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What Netflix Could Have Said This Week (appleoutsider.com)
367 points by barredo on Sept 20, 2011 | hide | past | web | favorite | 110 comments

Unified queue.

Regardless of media, business structure, delivery mechanism, company name, etc. methinks what all customers want is a single place to choose & queue content, filtered by whatever options they desire, delivered on whatever medium is available and they pay for via a spectrum of contracts (from unlimited-per-month to single order).

Just make sure it's all on one queue. If multi-queue, then only because one customer may be grouping for multiple individuals (ex.: husband wants ultraviolent scifi, wife wants sappy romances, kids want Elmo galore). Whatever you do, don't force the customer to spend time/effort along such artificial differences as media (ex.: I want the DVD of "Scarface", but it's not on streaming anymore and I don't want to pay extra for the BD version - let me pick those options based on my single content choice, don't make me search 2-3 different sites for the same title which, I notice, have unreliable availability).

Amazon faces the same issue: vast business differences between warehouses of books & other physical stuff shipped by mail, vs. server farms for Kindle, streaming video, cloud storage/processing, etc. - same problem as Netflix, yet they're doing well under one website. I can search for Moby's latest album, and when ready to order can with ease choose between CD, MP3, DVD, and instant video: same content pool, same checkout, easy delivery, user doesn't care how it all happened.

I think a unified queue hurts the loyalty for instant queue people. Whenever I am on instant queue and I search for a movie and see that it's not available for instant I am annoyed. You could argue that it would help convert me to DVDs- but I know that it doesn't, especially afte the recent price hike. In fact, it really just makes me think about how Netflix streaming lacks material.

If they feel the true future of their product is in streaming than I think this makes sense. They aren't trying to hold onto the low-margin DVD my mail people. They are trying to encourage more streaming customers and move forward in a drastic way.

Maybe the better way to accomplish this is to make the netflix classic website as discussed in the article include the non-streaming movies and just have people with instant queue not even see other movies.

Regardless- I don't think one queue is necessarily better.

I disagree I think a unified queue is where it is at. I want to keep my ratings linked with my queue and have social engagement around my queue also.

Services like goodfil.ms (http://goodfil.ms.) and GetGlue (http://getglue.com) are good at helping people discover and find films within their own networks.

Eventually streaming of films will become a commodity; Netflix, Apple, Hulu and the cable networks will all vie for market leadership of streaming; and IMHO whoever creates the best social queue is where the long term value is.

Facebook are clearly going to make a play at this with their Watch button - it'll be interesting to see how exactly, but it's not difficult to imagine them serving up "8 of your friends have watched Scarface" in place of their ads - then directing you through to Netflix for viewing.

My best guess as to why they are splitting the queues is due to the availability issues on the streaming side affecting customer 'morale', so to speak. i.e. when a streaming-only customer searches for a title, and then finds that it is only available on DVD, their perception of the service is diminished.

I think the end goal of this move is to kill off or sell the DVD portion of the service entirely, so by splitting the services, investors won't freak out when that eventually happens. This also is another reason for splitting the queues.

That is the main reason why I want a unified queue: inconsistent availability. I put "Scarface" on my queue, but being a low priority it's pretty far down; I was content that someday it would reach the top of the DVD queue and show up, or that on a whim I could hit "Play Now" and stream it. One day I noticed it was tagged for removal from streaming a few days hence, and didn't have time to watch it in the meantime. Streaming option disappeared. [shrug] Well, it's still available by DVD, I'll get to it. Then I get the "we're going to split the service" notice, note that I only watch 2-3 discs a month (lots of streaming instead) so the separate fee wasn't worth it and I canceled. Even if I want to pay a one-time rental to watch it, not available as an option and alternatives (sign up, get disc, cancel) are too much hassle now.

Huh, maybe I'll check Amazon, where I can buy "Scarface" new, buy it used, no-strings streaming rental, or maybe even Prime "free" streaming...and all from a single search...[clickety clickety]...ah, it's $3 to stream it once, and there's 53 purchasing/renting options from $0.01+shipping used VHS to $3 streaming rental to $700 including humidor. Pity it's not in the "free Prime streaming" option, but at least I know the options with one search.

That post was impossible to read.

Netflix, thanks for doing this to your customers.

When I put something in my DVD queue, it automatically appears in my streaming queue when it's available. This makes me happy, I watch the movie online, then delete it from my DVD queue. If the new system no longer supports this, it will affect my morale.

But I suspect you're right about killing off or selling the DVD service, and I think they're intentionally trying to sour customer opinion to bring about this end. It's a shame, because Netflix, as it previously existed, was one of the few subscription services I was happy to pay for. After the site redesign, everything's gone to hell (instantwatcher.com is the only useable interface I've found, on any platform). Oh, well, it was good while it lasted...

> when a streaming-only customer searches for a title, and then finds that it is only available on DVD

So now, they'll find... it's not available at all. How does that any better for customer morale?

I am getting the feeling that Netflix's customer base doesn't understand why some titles are available on streaming vs DVD only (this is based on random comment reading). It is a very subtle difference, but it comes down to 'Netflix doesn't have the title' vs 'Netflix has the title but they won't let me stream it'.

Admittedly, the much bigger motive is that they want to get rid of their dvd-by-mail business.

Don't forget ratings. Many people have years and years of ratings that drive their algorithm. That is now gone. Good job guys.

We don't know that yet!

I'm quite interested to see how they handle user data in the split -- will each company get a copy? Will the Netflix side maintain a complete database of movies, even if it can't stream them, so that you can continue to rate freely and get recommendations?

There are some thorny user experience problems here for sure, but they are not unsolvable.

they are clearly not unsolvable, and in my view they aren't even thorny UX problems. they are clear cut.

the issue is that Netflix thus far has done zero to try to make them better and has, ever step of the way, created these issues when a simple, customer friendly workaround seems apparent.

what to do about ratings? make the two sites interoperable. hell, create an API for Netflix ratings.

what to do about the two Queues? i already have two Queues on Netflix. make the two sites interoperable. seems pretty basic for a big league company.

whatever. i am not shedding any tears. I've been watching movies online for almost 10 years now and I'm going to continue doing so. whether i pay netflix money or fire up a BT client, i don't really care.

the real question is: does Hollywood want my money?

I think the problem with that idea is that they're likely preparing to sell off the whole DVD business in order to get the studios to stop insisting on Netflix paying streaming licensing royalties on EVERY subscriber rather than just the ones that subscribe to streaming. The problem with that thinking is that Netflix then loses the leverage that being able to say that they'll just offer a disc offers them.

I'm worried that the studios are like the barbarians at the gates of the Roman/Netflix empire, and that the dark ages and feudalism are looming. Hopefully we won't have years of crappy legit setup vs. a much better illegal option before another unifier like Netflix rises.

I'm pretty sure they aren't going to throw that away, are you nuts? They had a big ol' contest a few years back to come up with a new recommendation algo.

Further to what I assume is your point, we have a few years of practice in linking accounts, so a particular user's historical data can easily be integrated with this new corporate architecture.

EDIT: I'm using the royal "we" to refer to technological techniques for linking accounts across disparate websites. I don't work for Netflix.

I have to believe this is true. Netflix has made no small bones about the fact that its recommendation / collaborative filtering algorithm is its strongest competitive advantage. To your point, they even sponsored that contest awhile back.

No way in hell they'd weaken, much less throw away, their golden goose.

The problem is that their recommendation system really isn't that big of an advantage. Content is king & people got Netflix because it provided better service at a better price compared to what they were getting elsewhere. I don't think I've heard of anyone signing up for Netflix specifically so they could use their recommendation engine to find new movies.

Netflix has to go back to providing a better service at an affordable price, something that isn't as easy as it once was when you're going against other streamlined big name contenders like Apple, Amazon or Hulu vs the old "incompetent" competition that was basically Blockbuster & Hollywood Video.

I think their recommendation system is too limiting. At least give me a random button so I can see what else is available besides the same 37 selections they constantly shove in my face. Selection is king in on-demand streaming. Some people like to discover their own style instead of wearing the clothes their moms lay out for them.

This. Ultimately, the splitting of the queues between two sites will be what drives me away from Netflix. As long as the streaming choices are only sporadically decent and intermittently available, having the DVD option as a backup is important.

Currently, if I come across anything I'd like to see at some point in the future, I add it to my Netflix queue and forget about it. I may watch it via streaming if and when available, or get it on DVD, or buy it...it doesn't really matter. The queue itself has value because it's a one stop shop for anything I may want to see (well, aside from things currently showing on television, which get added to Tivo in similar fashion).

Splitting the queues kills that convenience. Now I'll have to add it to multiple queues on different sites, and think about which list(s) something needs to be on, and maybe keep things in sync...it takes Netflix's single best feature to me and just kills it.

Really? When you're not limited to a few out at a time, and when they don't have to be physically delivered to you at a cost of 1-3 days, does the queue per se really matter so much anymore? I can see a lot of different ways to represent saved content for a streaming biz, but DVDs pretty much force an ordering. I almost never use my queue for streaming.

But ratings are another matter. Seems like they could syndicate that data back and forth.

> I almost never use my queue for streaming.

On my Blu-Ray player, the queue is the only way to play anything.

As far as I can tell, the only reason to have the streaming queue at all is for the brain dead integration that some devices do. For instance, my TiVo requires the queue but my Apple TV does not. For that reason alone I use the Apple TV to watch Netflix streaming as the two step process isn't good.

Unified queue nothing. I was talking with Adrian Cockroft at QCon last year and he said that Netflix would prefer to not have a queue for Instant Watch at all.

Def unified queue. They are violating a golden rule. not giving the people what they want. They've lost the Value in Value Added Service.

As of today there stock is down 40% from when this whole debacle started.

I believe it was Henry Ford who said "If I'd asked customers what they wanted, they would have said "a faster horse"."

Sometimes you have to do something that customers might not "want" to get to something that they really do want. If this lets Netflix improve their streaming service without being bogged down by dvds then I'll be all for the change.

There's a difference between "giving the customer exactly what they're asking for" and "listening to what the customer cares about". Ford said to avoid the first. Netflix is failing to do the second.

It's not just the tone of the email or the new name that bugs people - it's the complete separation of their sites, pretending that the DVD-by-mail site can't communicate with the streaming-only site, etc.

People are annoyed that their ratings/suggestions won't carry over to the new site, and that the streaming-site won't let them add a movie to their DVD-by-mail queue when they search for a title and find it's not available on streaming (or vice versa, the DVD-by-mail site won't tell them when they could be watching a title via streaming).

You have to fix that to fix the customer response.

Agreed. In the end this is all about Netflix and not about its customers. If any of this had anything positive to offer customers it could have been spun better, but it doesn't.

I think netflix is actually in deep trouble. It's lost Starz, and could be losing other valuable rights, it's changing its business model in a way tha damages its own stickiness, and it raised its prices in a recession for reasons that make no sense to customers.

Not to mention that a lot of there growth was due to the fact that they had a fiercely loyal cust base that proselytized endlessly for them.

I remember getting an email from them years ago that said in essence, "We've upgraded our systems and are now more efficient. because of this your plan will be reduced by xyz." Better service and cheaper, i thought they had me for life...until recently.

> Not to mention that a lot of there growth was due to the fact that they had a fiercely loyal cust base that proselytized endlessly for them.

Yeah, that was me a week ago. Now, I just dread explaining to my other half that we will need to manage two movie queues.

We have four queues, DVD + streaming (for a family of four). We may ditch DVDs altogether, and switch to 2 separate streaming-only accounts. Maybe this is what Netflix is hoping will happen.

Actually, this is might be a great area for a third party to get involved. Inveni (http://www.inveni.com/) already works with Netflix, IMDB, etc as a recommendation engine. It would be a pretty short step for them to start managing your Netflix/Qwickster queues.

Back in June Netflix announced that they would be phasing out access to the DVD queue/movies in the API by the end of this year: http://techblog.netflix.com/2011/06/upcoming-changes-to-open...

Would be interesting to see if they have any plans to add that back, but otherwise, this type of solution sounds like it might not be possible.

I wonder if allowing an API that lets users import and export their ratings would help.

Maybe even allow non-paying members to sign up just to rate and suggest films, and constantly entice viewers with a "watch now with a Netflix subscription!" logo in the corner.

They could easily try to take share from IMDB and Rotten Tomatoes, and be "the website for movies". Every time someone makes a post on Facebook or Twitter it could be "_____ rates <film> !"

Reed Hastings makes me wonder what kind of company Netflix is.

Does Netflix listen to its customers? I've hated the website redesign since it launched and from what I've read, I'm certainly not alone. I find the redesign to be much less user friendly than the old one, which I loved. I don't login as much as before to browse, review and add to my queue. I avoid the website and stick to watching stuff on my Roku. In my opinion, the redesign took the Netflix website from one that was fun to use, to one that devalued the company to being just another company that provides movies. The charm is gone.

And now this odd, Qwikstupid thing. That site isn't even up yet. Is it because they planned it that way, or are they looking for customer feedback first before making any concrete changes?

And that takes me back to my original point: does Netflix care about customer feedback?

(edited for my terrible typos)

In my 3 or so years as a Netflix subscriber I have noticed an extremely disturbing trend of Netflix killing useful features simply because they aren't good for the business.

I can think of 2 off the top of my head:

- You used to be able to easily access a page of latest release DVDs. They killed this page because "too many people were using it" - and they had a pretty audacious blog post assuring that now it is a better customer experience claiming "it caused contention to ship" - although I never had a problem and sorely missed the feature when it was gone

- You used to be able to see the top 50 streaming movies. It almost always had the top new hollywood blockbusters which I really wanted to see. This feature vanished one day with no explanation that I could find.

The new site redesign is also a good example, making it harder and harder to find the movies you actually want to watch.

For these reasons alone I was a relatively happy customer but I would never have invested in them as a company due to their lack of customer focus. This latest price fiasco was the nail in the coffin. I cancelled my membership.

For the price of the streaming plan, I will just watch one or two movies a month on Amazon Instant Video with a much bigger selection and much stronger customer focus. All the nice features which Netflix killed for no reason are featured prominently on the Amazon web page for starters.

I cancelled my membership a while back also -- difficulty in finding content I actually wanted to watch was a huge factor.

It's almost like an insurance company -- they want you to buy their plan, but not actually use it! (Why, then they'd have to pay out to the movie studios!)

I agree. They push the lower level movies intentionally.

I've stopped trusting the Netflix so-called "Latest Release" and other lists a while ago and started using http://instantwatcher.com for this reason. Good filtering & sorting features.

Netflix does listen to user feedback. Back in 08, the profiles feature almost got the ax before vocal user feedback convinced them to keep it. I'm sure they're listening, regardless of what the final outcome is.

June 19, 2008 - Removing Profiles - http://blog.netflix.com/2008/06/profiles-feature-going-away....

June 30, 2008 - Nevermind - http://blog.netflix.com/2008/06/profiles-feature-not-going-a...

(Work has any URL with "netflix.com" blocked, so I'm guessing these are right blog posts.)

I don't consider pissing off a large portion of your customer base causing a backlash so strong that you backtrack to be "listening to customer feedback". It's more like "poking the hornets nest & getting stung". Netflix has a history of shooting first & asking questions later.

As far as giving feedback or suggestions voluntarily as a customer, good luck. You can't do it on the website & any suggestion you give to a customer service rep stays with the customer service rep & goes no further. It's a sad state of affairs when the best 1-on-1 communication with customers Netflix has had as a company is their CEO doing damage control in Facebook comment threads.

I remember vocal user feedback telling them not to ax the "friends" feature too, but that's long gone. (And sorely missed, at least by me.)

I also remember vocal user feedback telling them not to switch to Silverlight, for that matter. I was one of the many who stopped being able to use their streaming service when that change went through, until I recently bought a PS3.

It's downright embarrassing how badly Netflix has botched this transition. Not only was Netflix sitting on 25 million happy subscribers, but subscribers who were notoriously brand-loyal, and whose word-of-mouth promotion effectively acted as an unpaid sales and marketing force. Now they seem to be doing everything they can to alienate their most dedicated users, essentially saying "We don't want your business anymore".

As a Netflix user for 5+ years, I for one can't wait until a viable competitor with equivalent selection emerges.

It wasn't botched. Everything is by design. Qwikster or whatever they are calling, is a direct competitor to Netflix, in the same way that Blockbuster was a direct competitor to Netflix. It's the last generation tech. They want to kill it.

They want to kill it fast because streaming customers are more profitable. They want you to switch from physical media to streaming NOW.

Yes, yes, I know you can't get that esoteric or new release by streaming. There's a ton of stuff that never made it to DVD that is still on VHS or Beta. I don't see you crying over that.

Netflix knows this. They are accelerating the switch and they're doing that by killing their DVD division in the most horrid way possible. That game rental thing is a bone meant to mislead you and is absolutely pointless. That part of the rental industry is being killed off by Steam. They know that too.

I'm curious, do you have numbers backing the higher profitability of their streaming business over DVD-by-mail?

I do agree that, if they wanted to get rid of their original line of business without looking like that's what they were doing, this would be the best way.

> I'm curious, do you have numbers backing the higher profitability of their streaming business over DVD-by-mail?

Simple reasoning will get you to that conclusion. There are no physical plants to maintain. No physical inventory to maintain. No postage costs.

You do have the costs of bandwidth, computing power, and licensing fees. I would imagine those are less than the above.

On top of that, they wouldn't be throwing everything into streaming unless they were making more money there. Even the most retarded of businesses will focus on a more profitable line than a less profitable one.

Yeah, you mention it, but I think you're vastly underestimating licensing costs. Hollywood / content producers have them over a barrel, especially now that they're spinning off the DVD business.

On top of that, those servers don't run themselves and those infrastructure costs you so quickly dismiss are significant.

This. When you own a DVD, you can rent it out as many times as you want and you don’t owe the studio another dime. When you have a digital movie on a server, every act of streaming it to a customer constitutes “copying”, subject to a license fee. And the studios want to milk that revenue source for all it’s worth and then some.

You're simple reasoning seems to be: "I don't know if the costs for handling physical media are cheaper than streaming low-latency high-bandwidth video over the internet, but I imagine that it is." I'm failing to see how "I imagine" == "simple reasoning." Just sayin'.

You're also making the assumption that aside from the distribution mechanisms, everything else is the same. That's far from the truth. Netflix most likely has to do separate deals with the content owners for DVD and for streaming that likely have vastly different terms.

You're also ignoring the possibility that Netflix views the DVD side of the business as a noose around their neck in negotiating deals for streaming content with the content providers, and the separation is an attempt to free up their hands.

For other similar* businesses that I'm aware of, streaming isn't more profitable on a per unit basis as compared to DVD rental/sale (but subscriptions to unlimited streaming are much more profitable, because usage tails off but people don't cancel).

* similar = streaming and disc media - it's the adult space, not mainstream video

It wasn't botched. Everything is by design.

I hope so, but it doesn't appear that way. Netflix has alienated a large number of its customers.

I know you can't get that esoteric or new release by streaming. There's a ton of stuff that never made it to DVD that is still on VHS or Beta. I don't see you crying over that.

Those are different issues. No one probably cares much about those esoteric shows you're talking about, but they certainly do care about whether they can get mainstream movies if they're paying a monthly fee for streaming. And right now, it's a wasteland: B-movies, old movies, and some UFO documentaries. Starz sometimes added something of worth, but Netflix blew that deal -- Starz is gone.

If all this activity by Netflix is part of some intelligent design, I'd really like to understand it, because right now, it looks more like a suicide attempt.

To me, it goes beyond selection. Netflix is great because it's embedded, deep. I don't care if anyone else spins up the best, cheapest, most wonderful streaming solution ever. Because Netflix is already on my Xbox. Or my Wii. Or my iPhone. Or my PS3. Or my Roku. Or my TV. They're in deep, and no one else has the coverage they do. I can't watch Amazon's streaming product on my Xbox. I can't watch any of a dozen different channel specific streaming options on anything but a web browser.

I can't wait for a viable competitor with equivalent selection AND device coverage emerges.

I spent 20 minutes on Netflix last night looking for one decent movie that I haven't seen. I gave up and watched reruns (hah, deprecated term) of The Office on Hulu.

I hate their new site, I think Qwikster is a good idea poorly executed, but if they have good movies I'll still use them. If they continue to have crap, will cancel my Netflix account sooner rather than later and happily go back to piracy.

As a Netflix user for 5+ years, I for one can't wait until a viable competitor with equivalent selection emerges.

Not trying to single you out, but let me get this straight... You liked the service enough to keep it for 5 years, the service has not changed substantially to the point where competitors have suddenly become attractive and you still want to ditch them?

It's just the company's new strategy. Do I think it was a good idea? Not really. But it's not like they're killing people. Is this really a good reason to go all nerd rage on a company and start cancelling subscriptions?

I think they renamed the DVD service so that it allows them the flexibility to sell it off at a later stage, I dont see anyone mentioning this but it is quite common for businesses to sell parts of the business to gain cash to pump into their future expansions. In this case it makes sense to put 100% into streaming.

I agree. They had to know they'd confuse and alienate people by changing the name of the service _and_ creating an whole new website for people to figure out. But it does allow them to extract the highest value should they sell it off later (and they will).

With plans to sell there was only two things that would have been even more bone-headed than what they did:

:a => "Sell it as Netflix DVD (or something like that) and have two companies named Netflix running around."

:b => "Sell it and force the acquiring company to change the name, in which case they would have to accept a huge discount on the value of the business."

When they split the revenue without having a 'combined plan' discount, I was pretty sure the DVD half was going to die. They were just planning for it. My theory is that they are going to sell it before it stops being profitable... But keeping it as a separate company allows them to let it die without it taking the whole thing down, if worst comes to worst.

I'm guessing someone in PR wrote a letter just like it. Then the CEO decided that it didn't really have the emotion and humility that the one posted had.

Sure, PR can spin anything to seem pretty, but sometimes its really just better to admit failings (pricing changes) and show that you're not perfect.

If Hastings admitted to a mistake, it's for failing to explain what they were doing more clearly. His words: " It wouldn’t have changed the price increase, but it would have been the right thing to do."

Am I the only one hearing a hint of condescension here?

The whole point of the original email was to recognize that their pricing changes made them seem out of touch. What's so bad about a CEO apologizing to his customer base? Also, I'll always take product name critiques with a grain of salt. I remember when people were complaining about how awkward MacBook Pro sounded. Don't even get me started on "iPod". If the service is good, then people will use the name and avoid the confusion that's been happening with the soon-to-be previous Netflix configuration.

Hell, remember ipad? Sanitary napkin jokes, pundits predicting doom, and a stoic Jobs? But it's almost become the "xerox" of tablets. Unfortunately, the name is the least stupid aspect of Netflix's new plan.

I'd argue that the difference between iPad, iPad, MacBook Pro and Qwickster is that it's very very easy to mis-spell Qwickster.

It could be Qwickster, Quickster, Qwikster, Quikster, Qwickstr (if you wanna go the Flickr route) and probably some variations I haven't thought of. At the very least, Netflix should have made an effort to secure the domain-names for these alternate spellings to ensure their customers can find them when they finally go live.

The other difference is that Qwikster is a deeply stupid name.

The other other difference is that iPad, iPod, iPhone, etc. actually describe their eponymous products, and Qwikster doesn't recognizably describe anything.

The other other difference is that iPad, iPod, iPhone, etc. actually describe their eponymous products ...

iPhone? Sure. iPad? Maybe. iPod? Definitely not.

It only seems that way because the iPod dominated the product category so strongly as to become synonymous with "portable digital music player."

Huh? The iPad is pad-shaped and "pad" is a commonly-understood noun in the tech world to refer to these devices.

Same thing for iPod. It's pod-shaped (or was when it was introduced) and it's a pretty simple mental leap to classify this "pod" as a thing that you put your music "into".

By stark contrast, "Qwikster" has absolutely no mental, cultural or conceptual link to the product or service it describes. It's worthless as a name in addition to being confusing, already taken by various other services, impossible to spell, and dorky.

Not really debatable.

What does a "pod" have to do with playing music? Less than what being "quick" has to do with a DVD delivery service, in my opinion.

Not saying I like "Qwikster," but it's just not the case that the word "iPod" sounded like a music player before Apple made it famous.

Oh I'm sure I could rattle off at least a hundred or so names of products and services that have no relationship to their relative products, are challenging to spell (assuming you hadn't heard of them before) and sound somewhat similar to other services.

Netflix should have made an effort to secure the domain-names for these alternate spellings

And the correctly-spelled Twitter name! http://twitter.com/#!/qwikster

That's the second time I've botched their name while trying to type it correctly. Guess I'm proving my own point.

See also: Wii.

"I apologize! It's all my fault! And here's some other bad stuff, that's also my fault! What, you aren't happy I apologized?"

I think that would solve the crisis of people hating the name, but it's not going to stop all the people who are angry about having to maintain 2 queues.

The problem with using "Netflix Classic" is it wouldn't allow them to sell it in 12 months as a distinct brand so they can get the dropping subscriber numbers off their books.

The name change and web site split is obviously the prelude to a spin-off. They split their stock between the streaming business and the mail business, shareholders get shares in both (and the right to hold or sell the portion they prefer) and the two businesses go their separate ways. It's a really smart way to deal with a company that has a developing business and a mature but declining business, and it will probably unlock significant value in the stock market value, because it lets people cherry pick which business they want to invest in.

Would have been better if they attributed the change to getting squeezed by Hollywood. At least people could sympathize rather than make Netflix into a villain. I suspect the change came in large part due to payment terms on all accounts as opposed to accounts consuming media.

That might help with their relations with customers, but probably wouldn't endear them to the media companies they have to negotiate with. Those negotiations are no doubt already pretty tense, and Netflix shouting loudly about what jerks they are won't make them less so.

I don't even think you need to call them jerks. Just say something like, "Our new licensing deals have us moving to a model where we are charged, not for how often you stream video, but for everyone who could potentially stream video. This means that if you're not watching our instant streaming at all today, but only using the DVD service, we still have to count you as a head. So we decided that the best way to handle this was to separate our DVD from streaming service. This way we, and you, pay for the services you use, and not what you don't.

Now you may then ask, 'why the fee hike?' Simply put, the math doesn't add up otherwise. To keep $9.99 pricing we'd have to do something like $4.99 for DVD rental and $4.99 for video streaming. Compare our DVD pricing to Blockbuster -- even at $7.99/month we're still cheaper. $4.99 for video streaming would only barely cover our licensing costs. We found a reasonable price point that allows us to offer great DVD and streaming services going forward."

This letter is genius. If Netflix had sent it out I think it would have averted the entire crisis.

I don't think any of the serious complains about the letter had to do with the new name or the tone in which it was delivered. I don't think anyone would cancel their service over the name Qwikster or because the CEO is a jerk.

The real complaints dealt with the separation of the services and thus the separations of the ratings system and of queue management. This letter does not address either of those issues, and thus would fix nothing.

The fake letter doesn't separate them:

> Members can log into both sites using the same login. This will allow streaming-only members to add DVD by mail, and DVD-only members to upgrade to streaming, at any time. The websites, however, will remain separate, so that we can start giving these different worlds the unique attention they deserve.

> The websites, however, will remain separate, so that we can start giving these different worlds the unique attention they deserve.

Sounds like they are being separated to me.

I still think the separation of the DVD and streaming businesses was to "firewall" the cash flow of the DVD business, so that content providers couldn't use that against the streaming business in negotiations. This would severely limit the amount of money that a content provider could charge Netflix streaming.

But it's fairly obvious that this plan was too qwikly put in place, without proper due diligence. They didn't even bother to get the rights for @Qwikster on Twitter BEFORE announcing this, which was a huge PR blunder. 2 weeks ago, they could have bought the name for $1000 from this pot-smoking kid, but now I think it's worth at least 6 digits to them, just to end the embarrassment.

I like the idea of keeping it under one brand but Netflix "Classic" reminds of me of "Classic" Coke. It's like AT&T calling home phone service "Classic" phone :)

It could be Netflix:Online and Netflix:Offline or Netflix:Instant and Netflix:Delivered etc.

I prefer the original. I got the email as a customer and felt like it did a decent job for what it was trying to do.

I think "Netflix Classic" would be a poor name for the old service. It would be shortened to "Netflix" in conversation and cause a whole host of problems and confuse customers which "version" they were on.

It's also a poor idea to use a subdomain for the main entry point to a separate service (by their design), i.e. users of 'classic' will still type 'netflix.com'.

"Common sense is not so common"! This is incomparable to the actual post, it highlights the positive points and addresses some (though not all) FUDs.

Similar to HP, Netflix made the huge mistake of announcing big changes in one big lump, creating a chaotic reaction. They probably should have waited a little to announce the split.

Keeping the Netflix name for both companies would have been a great idea (see the two Motorola companies), as commented here it was done this way most probably because they will sell the DVD business and use that money to invest in streaming.

The gave their future competitor a pretty crappy name!

In order for them to survive, they have to split their customers. It sucks, big time. They don't want to do it, but those who own the content are holding a gun to their head. So they have to chop their customers into two so that 7.99 is palatable to both their customers and their bottom line. And they are playing nice so that gun doesn't get bigger and blow a larger hole in their wallet.

Regarding this suggested letter, the author is spot on with how this should have been handled. There's really little reason for taking the DVD portion of the company and rebranding it under a totally different (and poorly selected) name.

I don't understand why Reed and the rest of the team at Netflix are throwing away such an incredible business. Like any business that offers both old and new options, they should have merely announced a plan (much like what was suggested in this letter) to slowly phase out DVDs and educate their customers on the benefits of streaming (as well as developed a plan for making more DVD-only content available via the streaming service). This just feels like that scene in the Beach where the guy gets his leg bit off by a shark and is taken out into the woods to die slowly. Despite this mistake, I still love Netflix (it's my primary source of television save for torrents). I hope they can recover from this and really turn around the brand. If not, I'll be really sad if I have to subscribe to cable again.

Even if they're separate companies, Qwikster and Netflix should license (for pay) the queue information between themselves.

That way customers will remain happy, and the Qwikster brand could be sold to someone that wanted a business that has a sustainable deal with the content providers...

A DVD-by-mail queue makes sense to me. What does "queue" mean in a streaming service, especially one where availability is frequently changing? In fact, DVD-by-mail and streaming services require and invite dramatically different management by the user.

I don't want a unified queue, because I don't want a queue for my streaming service. I can think of many ways in which I would want integration between my activity in each service, of which a unified queue is one of the least innovative and least helpful.

I have to believe that, even if Netflix/Qwikster can't provide useful integration, someone can. Despite my initial negative reaction to the split, these opportunities actually make me a little excited.

I think for a lot of people, myself included, a queue is simply a list of movies I'd like to see, in roughly the order I'd like to see them. Choosing a delivery method for the movie is a secondary thought, that right now is dead simple to do -- given availability information for the movie for each queue type, simply click the button for the available queue that best suits your needs. You also have the ability to see and play movies that become available to stream while sitting in your DVD queue, and can move a movie from your instant queue to DVD if you'd like. The two services blend well enough together to form a layer of abstraction, letting you use Netflix as a unified movie-finding-and-watching platform instead of just as a "DVD delivery service" or "Movie streaming service".

I believe that DVD will eventually die and streaming will be the primary way to watch movies, but the streaming selection just isn't there right now, and splitting the company like this forces customers to deal so heavily and directly with delivery methods that it dissolves that abstraction layer that made Netflix so valuable in the first place. They now have to sell potential future (and unhappy existing) subscribers on 2 new separate products: a "DVD delivery service" and a "movie streaming service", neither of which really measure up the the way the combined system did, and for the same price!

Change the implementation, not the API.

Netflix broke their API with their customers, so they're gonna be confused and upset. No explanation, no matter how good, will fix that.

It's like when you write a long comment in some code to explain why your code is goofy. Just fix the code!

In this case netflix needed to make their site more usable and make the pricing distinctions between streaming and dvd more clear.

New company, new prices, new billing options. Wayyy to much info for your avg customer. Netflix is way too confident if they think, customers won't cancel their plans with all these questions being raised. Once a customer starts to think about all these options, they might just think I don't really use Netflix much anyway!

The core issue here is the pricing change wasn't just about making more money, the main reason was Netflix had to pay a lot of money for users with Streaming included but had never used it.

As they had to say in the licensing "x amount of users have streaming" when only a percentage had ever used it".

The idea was they could now say "These users are specifically paying for streaming". They'd already split up the two plans into two different business departments.

In my opinion they should have offered a streaming plan, DVD plan but let DVD users pay a small premium to access streaming instead of doubling their core users bills, if they wanted to sort this licensing issue.

The problem is everything wrong with the Netflix changes makes sense... if you're Netflix and hellbent on selling off your DVD business. Of course they didn't consider the users in all of this - the whole point is to shed Quikster as quickly as possible, probably by selling it to Redbox or Amazon or something.

That's why we can't have a shared queue or keep the same name or keep the pricing unified on the bill. All of this is simple to do if Quikster is a subsidiary but I wouldn't be surprised if Netflix already has a buyer for Quikster lined up. These changes have the stink of "buyer requests".

Netflix has handled this so badly for customers and investors, and so obviously badly at that, that I can either believe they are incompetent, or that there are hidden factors (lawyers) at play.

The conspiracy theorist in me leads me to suspect it's somehow related to cost of licensing content for streaming, and negotiation positioning with Hollywood. That by burning the DVD bridge, Netflix can somehow lower costs dramatically or make their position in negotiations better. (But don't ask me how.)

Otherwise I have to believe Reed Hastings picked the wrong week to start sniffing glue.

An interesting point about the name Quikster - they took the ONE weakness of the DVD by mail service (you have to wait a few days) and made it the centerpoint of their name. Completely tone-deaf branding. Not to mention archaic domain naming (-ster? Friendster was a long time ago and doesn't have a nice shine anymore). I don't work in marketing, but I couldn't imagine much worse unless they tried on purpose. Maybe "Shitster."

It's easy to remember but that's about it. It literally could describe anything: oil change service, magazine publisher, board game company.

It's kind of refreshing to see such a textbook, illuminated lesson in bad management in the tech world, when usually all we get to see are the all-stars.

By keeping one brand it becomes more difficult to sell-off the silver disk business without impacting the download business negatively.

Better to make a clean break now.

The only way the Netflix Classic plan makes any sense is as a staging post to splitting the company in two. This would have been good PR as well as a sensible internal business step. It lets everyone get used to the idea gradually.

Keeping the logo and the word Netflix in the new company name makes it less attractive should they wish to sell it off. Just sayin'.

Rebranding the DVD company is relatively easier than the streaming one due to the many devices in people's homes which are "netflix enabled"

This letter isn't in line with Netflix's strategy. They want the Netflix brand to be completely unassociated with by-mail DVDs. Sure Qwikster is a stupid name, but in a years time we will think of it as it's own entity/brand. Netflix classic would not accomplish this.

I'm fine with the changes Netflix made, although I would prefer to login to only one site.

Just me or does that sound awfully close to Apple's marketing language? "We think the benefits are going to be huge."?

People would have bitched no matter what they said. The level of entitlement in modern society is pretty shocking.

Impressive discussions. I like the Spotify model compared to Netflix. Care to comment?

The Spotify streaming model is the same as the Netflix streaming model. They just have far fewer licenses. What do you see as distinguishing characteristics of Spotify over Netflix beyond available content?

Terrific - couldn't have phrased it better. Only missing item is maintaining ratings/carrying them over.

I wonder if Reed hastings was drunk or high when he made these announcements and wrote that blog post. Hard to believe someone who built a business so shrewdly could screw up like this..

Quikster sounds too much like Amway's failed Quickstar. Classy.

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