But still, prices went up for a service I was happy with. I stuck with the DVDs and got rid of streaming because honestly, Netflix's offerings for streaming are pretty weak. And so it surprised me when Hastings announced that the direction of Netflix was to move more into the streaming sector, and portion off the mail-order DVD sector into a new business called... Qwikster.
Yeah, it's a bit of a headscratcher for me. For one thing, the name makes me think of this:
But also, it's pretty much brand suicide to take a beloved service and raise the price, while making it more complicated. You've botched your brand promise. Now you're seen as unreliable, expensive, and untrustworthy.
I feel for Netflix. They spend a lot on postage to deliver us our DVDs. Plus, there's been a lot of buzz about online video, streaming TV, and all the rest, so it makes sense for the business to go this direction. However, I think the transition is reading as haphazard at best. It would have made sense to hold off on this particular bent until they had more to offer on the streaming channel. Right now it looks like they want to get out of the DVD by mail business altogether, and that's going to alienate a lot of brand evangelists who got into Netflix in the first place because they liked that model. They run the risk of severing off their bread and butter consumer, and that's problematic to say the least.
CNN Money points out that their stock has already taken quite a dip. They face some stiff competition from Amazon, Google, and Apple—even more so if one of those companies acquires Hulu.
Even after last week's huge sell-off, Netflix remains a very pricey stock that has room to fall. Shares trade at about 35 times 2011 earnings estimates and nearly 25 times profit forecasts for 2012. If you are willing to pay that much for Netflix, you can't afford mishaps like lowering subscriber targets by a million. (Paul R. La Monica for CNN Money)So bad timing, not a great idea for a split, a kooky name... is Netflix doomed?
Angry Netflix Customers React to Qwikster
Qwikster: Let's Make Fun of Netflix's New Service
Qwikster: the new name for something that takes several days