Monday, September 19, 2011

Netflix Goes Full-On Charlie Sheen, Spins off DVD Service

Just minutes before I did my regular check of Netflix's blog, I decided to see what's new on the AV Club's site. Rare for the early hours of a Monday, they had news up. And, wow, this one's sort of a big deal.

I've reminded readers twice over the past few months that Netflix sees its future as an "online streaming only" business. Now comes the announcement that Netflix will spin off their DVD service into a new company that will handle DVDs exclusively. I #$@# you not, my friends.

In a post that went online at 9PM last night, Reed Hastings, Co-Founder and CEO, discussed the recent price change that's gone over so poorly with members, stock analysts, and their own investors. This incredibly flawed defense for their actions makes a lot of unlikely statements like:
Most companies that are great at something... do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business.
I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do. 
Yes, apparently Netflix is capable both of feeling afraid and of retroactively deciding that its actions weren't wrong, they were just poorly-communicated. Who knew it had so much psychological depth, or so many personal problems? Did it recently find out it was adopted or something?

So, this soon-to-exist DVD rental company, Qwikster, is supposed to spring up in about a month, and all the DVD options on the Netflix site will disappear. It sounds like your entire DVD queue will also disappear. You will need two sets of billing and login information  if you want to both stream videos and rent DVDs, because you'll be logging into as well as Easy-peasy, right?

Qwikster, Hastings helpfully explains, gets its name "because it refers to quick delivery." Thanks for the tip, man - the mouth-breathing living wallets you call "members" might've been confused; I myself thought they sold chocolate milk. The big Q will immediately diversify from Netflix's dvd business, renting Blu-Ray discs and video games for Wii, Xbox360, and PS3. Why do I point that out?

Those three are the big console gaming systems at the moment - they are all also devices that can stream Netflix videos. I guess that's a nice addition for some people, but it's still confusing because even they will need both services for their devices too. The one thing that's clear is this move is just beyond stupid.

At this point, I expect Netflix will soon announce that it hates its executive producer, that it has tiger blood, and make threats against some person if they don't "stay out of my octagon." Charlie Sheen's erratic behavior from earlier this year serves as the best comparison for this sudden series of self-destructive, ill-considered choices. This company split sure sounds like Netflix is bi-winning just like Sheen was; I hope it doesn't also pay for sex.

Does it sound like I'm over-reacting? Well, can you offer a better explanation for why you'd (a) raise your prices, (b) creating a division between your two services (here, streaming and dvd rental), only to (c) move one of those services to a new subsidiary about a month later?

What kind of idiot gives customers one billing cycle to adjust to a big change right before turning things on their head further still? Even a bad plan can be carried out well, and it's clearly the smarter move to get the customers used to paying for both first, then splitting the services... And keep in mind, that other classy Netflix moves in 2011 include removing all identifying info from its review system. Because, apparently, "who cares about the people using your service?"

This in no way sounds like a company that's worried about its members. And I guess the level of self-delusion is clearest when you consider this other ripe quote from Mr. Hastings:
Companies rarely die from moving too fast, and they frequently die from moving too slowly.
Actually, many companies have suffered terribly for large-scale expansion over a short period, or taking on large contracts - Blockbuster, Dr. Maartens, Gap, and Westinghouse are all good examples I think. But lots of companies die from making dumb decisions, and it doesn't really matter whether those are done quickly or slowly.

Remember that, as we learned from that quote above, Netflix just has problems expressing itself properly; also, it's doing this because it's scared of not, uh, growing enough. I guess we all should've told it we loved it more, then it wouldn't've gone out of control and started seeking out bad attention instead of good attention. At least Hastings followed up his daring blog post by emailing the same message to customers a little before 6AM.

Apparently, proper communication isn't about the content or thought behind your words - it's all about the follow-up.

This entire mess is ridiculous and sad. A company that beat out all competition is now tired of rising up to absolute success, and so it's just abandoning everything (and annoying its customers) so that it can focus on some new... challenge? What is this, the end of Conan the Barbarian?

I signed up for Netflix very late into the game - only two & 1/2 years ago. I loved their rapid delivery and their broad selection, and I thought they had a fine price for their service. I didn't worry or care about their streaming options. The "nice option" of the streaming service is now dictating prices and service. At this point, all I'm left with is the old former high school/college friend statement: Man, I used to think you were cool.

UPDATE: And their shares dropped 7% today, according to NY1. Hey, Mr. Hastings, it's called a hint.


  1. I guess that Hastings's blog post wasn't just addressed to Netflix's customers, but also to its shareholders, to whom he's announcing, "Now's a great time to abandon ship. My stock? Me and the other insiders sold a bunch of it a couple of weeks ago!"

    From a customer perspective, I'm always shocked when businesses think that their customers care about changes that make things more convenient for the company, but don't do a damn thing for the customer. Yeah, I get that Netflix wants to ditch the DVD service because they think physical media doesn't have a future. I get how this makes sense for them. But I'm not Netflix's customer for their convenience--I'm a customer for my own convenience. Why, exactly, should I care that they'd rather move too fast into streaming than too slow? Why do I care about anything other than the fact that I'm paying more money for less service?

  2. Yeah, companies DO shock with their "I'm not gonna tip you anymore, I need the cash for other stuff - hope you don't mind!" approach. My friend Brandy points out that this move can only lead to the subsidiary being sold, so Hasting's "desire to improve communication" is meaningless.

    Oh and the stock sale is both funny and annoying. I hope one of those execs forgot to ask the board for permission to sell or something.

    I'm glad you're asking those questions, DJ - and for playing along with me; I obviously went out of my way to mock Netflix's supposed emotional concerns because throughout it all, we're being asked to be "understanding" toward a faceless business that's saying "me! me! me!" - but what about US, your living, human, customers? It's not horrible to be a jerk, but a lame, cloying jerk?...


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