So, as reported on TekGoblin, Netflix has now renounced their pronouncement announcing Qwikster, the spinoff which would have split the DVD rental business off from the streaming business. I had written previously about the Netflix saga and as before I don't think Netflix has done themselves any favors but I also don't think they are dead in the water. I also received one of these automated emails and my first thought was that perhaps the Qwikster Twitter guy was just asking for too much money.
If nothing else, I personally like the fact that they listened to the customers complain about now having to split activities across two sites and have decided to keep things in one house. From a business perspective though, it certainly does come across as being indecisive, which is never a happy-maker with the shareholders. It's the right decision, but it shouldn't have to have been made as Qwikster should never have seen the light of day. Still, that's easy to say in retrospect.
Initially I took the message, particularly the announcement of no new price changes, to be a positive thing, perhaps an indicator that they had secure new licensing to replace Starz! once it goes away, but the more I think about it, the less sure I am of this. If they had secured new licensing, they would want to shout about it, not obscure the fact. The rest of the email discusses addition of new content now, under existing licenses. It doesn't mention anything about what will be available in a year or two. And then there's the whole Qwikster flip flop.
On the one hand, eliminating Qwikster before it actually had a chance to start was, as I said before, the smart move. Frankly, it should have been done before Qwikster was even announced. No one outside of a board room should have ever heard of it in relation to Netflix. Then, when it was announced, customers got angry. It was bad enough that prices went up but then to force them to maintain essentially two lists of content to view and rate was just silly. Even from a technological perspective, the two sites could have shared accounts and data. There was no need to tell customers they couldn't manage lists in one location. It was a stupid move. But they addressed that with Qwikster's death, so kudos earned and given.
But the rapid switch in strategy makes one wonder why the sudden change in direction. Again, at first I took it to be a good sign that Netflix was willing to listen to customer dissatisfaction with the Qwikster split and do something about it. But then if it made sense for the bottom line to do the split and now they have decided against it, what reasoning did they use? Because customer dissatisfaction with the split mostly seemed centered around managing those two queues, a technological issue that could easily be addressed without giving up whatever economic incentives the split would have provided. Yet now those incentives don't seem so important anymore. I can only think of two reasons.
One is because there are new licensing agreements coming soon and so they plan to try to stir up as much goodwill as possible to win back lost customers in order to make the new content available to as many viewers as they can. As a result, they keep the DVD rental business within the fold and continue to play nice with those who make use of the service, in order to quell the discontent. That would be swell but then why keep us in the dark about it? Why not delay the Qwikster launch until they have the new licensing wrapped up and can announce it alongside Qwikster's death. Instead, we get an email telling us prices won't be going up and oh, we've added a bunch of new content lately or will add more soon. That new content is simply from existing licenses. It doesn't represent the premium content which Netflix is tussling with Starz! over. (Or was until the deal went bust) What of that?
The other reason why Netflix might want to bury the idea of splitting the DVD business out is because they believe they may need it to survive. With negotiations dead with Starz!, the Netflix team has no doubt been courting other content providers to find more premium content to show viewers. If they had no luck, they would need to stave off elimination until they could get someone to work with them on terms that would not further alienate their base due to price hikes. In this, they would look to become the next Apple, arm twisting content providers into a more consumer friendly model with consistent pricing at lower rates than the content owners want to accept. But if they couldn't find anyone willing to license to them on such terms, they would have no choice but to keep the DVD business around to keep profits up.
The interesting thing is that in this second scenario, we wouldn't necessarily know it if it happened. We would see Qwikster buried soon after it was announced, we would see some PR come out about new content now available (but under current licensing), and then we would see... nothing. Nothing further would need to be said because the negotiations would be taking place with various content owners. And if they won a new license, you can bet we would hear it trotted out and used to show that Netflix is a great bet. But if they failed to secure new licensing, you would continue to see the DVD rental business pursued relentlessly, with perhaps an apology concerning not being able to transform the industry or something to that effect.
I'm an avid Netflix user. I like it and hope the model thrives, especially because it's pretty friendly to Mac users what with Netflix built into the AppleTV. I hope they secure new content licensing. I don't know if they would survive if new premium content required a higher tier of pricing or some sort of pay-per-view option, as that is ground already well-tread by other services. In some respects Netflix is attempting to commoditize movie and TV programming, making it something much less expensive than it is elsewhere and far more accessible. I think this is to be commended and insofar as Netflix continues to be a player in this arena, I'm rooting for them. I just hope they start showing some consistency.
I'm so sorry to see you like this. It seems like just yesterday when you were the youthful embodiment of revolutionary zeal, ready to take on the world and change how everything works. Now you're in a bit of a pickle and it seems like the vultures are circling. It wasn't supposed to be this way!
Back in the day, you were a plucky young thing with a crazy idea of how to take on the ten ton gorilla, Blockbuster. Mail the movies to your customers! It was genius! Of course it was risky, too, which is probably what made your derring-do all the more enthralling. You had to create a supply chain comparable to that of other big name retailers, able to move DVDs out with an efficiency bordering on mania. You had to have inventory available for enough of your customers to keep them happy. And you did it with a panache that turned heads. Oh, yeah, you were the star baby!
And then there was your ability to offer suggestions based on viewer's likes and dislikes. It was like having Miss Cleo right there with you as you picked your next flick! Except it was science! Do you remember that time you set up a contest to see if anyone could beat your recommendation algorithm? Yeah, me too. Those were the days, huh?
Blockbuster was steadily going down, you were on top of the world, and it seemed like nothing could stop you. Then we found out you had your eyes on another prize. Online streaming. Oh, sure, you told us later that was what you originally had wanted to do and I don't doubt it. But like you said, the network wasn't there, the licensing wasn't there... you made the right call, to be sure. But now look what's happened.
You started off well enough, hooked up with that Starz chick, but I told you at the time she was just slumming. I warned you she was just curious about you, not really sure things were going to work out. And sure enough, just when it seemed things were about to get serious, all of a sudden she demanded more. Hey, this sort of thing happens to us all. You know about my history with that girl from.. well, nevermind. No need to go there. But you know that old truism about there being lots more fish in the sea? Those aren't fish here, buddy. Those are barracuda.
See, before, when you were happily doling out DVDs, they didn't want any part of you. Sure, you sent them a check and all was well, but that was as far as it went. But now with this online streaming thing, they're like little gold diggers, wanting a piece of your pie. And if you aren't willing to share with them, well, they've got other takers. You aren't the only one in the market, you know. I hear some of them are even willing to go it alone. That's cold, man.
And now you've gone and ditched your DVD business, handing it off to your little brother, Qwikster. I hope you know what you're doing there. No one has even heard of him and now he's running the whole enchilada. Well, the DVD side anyway. And what's up with that stoner he's hanging out with these days?
Look, man, I know times are hard right now, but if you're going to stick this out, you need to get back up, brush yourself off and go make the best of it that you can. You've still got some good numbers, and your online streaming thing isn't going to melt away overnight, but you've got to get some serious juice lined up to jazz up that online streaming card you're showing everyone. It's a little stale at the moment. Consider what worked the first time, when you were offering people something that they couldn't get anywhere else. Or, I don't know, maybe you could get a wing man! Wait, that's right, I heard you and Hulu hooked up with someone recently.
I know you're the cheery sort, and I hear you've got some big plans, but you haven't been really forthcoming with them yet. That's cool. I'll be here when you're ready to talk. Just don't do anything drastic until we get a chance to discuss this some more, okay?
I swear, I'm going to quit sleeping. I go to sleep and all sorts of things happen overnight. I wake up and it's like gremlins have come in and moved things around. Now it seems my DVDs aren't coming from Netflix anymore, they're coming from some Qwikster place? Same label and everything, just a different name. Anyone see this coming?
It's interesting they did this, though not completely surprising. Reed Hastings, CEO of Netflix, has made no bones about wanting to grow the streaming side and speculation has been running high that they were looking to the streaming business as the focus of their future. Honestly, in the long run I think physical media delivery is going to only be decreasingly attractive, both as a business venture and as a product (the two do go hand in hand after all). But that shift is only going to happen when fast internet is available in more homes and, more importantly, when content is given equal availability via streaming as well as physical media. Until then, sure, if you ship, they will come.
I said not 'completely' surprising though, didn't I? And I mean it. For streaming to take off, one of the two factors is going to be having more content, and higher quality/current content, available for streaming. But Starz is taking their ball and going home because Netflix didn't want to pay the new, much higher rates Starz requested. I get that. I just hope Netflix has a plan in place to replace some of that content.
Of course this may be a way to mitigate potential disaster, too. Consider... if the streaming business does take off, it won't be hampered by what I imagine will be declining business on the DVD side in years to come. Yay. And if this gambit doesn't pay off because Netflix can't secure that higher quality content and all goes to hell in a handbasket... well, they've still got their DVD business, though at the loss of a well established brand in preference to a newly minted brand. Which they now have to share with a pothead on Twitter.
On a personal level, I really want to see Netflix succeed (you know, the new super sleek, purely streamy Netflix, not that mangy old dual business channel, clearly crufty Netflix) because I prefer to stream. It appeals to my whimsical nature when it comes to deciding what I'm going to watch. With a delivered DVD sitting there on the TV stand, I feel compelled to watch. Like I'm obligated to watch it as quickly as humanly possible just so I can return it because "oh my gosh they might be missing it and what about that mother of seven in Wichita who really needs this DVD gaaaaahhhhh". So, dear overlords of movie and tv content, please help me out. Destress my life. Let Netflix have reasonable rates for streaming your
schlock er, content. A rising tide lifts all boats and all that.
Now let me get back to watching this next episode of 'Haven'. Gotta get this disc back this week.