All that Netflix handwringing was all for naught.
Netflix will not be spinning off its DVD business into a new company called Qwikster:
“It is clear that for many of our members, two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs,” read his post on the company’s blog (blog.netflix.com). “This means no change: one website, one account, one password… in other words, no Qwikster.”
The big problem with splitting the company in two was usability. Users would have had to search for movies on two different sites and maintain two different movie queues. While this may have made sense for Netflix in an abstract business sense, it was a huge usability fail.
The question now becomes: Will Netflix still be able to convince movie studios of the value of streaming movies? That was the whole idea behind the split in the first place. Studios argued that people had Netflix for physical DVDs, while Netflix said users really loved streaming.
Today Netflix split into two separate companies — Netflix for streaming and Qwikster for DVDs through the mail.
This won’t just be two separate names, but will also involve users going to two different websites and managing two separate queues. It’s a big decision, and one that frankly will probably have a rough go for awhile. Below are some of my early thoughts on it.
Netflix CEO Reed Hastings had a lot to say about this decision, including his fears that Netflix wouldn’t make the digital jump:
For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.
This was bound to happen — Whether people want to admit it or not, Netflix wants to get out of the DVD business. They also want the studios to offer them more access to movies and TV shows for streaming. The DVD business is holding that back, while also masking how many streaming subscribers that Netflix has. Netflix has almost as many streaming subscribers as Comcast has customers. Netflix wants to hammer that home to rights holders. Netflix needs to convince studios this is because people love streaming, not because they love getting plastic discs in the mail. This divorce had to happen, otherwise the studios could argue that Netflix users really want the DVDs and view the streaming as just a nice add on. The numbers say otherwise; 10 million people are streaming only subscribers, while only three million are DVD only. The other 12 receive both.
What’s with that name? — I don’t get the name at all, and I don’t get why it has nothing to do with the business at all. Netflix was a great name from the beginning and one that showed how prescient Reed Hastings was. Reed always knew that Netflix would be about the Internet, and even when the company had a DVD-only beginning, he knew that a name like Netflix would make sense. It’s movies. It’s over the net. It’s Netflix. The only thing I can think of with Qwikster is that Netflix didn’t want anything that remotely confused customers — Mailflix, for instance — and they also don’t see this as a long-term business. If they only see Qwikster as a bridge business for a few years, how much does the name really matter?
Social media is important — Would you really name a company without securing the social media accounts first? I wouldn’t. Netflix apparently would. On Twitter at least, Qwikster is a pot-smoking parody of Elmo. Fantastic. I don’t get why this mistake was made. Does Netflix just really not care about Qwikster more than the bare minimum that they have too?
Streaming is the future — This is what people have to get. DVD subscribers to Netflix have peaked. It’s all going to be downsizing from here on out. Netflix is doing this to force people to move to that future. Trust me, you want streaming. Plastic discs suck.
Is their a future for DVDs in the mail, anyway? — The Post Office is facing major issues right now, including discussing cutting a few days of deliver. President Obama has even endorsed the idea. Netflix is utterly dependent on the Post Office for delivering DVDs in a timely fashion for cheap. Imagine no Saturday delivery. Imagine delivery only three days a week. It’s too expensive to deliver DVDs via UPS or FedEx. Would you really want to bet the future of your business on the Post Office? Netflix doesn’t. And frankly, I don’t know how strong a future DVDs in the mail would for any company, with or without streaming.
This isn’t Netflix’s fault — Well, yes, the poor way they handled this is, but Netflix wants to offer more streaming movies. They’d love to offer every movie and TV show. The studios are holding on to the past and don’t like streaming, mostly because they love it when you buy an entire movie, even when you’ll only watch it once. Netflix is doing this to force their hand. If you give up on Netflix or one of its competitors, you’re giving into the studios and their retrograde way of viewing things. They care about legacy profits, not what users want. I never root for people who don’t care about what users want. Netflix does, unfortunately things may get worse before they get better.
If one website is good, are two great? — I don’t get the two different websites thing. Yes, they are different companies, and, yes, Netflix wants to hammer that home. But people don’t want two queues. They really, really don’t want to have to rate movies twice. Netflix needs to do an API that allows for reviews and ratings to at least be transferable between the two websites. If not, this is a big usability fail. That would be very unfortunate and unfair to users.
Qwikster won’t be around long — Either Qwikster will be shut down in five years or it will be sold. The name is not related to Netflix at all. It will have a separate website that as far as we can tell won’t integrate with Netflix. Netflix wants to get completely out of the DVD business too. In addition, Netflix cared so little about this move that the choose a name that was a pot-smoking muppet parody on Twitter.
I’ve already gone streaming only — I want everything to be streaming. The only way to get to a world where everything is available to stream in HD is for the market to speak. I’m done with plastic discs. I suggest you do the same.
This is our Net Neutrality episode, and it’s a great discussion about what could be and how that may not come to be.
We go into this whole big discussion about our cloud/streaming/awesome future that may be derailed by our terrible ISPs. So get excited — but be prepared to cry.
We ask some big questions:
- Do younger generations who have never paid for music have interest in owning digital content? Are we exiting the age of ownership?
- Can our Internet support our awesome cloud/streaming future?
- Will streaming digital content and better user experiences vanquish piracy?
We kick off the show by asking, are people being too harsh with Google and the whole Google+ deleting users for not using their real names? We think that people should cut Google some slack during a field test.
And organizations? Well you knew from the start that Google was rolling out pages for organizations at a later date. So, really how upset should you be that your organization’s page was deleted?
Out of nowhere we kind of do an Apple TV review at the end of the show. We talk about whispers of NFL Sunday Ticket coming to Apple TV.
Also, I lecture people about how only stupid people use P2P services such as Limewire. Is your computer acting weird? Is it slow? Might be because you’re using a P2P service filled with malware and viruses.
Listen to this week’s podcast:
- Google+ kicking users off for not using their real names — The blogosphere has been all up in arms about this.
Apple updates Apple TV to allow unlimited streaming of TV shows — We are excited.
- Your ISP is screwing you — We are not excited.
- Netflix is causing less piracy — People should be excited about this, but ISPs may not be. But seriously, if you make a great product, people will pirate a lot less.
- Former EMI boss says Limewire users were major iTunes users — So labels ended up suing their best customers? A solid business model, we’re sure.
Netflix uses its price increase to bring subscribers to the future (could news organizations do the same?)Posted: July 28, 2011
Netflix’s price increase was largely created to encourage subscribers to adopt streaming only, because Netflix clearly sees that streaming is the future of video, not plastic disks shipped in the mail (and stored in big, expensive warehouses).
Netflix also wants to encourage content holders to release more content digitally. If the majority of Netflix’s customers are on streaming only plans (which is not the case today), that would push reluctant content holders to see that the days of the DVD are over.
A lot of people are upset with Netflix now, but in five years it will be clear that this was the prudent decision. They’ll end up convincing more subscribers to go streaming only and sell more new subscribers on the idea of streaming video, especially as their streaming library grows. Their streaming library will grow as content holders see more and more people signing up for Netflix streaming (and hopefully my streaming video dreams will come true).
The Nieman Lab tries to see if these lessons could be applied to the news industry:
Newspaper publishers started this process several years ago, saying, “Let’s have these print customers pay more of the freight of creating and delivering print.” Since then, community dailies that used to cost a quarter a day havetripled to 75 cents, and The New York Times goes for $6 on Sunday. They have priced in more of the cost of that expensive newsprint, ink, and delivery.
Now, this year, we’ve seen added in the charging for digital access. We’ve begun to see the answer to this question: How much will consumers pay for digital access? That’s still uncertain, though early evidence is coming in from The New York Times, Time Inc., and Journalism Online experiments, among others. In newspapers and in magazines, we see the interim play: the bundled, all-access subscription — pay us once and get both analog and digital, print and pixel. That’s a move for more consumer revenue in the short-term, but also a longer-term pricing play to get pure digital revenue as readers give up print.
What do you think? In my view, legacy news organizations, particularly newspapers, have been double- and triple- downing on print. Investment in digital has seen fits and starts, and there hasn’t been enough attention paid as to how to monetize the future, which is clearly digital distribution of news.
I have a dream for streaming movies, and it doesn’t involve mailing DVDs around the world.
It’s convenient, it’s not that expensive, and the selection is just good enough.
Yes. Yes. And Yes.
Just as the best way to slow music piracy was to make it easier and more convent to not pirare (think iTunes and now services such as Spotify). When piracy is the easier option (think Napster before iTunes), people will do that. Make being a legal customer the easy and fun option, and people will pay.
Here are some reasons that Netflix stopped this pirate:
At the time, pilfering movies was a whole lot easier than watching them legally. Netflix’s streaming catalog had a tiny number of titles, most of them not to my liking. Apple’s iTunes rental plan had more titles, but too many restrictions (paying $4 for just 24 hours of access to a movie was a bad deal). I outlined what I called the perfect online streaming service—I wanted a plan that had a library as extensive as Netflix’s DVD plan, but which allowed for unlimited viewing—and I promised to pay as much as $40 a month for it. Netflix’s instant watching service isn’t anything close to that, of course. But in the last year it has improved its selection and accessibility (you can now get it on pretty much any device you own) just enough to hit a tipping point. I’m happy to pay $8 a month for not-terrible selection and amazing convenience. And nowadays, I almost never turn to BitTorrent.
It’s a simple dream: I want to be able to stream any movie ever made in HD to my TV, computer, smartphone, iPad and other devices.
It’s a reality that could happen today. It should have happened already, but it hasn’t. If this happened, I would spend more money on movies.
I would spend more money on movies.
But the movie studios have resisted this idea, because they are more tied to what has made them money in the past than what people want in the present. They don’t like streaming. They have begrudgingly given Netflix some older content to offer up and a few newer releases. They allow iTunes, Amazon and other companies to allow most newer movies to be streamed and some older movies, usually at prices that feel a little high, with really restrictive windows on watching the movie ($4.99 to watch a movie once at home within 24 hours?).
There should be no outrage that Netflix wants to charge customers separately for its streaming and mail services. They are separate services with separate costs, but people are angry almost entirely because Netflix streaming doesn’t have enough content for most people. It’s not the price, it’s the product.
But it’s not Netflix’s fault. They have all the content they can get. The movie studios just don’t want to give up the ghost — the dream that you’ll keep buying DVDs.
They want you to buy movies that you only want to watch once. Sure, you can watch a DVD as many times as you want. That’s the dream they want you to believe, but it’s not the reality for most movie purchases.
It’s like how music labels tried to cling to CDs desperately because it’s so much more profitable to get people to buy an entire CD for one or two songs.
But this is myopic. It’s silly. It’s retrograde.
Heck I would even buy more movies if I could buy them how I want to buy them. I would love to “buy” a movie that would allow me to stream it as many times as I want to any device I own. I don’t want to have to deal with storing a digital file (and backing it up), and that whole dance of trying to sync the movie to different devices.
This whole situation is anti-user. The technology is available to make more movies available for streaming. The technology is available to make movie watching easier than ever.
Streaming movies is so easy. I can just sit down on my couch and select a movie that I want to watch on my Apple TV and just hit rent. Watching Netflix streaming movies is just as easy to. The service even saves my location, so that if I go from watching on my TV to my iPad, I can pick right up where I left off. I like that.
No going to the store, no waiting in line, no dealing with out of stock issues. If you make a product or service easier to consume, people will consume more of it.
I’m done with physical media. It doesn’t fit my life. I don’t like needing shelf space for it. I don’t like going to stores to see what is in stock, nor do I enjoy wasting my time, energy and gas/public transportation money to get there.
Frankly, even with Netflix’s mail product, I couldn’t be sure that the movie I selected on Tuesday to ship to my house to watch on Friday would still suit me when I actually sat down. How can I judge my mood days in advance? With streaming I sit down, look through what is available and select something — often an impulse (most companies try to encourage impulse buys).
These impulses should be fed by making moving watching easier and more social. Why doesn’t iTunes and other movie services have a social component or integration with existing social networks. I want to see what people with similar tastes like. I want to see what my friends are watching. I want to watch movies with them.
Make these things happen, and I will watch more movies. I’m not alone.
We shouldn’t have to dream about putting existing technology together. We have seen bits and pieces, but it is time to give the people what they want.
My current movie watching setup is like this: Netflix streaming for whatever I can find and all those awesome esoteric movies and documentaries it has, iTunes on an Apple TV for renting of new releases and other movies not available on Netflix and I buy blu rays of movies that I want to watch a lot, particularly movies that look great. I can never watch Lord of the Rings enough, and it really shines on blu ray.
This is why everyone should go Netflix streaming only. Drop the DVD portion of your packages. The studios shouldn’t force us to watch DVDs as a fallback because they don’t want to make more content available for streaming.
Users should never be forced into an inferior user experience. DVDs are an inferior user experience, especially when you have to ship them back and forth with the post office.
You’ll always make more money by getting people to like your product more.
This is the conclusion David Pogue comes to, and it feels right:
Originally, it was “pay $10 for one DVD—streaming free!” Almost overnight, though, people began thinking of it as, “pay $8 for unlimited streaming—and get one DVD for $2 more!”
“That’s not sustainable for the longer life of DVD’s,” Mr. Swasey said. “We need more revenue. It’s a business concern we have to address. We want two separate business units, each side of the service. We were not able to fulfill the requests for DVDs at that cost.”
“I’ve had this conversation over and over again for the last 24 hours,” said Mr. Swasey. “Yes, 60 percent is a big number. But that increase is only $6 a month more. That’s a latté a month. We’ve gone from an extreme terrific value to a terrific value.”
Want to know the worst part? He’s right. PCWorld.com has a nice summary of Netflix alternatives. There’s Amazon Prime (no DVDs by mail, small streaming selection). Blockbuster by Mail (pricier mailed DVDs, no free streaming at all). Hulu Plus (no DVDs at all). Redbox (no streaming, pay by the day). In other words, even at $16, Netflix still gives you more than anyone else.
So whether we like it or not, whether we can explain it or not, Netflix has indeed killed the best entertainment deal on the Web. Mr. Swasey has it half right: it’s gone from an extreme terrific value — to an average one.
When the unlimited streaming came out, it felt like a nice add on. And the price point seemed to work. But then I got hooked on streaming. It is Netflix to me.
I just downgraded to the streaming only plan. I regularly sit on DVDs for weeks and months on end. The whole waiting-to-get-DVD thing doesn’t work for me.
Invariably what i felt like watching on Tuesday didn’t ring true on Friday. That’s why I love streaming; I watch what I want to watch when I want to watch it. It just feels right.
I have an Apple TV to stream new releases that aren’t on Netflix. I only buy Blu Rays of beautiful movies that I really love. Think Lord of the Rings and other movies where you want the best possible video. I’m just one bad day at work away from wanting to escape to Middle Earth for an evening (or Hogwarts). Those are the kinds of movies I have on my shelf.
(This is the first blog post I wrote from my iPad. Not bad at all.)