Netflix has been a trailblazer in the field of instant streaming and DVD rentals since it started its subscription-based digital distribution service in 1999.
Allowing customers to rent DVDs and Blu-ray discs through the mail, as well as stream films and television series for a flat-rate price, Netflix seemed like it was really on top of its game.
While companies like Amazon and Hulu have started to challenge Netflix in the digital streaming arena, Netflix still had a firm upper hand. That is, until it decided to raise its initial flat-rate prices this past summer, which included charging some subscribers twice as much as they were already paying for both streaming and DVD-by-mail.
Public outrage appeared to be overwhelmingly negative, enough so that co-founder and CEO Reed Hastings took to Netflix’s online blog Sunday to apologize for his poor communication in the process – as well as seemingly announcing an overall dismissal of the DVD-by-mail format Netflix pioneered.
Just in the past week, Netflix has lost the rights to stream films from Starz, Disney and Sony, three of its most prominent suppliers of streaming content, and Netflix’s stock has dropped as much as 15 percent in recent days. With staffers like Hastings reportedly selling off their own stock in the company, perhaps subscribers should have seen this coming.
In the video posted on Netflix’s blog, Hastings says that when they looked toward the future of the company prior to the controversial price increase, they saw that DVD-by-mail and streaming services were becoming very different from one another and splitting them up would let them provide more focus on the respective formats.
Netflix has created a new spin-off company, entitled Qwikster, which will provide customers with DVD, Blu-ray and the new addition of video game rentals. Qwikster will have a new website separate from Netflix at qwikster.com, and will be run by former Netflix executive Andy Rendich.
What all of this really sounds like is an attempt to become clean of their DVD-by-mail service that has become increasingly less popular in the wake of online streaming. While Hastings insists that Rendich and his new Qwikster team will be able to devote more time to improving DVD-by-mail service, the casual nature and faux-affable tone of the entire video makes this feel like a low-rent affair.
Now if Netflix’s streaming service had been offering a variety of special content that you can’t find anywhere else, perhaps this wouldn’t be such a cause for alarm. Yet, since the announcement of the price increase, Netflix has lost three major suppliers of streaming content, while sites like Hulu Plus have been adding up-to-date television series and acquiring licenses to major film distributors like Criterion and 20th Century Fox.
On Monday morning, Netflix subscribers received an email with the subject line “An Explanation and Some Reflections,” which was once again an apology from Hastings and the announcement of Qwikster. What’s really stirring about this whole apology front is that it feels like we’re being sold Netflix, not receiving an apology.
It would appear as if the plan all along was to eventually sever the limb of Netflix that was the DVD-by-mail distribution process, and it’s even fair to suggest that the price hike was a way to draw sides between the two and see who had more subscribers – clearly, streaming walked away with a victory.
As Hastings sends the new Qwikster CEO off on his way to “innovate” his new company, it seems as if Rendich is serving as a martyr for the Netflix namesake. While the name Qwikster is already being skewered by the Internet community, particularly because there’s already a Qwikster Twitter account owned by someone infatuated with pot smoking and Elmo, it seems like only a matter of time before DVD-by-mail subscribers realize that Netflix has no interest in physical media anymore.
Netflix may believe it is on to some sort of genius repositioning of their brand that nobody has caught onto, but the majority agree that Qwikster is another foolish move in a long series of events that appear to be an unspooling of this company. In an age where consumers are growing to appreciate accessibility of products in one place – in this case streaming and DVD-by-mail – Netflix is practically forming a divide and saying, “No.”