Netflix backs down and keeps DVD service

Netflix responded quickly to the backlash surrounding their recent announcement to split their traditional DVD subscription business from their streaming business by reversing their previous decision. The announcement to create “Quickster” as a new service that would handle DVD subscriptions going forward was a PR disaster for Netflix, partly because it was handled poorly and seemed to come out of nowhere. Customers were blindsided, and this followed very unpopular price increases.

Here’s the email that Netflix sent out to subscribers:

Dear ____________,

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.

This means no change: one website, one account, one password…in other words, no Qwikster.

While the July price change was necessary, we are now done with price changes.

We’re constantly improving our streaming selection. We’ve recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros., Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we’ve added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.

We value you as a member, and we are committed to making Netflix the best place to get your movies & TV shows.

Respectfully,

The Netflix Team

Many analysts and tech experts actually liked the move, since the streaming and DVD businesses are so different. Yet the stock has lost more than half of its value since July of this year.

While the whole episode, including today’s reversal, seems like a case of bad management decisions, it also highlights the difficulty companies are facing with the constantly changing landscape surrounding content delivery. With new tablets, smart phones and consoles, consumer behavior evolves rapidly, and business models can see significant success followed by the threat of obsolescence. Netflix helped put the final nail in the video store business, and now streaming is shaking up the DVD by mail model. The brain trust at Netflix can’t seem to stick with a strategy, but it’s hardly surprising given the uncertainty out there.

Meanwhile consumers have tons of options, and the next few years should offer a dizzying number of new options. For many of us, that’s part of the fun.

  

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One response to “Netflix backs down and keeps DVD service”

  • chris says:

    Netflix really dropped the ball on these notices. Especially with the price increase. I’m still wondering WHY the price increase was “necessary”. They never went into detail to justify raising the prices. Now, i could understand a restructuring of the services. maybe different tier pricing, etc, but a 50% price increase? That must have been to offset the scads of people that were going to leave when they found out about all this. Maybe it was actually a GOOD decision. haha

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