Monday, September 19, 2011

Netflix Letter to Customers from Reed Hastings: Qwikster Launches

Just when I thought Netflix couldn't make anymore mistakes to try and destroy their business comes the letter from Netflix co-founder, Reed Hastings.  The letter begins by expressing his sorrow for the changes they have made and the impact it has had on their customers, though nothing will change.  He explains the need to focus on streaming in order to maintain relevance, and not become another AOL or Borders.  The dagger point to their business comes later in the letter when he announces the official splitting of the DVD and streaming business.  All of the physical media transactions will take place on their new website, Qwikster, while the streaming service will continue through the Netflix website.  For most successful businesses, like Wal-Mart, the goal is to have a one-stop shop.  I felt I was able to keep my business with Netflix because I could manage both my physical DVD's as well as my streaming content on one website.  You see, webpages have something called tabs and links that allow you to do multiple things on a single site.  They've been around for years.  Netflix, however, feels that their consumers are incapable of navigating multiple tabs within a single page to manager multiple services.  So their solution is to send you to another "store".  When you separate these two services in such a dramatic way, the consumer will then shop around for each service individually, and the value add of doing both services on one site is lost.  If I go to Wal-Mart for years to get my groceries and shampoo, and they suddenly don't sell shampoo and their main store, but instead tell me to go to another store, chances are good that #1, I'll be mad.  #2, while I'm mad at having to go somewhere else, I will be less inclined to go to the other store they own.  #3. I might find that going to another store, I like their services better and maybe stop going to both stores all together.  In summary, Netflix's effort to control the streaming business has caused its consumer base to look for the off ramps and maybe try another stream.  They did lose 600,000 customers over the last couple of months.

2 comments:

Kansas Bob said...

I got the email too. Hard to believe these folks are imploding the way that they are.

Limitless is coming from Flixster, I mean Quikster, this week so I have bookmarked your review to read after I see it.

jrchaard said...

I can't wait to read your review. My next review will be source code