Thoughts on the Netflix split (and about Qwikster)

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.