It is not often that we see a company make two exceedingly public bad customer service-related decisions so quickly one after another. But following July’s announced change in their pricing structure for their DVD-by-mail and internet streaming services, Netflix’s announcement that they are spinning off the DVD rental-by-mail service to its own brand name, Qwikster, has seen the company do exactly that.
Announced last night in a blog post on the company’s official blog and in an email blast to customers, the news that Netflix was spinning off half its business came couched in an apology from Netflix CEO and founder Reed Hastings for the way the company handled the July price structure change.
In a few weeks, we will rename our DVD by mail service to “Qwikster”.
We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.
Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies.
Hastings tries to present the split as a plus, stating that now DVD renters will also have the ability to rent video games as well. While the offering will indeed appeal to those who may also have a GameFly account, it means nothing to those subscribers who have no interest in video gaming. In fact, I would be interested in seeing numbers relating to how many Netf–, excuse me, Qwikster users start adding video games into their queues when they become available. I would wager that it would be a relatively low percentage.
In retrospect, July’s splitting of subscription prices for both services now makes a little more sense. Dividing the pricing up for each service and allowing customers to pick which of the services they wanted to continue with does help facilitate spinning those DVD-by-mail customers off to the new service.
But the number of customers, which I count myself among, who want to continue to use both services now face a loss of functionality that currently exists between the two delivery systems. And I’m not talking about just the double work now involved with updating a changed credit card or other account information. Going forward, the reviews and recommendations features will also not communicate between platforms.
Additionally, subscribers will lose the feature that added DVD queued titles to their streaming queue when they became available for streaming. This change will now leave subscribers to both services to do their own queue maintenance, which honestly will be time consuming and a hassle. I was willing to pay the price hike for the continual use of both services, but with the loss of functionality between the two, I am now questioning whether I wish to continue to do so. The question I am asking myself is “Why am I paying more for less service and more work for me?” How many others are mulling over the same thing?
Netflix has faced some subscriber loss since they announced the split in subscription plans. Last week their stock price tumbled nearly 20% after the service adjusted their projected number of third quarter subscribers down a million from a previous announced 25 million to 24 million. This helped fuel an almost 40% stock price drop since the revamp subscription plans were announced in July.
Netflix’s stock fell another 7.4% today.
It remains to be seen if these new inconveniences will drive even more people to drop either one or both services, but if I were a Netflix stock holder, I just might be a bit nervous. A few years ago Netflix was a fairly unique product. However, there are a number of competitors slowly starting to nip at its heels and that means that the company will slowly be losing any power it had in gaining exclusive content for its subscribers. Splitting the company in two just weakens them even further.
The opening line from Hasting’s blog post/email from last night was “I messed up.” While he was referring to the lack of communication from the company concerning this summer’s price split, it remains to be seen if it could also refer to splitting the entire company in two.
