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Summary:

Netflix came under a lot of heat when it announced plans to separating its DVD service and re-brand it Qwikster. But after nearly unanimous disapproval, the company has decided to shelve those plans, and will keep DVD-by-mail a part of the Netflix brand and website.

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Netflix came under a lot of heat last month when it announced that it would be separating its DVD service from the rest of its operations and renaming the business Qwikster. So now, after hearing more or less unanimous disapproval from users, analysts and investors, the company has decided to backtrack on those plans, and will keep DVD-by-mail a part of the Netflix brand and website.

Months of missteps

The debacle first began way back in July, when Netflix announced a change to its pricing that separated its $9.99 DVD and streaming plan into two services that cost $7.99 each. That led to an effective price increase of 60 percent for users that planned to continue subscribing to both services, which was met by wide-scale disapproval.

After announcing an update to its customer forecast, which lowered its expected subscriber count by a million at the end of the third quarter, Netflix CEO Reed Hastings then apologized and announced that the company was spinning out its DVD service as a standalone business and re-naming it Qwikster. That would mean a whole different website, billing relationship and ratings system for customers. The Qwikster plans made Netflix’s situation even worse, leading to even more customer unrest. (Not to mention ridicule by late-night comedians like Conan O’Brien.)

A step back, and an apology

Netflix is now announcing that it will not go through with those plans after all, and that it will continue to have a combined streaming and DVD-by-mail service and offer those services both through Netflix.com. Users will continue to have one monthly bill, and their ratings and recommendations will carry over between the services as they always have.

The move is a concession to those who questioned the wisdom of Netflix’s recent plans, but also an acknowledgment that the company harmed its brand and relationship with users through poor communication and an apparent disregard for what customers actually liked about the bundled service: simplicity. By splitting the services and brands, Netflix added an unnecessary layer of complexity to using both DVD-by-mail and streaming. CEO Reed Hastings admitted as much in his statement issued with the press release:

“Consumers value the simplicity Netflix has always offered and we respect that,” said Netflix co-founder and CEO Reed Hastings. “There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”

But is damage already done?

While most of Netflix’s recent problems have been self-inflicted, competitors are hoping to take advantage of customer disapproval of the announcements made over the past few months. Dish Network, for instance, unveiled a new streaming and DVD-by-mail offering called Blockbuster Movie Pass that it’s making available to its pay TV subscribers for an additional $10 a month. Amazon has doubled the number of streaming titles available for its Prime Instant Videos subscription service, and will likely see an uptick in video users once its new Kindle Fire tablet becomes available. And Hulu has been talking up its subscription service, saying that it expects sales from Hulu Plus will make up about half its revenues in a year.

Will Netflix’s decision to halt its Qwikster plans win back customers or get them to stick with the service? Or has the damage already been done, and will they look for alternative services elsewhere? Let us know what you think in the comments!

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  1. Netflix … Rumbling, Bumbling, Stumbling …

    1. Yeah perhaps, but they are still the best value in town and no one can compete with service for flexibility and price.

  2. For me, the damage has already been done. It’s a good thing, though, as the misstep reminded me I was unquestioningly giving netflix money without being a responsible, discerning consumer.

  3. Damage was done when they jacked up the price. They put themselves. They put themselves in the same group as everyone else, so why not use everyone else?

  4. I put my Netflix subscription on hold when they announced the 60% price hike then cancelled completly after they announced the Qwikster spinoff. They only way Netflix can get me back as a customer is if they reinstate the $9.99 streaming/DVD combo plan. Hell, it’d even rejoin if they made the combo plan $12 but to go from $10 to $16 is ridiculous.

  5. Travis Henning Monday, October 10, 2011

    Personally I don’t understand all the gripping about the price increases. Were they significant? From a percentage basis, yes. But overall, the value is incredible. For $20/mo you get unlimited streaming and 2 DVDs at a time. We haven’t had cable or sat service for 6 years – strictly Netflix and Hulu, but my parents pay $90/mo for satellite and outside of sports and news, they use their Netflix plan more often than they watch cable or sat programming. I guess it boils down to each person’s perception of value.

    1. I do agree that they way they handled these last few months has been a complete disaster from a public relations perspective. It looks like management can’t make up their mind.

  6. has the leadership of this company gone brain dead in the matter of 3 months?? I expect some heads to roll over the PR disaster this company has put themselves into with decisions they can’t even stick with

  7. So tired of listening to the cheapskates complain about Netflix. Next time you go to the movie theater compare its value to Netflix.

    1. It’s this…a lot of people complaining were converting from free [torrents] to Netflix. The $10/mo was more like a “convenient fee”. $16 is too high when compared to free, but $10 is the “golden spot”

  8. Netflix had just about severed its own foot before backtracking on the Qwikster decision. Just like with eBay and Facebook, why were they “fixing” what wasn’t broke to begin with. Companies need to stop looking for the next quick millions and just be happy with what works and makes them popular with their customer base. Stay in business for the long term, not the quick buck.

  9. Wesley G. Skogan Monday, October 10, 2011

    I have always assumed that NF separated the two businesses, setting up a separate name and billing for the DVD side, because they plan to spin it off to some investor group in order to focus on what they expect will be the “high value” side of content delivery.

  10. I agree with the few people who think that some have overreacted over this whole thing. Although I guess it’s a good thing that they did, because this Quickster thing was a pretty bad idea, and the overreactors made Netflix go back on that decision. Their main error was to move too fast too soon, and not communicate properly. They should have started by raising the combined plan to $12, explaining that they had to because the content owners were asking for a lot more money, then they could have said, “but out of our concern for our customers, we now offer the option of going streaming-only or DVD-only for $8 each.” They would have looked like heroes, and this would have given them an opportunity to fully quantify how many people were interested in the streaming-only or dvd-only options. A couple of years down the line they could have raised the combined plan price or eliminated the combined plan “discount”. Oh, and they should have kept the whole Qwikster and splitting the business idea to themselves for now.

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