Netflix Scripts Its Own Disaster

September 20, 2011

Monday morning broke with the wailing of Netflix customers everywhere.

The online community bemoaned a division of the company that leaves streaming service with Netflix and DVD rentals with a new entity called Qwikster. Already hemorrhaging customers, Netflix shot itself in the foot, multiple times, by using poor crisis communications to explain its business moves.

Don’t set yourself up for failure.

The first wound stems from the apologetic word vomit streaming out of Reed Hastings, the co-founder and CEO of Netflix. The company’s blog and YouTube video explanation are littered with the word “sorry,” talk of doing wrong and justifications.

By apologizing right off the bat, Hastings is positioning Netflix’s business development and the introduction of Qwikster as being a bad, scary thing. In reality, this could potentially be a good long-term business decision. Hastings’ apologies leave a bad taste in the mouth as he moves onto news about the future of Netflix and Qwikster.

Granted, Netflix customers are upset by the price hike and, now, the business split, but with more clarity the public reaction may have been less negative. Hastings should have discussed how the division of the company’s current services will benefit the customer and not lamented change (see photo below).

But, why will this be better?

This leads me to Netflix’s second gaping wound. If the company’s television show and movie streaming services are on the mend, why has it been severed from the body? Andrew Miller, fellow pony, and I got into a lively discussion about the reason for Netflix separating services. We both agree that there is more equity for the company in associating the name Netflix with online streaming, as well as more business growth for Netflix in the field of digital viewing. However, I don’t feel that this service has come far enough to stand on its own as the body of Netflix’s business model.

In the past two months there has been significant criticism over the quality of shows and movies available via streaming, as well as the announcements that Disney, Sony and Starz will not be renewing contracts. Although there is a significant amount of growth potential, Netflix doesn’t have much to show at the moment. The announcement, premature in my mind, would have been better received if information was presented showing that the separation of streaming and DVD services would benefit the customer, whether new movies and tv shows available or fresh partnerships. I don’t know if these content partnerships are in the works right now but the change of services should have been announced once this information could be released.

Netflix CEO Hastings says, "For me the Netflix red envelope has always been a source of joy. The new envelope is still that distinctive red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be the same for many of you."

Have all your ducks in a row, cover all your bases, do your research, etc. and actually do it.

The cherry on top of the mangled body of Netflix is @Qwikster. Monday morning may have started in uproar, but it ended with Netflix being the laughing stock of the online community. As people searched for the Qwikster Twitter handle they came across a picture of Elmo smoking an illegal substance (FYI, as of 9:20 p.m. last night the photo was changed) and the Twitter account of a young man littered with talk of girls, profanity and the use of previously said illegal substance. How does Netflix, a major company, forget to check the availability of Qwikster’s Twitter handle prior to the announcement? A couple years ago this may not have seemed like a major oversight, but today it has the potential to damage a company’s reputation in a world where information is shared and seen quickly online, especially for a company separating services to focus on streaming capabilities and digital content.

Actions may speak louder than words but, at this point, Hastings isn’t doing much more than talking.

What do you think about the division of Netflix’s services? Will you use one or both of the new services? What are your thoughts about how Reed Hastings, co-founder and CEO of Netflix, communicated with the public? 

Here are reactions from other ponies about the Netflix and Qwikster news:

Andrew Miller says, “To anyone who says they don’t think online streaming is strong enough to stand on its own, I completely disagree. Consumers are moving away from physical media (CDs, DVDs, etc.) in favor for digital files and streaming services because a) they can access it anywhere b) they can use it across several platforms (players, computers, smartphones, tablets, etc.) and c) they are immediate. That’s everything. I’ve never once rented a DVD from Netflix, even though I know the library is much larger. But when I want to see something, I want to see it now. I don’t want to wait two days or until its finally available.”

Mike Keliher says, “The selection of streaming movies and shows on Netflix is poor. It’s improved in the past few months, but there’s no way I’ll pay for it. Also, Qwikster might be qwik, but there’s no way it’s as qwik as walking to the Redbox at the gas station or grocery store I already go to frequently. My friend Garrick Van Buren makes an interesting point, though: There’s nothing in the name Qwikster that indicates anything about movies or even entertainment. Who knows whether that’s intentional or what the future might hold for this generically named company?”

Amanda Mark says, “Qwikster=Cancelled. I’m also pondering cancelling my Netflix and using a mix of Hulu Plus and Amazon On Demand, but I do dig the no-ads of Netflix and the ability to watch an entire show during a cold Minnesota winter. Having said that, I read a few articles on their strategy and it makes sense. Spin off the DVD business because you’re not as sure of the future, but focus on improving your streaming service. Having said THAT, I really wish they’d improve it! I can’t think of a noticeable improvement since I started streaming Netflix in earnest last fall.”