After only a few weeks since their announcement of Netflix breaking off into two services (one for streaming and one for DVD/game rental), the company has decided to axe the new Qwickster service. I like to think Netflix read my blog post Netflix’s apology uncovers something much worse a few weeks ago.
I’m glad they are doing this. In my previous post, I highlighted why this would be a terrible idea based on a few factors, the most important being the ease of use. The breaking apart of Netflix into two services could double the number of steps it takes to rent a movie. For a company known for its simplicity, this didn’t make sense.
They were destroying their brand right before their shareholders’ eyes. It was a big mess that resulted in a huge drop in stock value. Over the last three months, Netflix’s stock has dropped over 60%.
This drop includes three bad news items. First, Netflix announced it would be breaking streaming and DVD rental accounts into two separate accounts which would cost more money. Previously, anyone with a DVD rental account also had access to the Netflix streaming library. This change would remove that feature unless you paid an additional $10 each month.
Second, there was an announcement that the Starz contract negotiations with Netflix failed and that starting February 2012, much of the best content on the streaming library would disappear. This included a huge library of Sony Pictures films. Many of the newest films arriving to Netflix streaming came from this contract, so losing Starz content meant a lot to streaming users.
Finally, we all know this one, the breaking of Netflix into two companies (Netflix for streaming video, Qwickster for games and DVDs). That HUGE drop from around 210 points to 130 points, that 80 point drop, that is a direct result of alienating your customers three times in a row. Make us pay $10 more a month, loss a huge swath of great content and then split the company in two making it twice as difficult and confusing just to rent a movie and expect people to flee.
Over a million Netflix users have left already. Hopefully this move will help to slow the leak, though I’m not sure that the damage isn’t already done. It will be interesting to see how Netflix does over the next few, pivotal months. One more misstep and they could be the next Hollywood Video.
I wonder if we should expect another video apology from Netflix CEO Reed Hastings. Even that apology didn’t go over well. Over 85% of people who viewed and rated the video on YouTube gave it a thumbs down. If that isn’t a sign of customer dissatisfaction, I don’t know what is.
Yikes Netflix. Here’s hoping you can turn this around. Pissing off both your shareholders and your customers at the same time is a dangerous thing to do and puts your company in a place no business wants to be.