It’s only been a few weeks since Netflix rolled out a price hike that irked customers and forced the company to revise its projected total subscribers for the year. Realizing he could have better communicated the change to subscribers, Netflix CEO Reed Hastings took to the company blog last night to say he’s sorry and offer some candid insight into the company’s intentions.
Hastings had barely finished apologizing before announcing another radical change: Netflix is spinning off its DVD-by-mail business into a new brand called Qwikster and running it separately from the streaming business, which will continue to be called Netflix. Qwikster, which will be run by company veteran Andy Rendich, will also now include video game rentals.
Qwikster and Netflix will be run as two separate businesses with two different websites. For consumers, this will mean two places to manage their payment details and two movie queues and two sets of recommendations. The move, as Hastings candidly explained, was designed to improve the company’s ability to run both businesses as effectively as possible.
From the company’s perspective it’s a sort of pre-emptive self-disruption; Just as Netflix upended movie rental stores with its DVD-by-mail service, that model now stands to be disrupted by the streaming-only model that Hastings sees as the future of the company.
Customers Respond (And It’s Not Pretty)
If the heightened transparency was meant to assuage angry customers, the effort could hardly have fallen flatter. By this morning, the post had accumulated over 4,000 comments, most of which were harshly negative.
“As a Netflix loyalist for more years than I can remember, I find these two significant changes to the service to be a failure of epic proportions,” complained Tod Sacerdoti.
“This just further encourages me to drop one of the services (or both),” said Netflix subscriber Julie Carter. “Without integrating the two services, it makes things much more difficult for customers who’d like both DVDs and streaming.”
Many of the objections are centered around the user experience issues raised by splitting the service into two distinct websites. The change runs the risk of causing serious damage to the service’s established user experience, argued Hubspot UX designer Joshua Porter in a blog post.
“They’re changing the user experience of their web apps to model the new company structure, not a structure that is most friendly to people,” Porter wrote. “This is an extremely common problem in user interface design. Netflix is in serious danger of breaking the user experience they are well-known for.”
As negative as the feedback has been, some people have been more supportive. Venture capitalist Mark Suster wrote an enthusiastic endorsement of the split on his blog, arguing that it helps the company better position itself to survive into the future by effectively disrupting itself while making the most of the DVD side of the business while it lasts.
