image of movies and TV shows. At least, with Netflix, you had "flix" to indicate flicks. Oh well.

    Sure, Netflix has its troubles, as they struggle to compete with more and more online streaming or on-demand services. A key reason is the single price scheme for streaming, and fixed price plans for rentals, depending on the maximum number of discs you want at the same time.

    Now the entertainment industry has forced Netflix to delay distribution of new DVDs by up to a month to offer a longer window for sales of physical media and on-demand rentals from cable, satellite, iTunes, and others. I understand Hollywood's desire to monetize their product in every way possible, but it also means that with Netflix, make that Qwikster, customers have been shunted to the back of the line for many new releases.

    When it comes to the streaming, Netflix has already confronted problems with their buffet trays. Just recently, Starz, owners of lots of movie and TV content, decided to end their deal with Netflix early next year, after the two failed to agree on a new contract. Starz reportedly wanted a multiple tier pricing plan, so that Netflix would be forced charge higher fees for streaming more recent A-list movies or TV programs to your computer or TV. This is sort of what Apple confronted with iTunes music when a deal to remove DRM was consummated. Today, you pay different prices depending on a song's popularity or release date.

    I wouldn't pretend to know enough about the online streaming and DVD distribution business to guess what Netflix ought to do next, but I will make suggestions. The one-price scheme may be passé. Indeed, if Netflix wants to make the streaming shine, they might have to consider offering a higher-tier service, and even on-demand content offered ala carte. Yes, it would put Netflix in the same business as iTunes, but it would also allow them to offer a one stop shopping service. When it comes to DVDs, same answer. You want current releases, pay a little more.

    Yes, the Hollywood moguls are super greedy, but as long as content delivery services, such as cable, satellite and the online alternatives, are willing to pay the piper, that's what Netflix may have to consider. As it is, they may be in danger of becoming less and less relevant if they don't make a few rapid changes. I hope they can also do it without angering customers any further. The changes could have been handled more gently, but sometimes egos get in the way.

    Speaking as a long-time Netflix customer, I am not happy with the new price structure. Even if I were to tolerate having to deal with basically two services from one company, I have already cut down on the number of DVDs I receive, to one. I can just rent current movies from iTunes weeks before Netflix offers them. But streaming has been a very mixed bag for me. After trying it a few times, with one notable exception (below), I've opted to let it sit on the back burner simply because so few recent quality movies are available.

    Sometimes why some content is available and some isn't makes doesn't even make sense. So, for example, you may find a sequel to a popular movie available for streaming, but you have to rent a DVD of the original. All right, perhaps that's because the sequel bombed at the box office, and Hollywood was content to accept anything to help recover their losses.

    I'll give you another example: Only recently, I decided to watch the cult sci-fi series, "Farscape," which combines live action and muppets. Don't ask if you haven't heard of that show. Well, this genre series lasted four years, 88 episodes in all, between 1999 and 2003. The fourth season ended with a cliff hanger, but the network cancelled the series, which is typical of the foolish fashion in which the industry works. After loads of complaints from fans, they produced a mini-series, "Farscape: The Peacekeeper Wars," in which to wrap up the show's loose ends.

    Well, all of the regular episodes of "Farscape" are available for streaming from Netscape. If you want the mini-series, you have to rent a DVD. Does that make sense to you?

    I do hope that the management at Netflix will find a way to sort this all out before too many members simply go elsewhere. And don't think I'm not tempted to follow them.



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    4 Responses to “The Netflix Report: Qwik Who?”

    1. RB says:

      This whole situation is a just bad business. Most of us understand the need to go to a streaming only format but they can't simply disregard what the product that elevated them to where they are. That said, they could've changed the pricing scheme with the streaming being the bulk of the cost (around $15) and dvd's as an ala-carte addition (no more unlimited dvds). Many would still hate this idea as well but this refocuses the service in the direction they want and fazes out the dvd service by attrition. Heck, I on the 2-DVD plan and send them back almost as fast as I get them. 2 dvds per week minimum, which could add up to a tidy sum IF i had to play for each dvd I ordered.

      And as far as ordering the dvds, let people keep their queses but give them the option of automatic or manual delivery. Again, people would pay more attention once they received their first bill for the 8 dvds they watched that month on top of the streaming fee.

      Netflix could've handled this whole situation differently instead they've inspired their customers to simply drop the service. Like others, I'm pissed and on the fence about dropping the service altogether.

    2. Jim says:

      With so many options for entertainment today, my wife and I found that DVDs from Netflix would sit for weeks before we got around to watching them. All we needed was a little push to discontinue the DVD option from Netflix entirely, and Netflix inadvertently or otherwise provided that push when they split up their services and increased their prices. Clearly, the future is in streaming, and Netflix is moving there with all due haste, rather clumsily, I might add. In hindsight, I'm sure Reed Hastings is imagining all kinds of ways he could have done so more elegantly. The good news, though, is customers are talking with their wallets and walking away from services where the costs outweigh the benefits. Hopefully, Netflix will survive, and will continually improve their streaming content, because that's where we, as consumers, want to go. The old Hollywood guard, however, is fighting this trend tooth and nail, but eventually someone will figure out a way to open the floodgates and still maximize profits. Now if only Apple could get behind this in some way...

      Lantzn Reply:

      @Jim,
      Apple is moving in this direction in a BIG way. They've already signed a new deal with all the big media companies and are about to release their iOS 5 which brings it to the masses. I'm looking forward to my Apple TV becoming more feature loaded!

    3. Jeff says:

      When I got my notice from Netflix about the changes, I guess I was the only one that decided to stick with the DVD delivery option and dump the streaming. The streaming options on Netflix have been significantly reduced, and they were not that good to begin with. I have streaming available on my TV via my cable system, and on my computer or iPad with a whole host of options (including the HBO GO app, which works great for me!)

      I think Netflix (well the new Netflix any way) is heading down a road where they can not compete with the big boys. They don't produce the media nor do they have a huge backlog of titles to stream. Thus they will remain at the mercy of the content providers who have little or no incentive to continue to supply the product to Netflix, they can just build their own distribution network. An AMC branded streaming network has just as much chance of being succusful as does Netflix.

      So I will stick with my new Quickster account and continue to watch my DVDs when I want and not worry about if their is enough bandwith for me to use streaming media right now. That pipe isn't getting any bigger on my end, but it is getting filled with more and more stuff!

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