It has been a rough couple of months for Netflix. The company that virtually defined online movie rentals was swamped by an unprecedented wave of customer ire two months ago when it raised prices for both its DVD mailing and online streaming services.
Netflix announced this week that it's splitting itself in two and rebranding its movies-by-mail service as "Qwikster." Based on initial online responses, this latest effort didn't make things much better.
"Reed, thanks for reminding me that I should go somewhere else for my DVD rentals. It was an insult enough that you raised the price on me last month, right in the middle of the biggest recession since the Great Depression, but now instead of a sincere apology, all we get is excuses and a flimsy new name."
That's from a customer named Jonathan Ortega and it's one of more than 16,000 comments on a blog post by Netflix CEO Reed Hastings explaining the latest changes. In the post, Hastings announced that the service that made Netflix famous, mailing DVDs in those iconic red wrappers, was being spun off as Qwikster, while Web streaming video will continue to be called Netflix.
Not all the posts took the same flamethrower approach as Ortega's. But even some of the more evenhanded messages raised questions.
"While I appreciate the explanation (and e-mail) and I guess I understand your reasoning for doing this, the thing I'm having the hard time about is the separation of websites," wrote a user named Tellier Killaby Booth. "I don't understand why I will now have to go to two separate websites to manage my queues. The only reason that I have both services is because half the things I watch aren't available yet on streaming."
Chris Taylor of Mashable (a CNN content partner), questioned whether the spin-off of Qwikster was "the worst product launch since New Coke."
"As any marketer will tell you, there are some truly awful times to launch a new product -- like August, when few potential customers are paying attention, or January, when they're all shopped out from the holidays," Taylor wrote. "And then there's launching your new product in the 10th paragraph of an apology for some previous poor communication, as Netflix CEO Reed Hastings did late Sunday with Qwikster. ..."
Taylor, who says he has met and interviewed Hastings several times, calls him "one of the smartest and most amiable minds I've ever met." But he lays out a laundry list of problems, from the odd spelling of Qwikster to creating unnecessary confusion for customers who keep both streaming and DVD service.
The Internet wasn't unanimously down on Netflix's move, however.
Venture capitalist Mark Suster, who focuses on early stage tech companies, had a more positive take, calling Hastings' explanation "simply brilliant." (Worth noting: His company, GRP Partners, does not list Netflix as one of its investments.)
"[M]any short-termists will think it's a bad idea. Indeed, my Twitter stream tells me so," Suster wrote Monday on his blog. "I find much of the criticism so far fairly reactionary."
He argues that, by splitting off streaming from DVD delivery, Neflix can react more flexibly to the emerging streaming market while maintaining its hold on the mail-delivery market. Keeping them both under one umbrella would have made it harder to respond rapidly to changes in customer demands, he said.
As DVD customers decline in favor of streaming (and Suster says they inevitably will), Netflix may have to raise prices for DVD delivery, but could keep streaming prices the same under this model, he wrote.
"It's rare in business to see somebody like Reed Hastings tackle the massive changes happening to their businesses and deal with them before they're too late," he wrote. "Imagine if the record labels had been as bold. By making the separation, Reed can now point the Netflix business squarely at the future."
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