Friday, September 23, 2011

Throwing The Netflix Out With The Bath Water

In some future historic compendium of corporate blunders that will invariably include the Potiac Aztek, New Coke and Windows Vista, Netflix' marketing and customer service decisions of 2011 will most have its own chapter. The video rental service that bested the once dominant Blockbuster Video behemoth by providing a seemingly inexhaustible selection of DVD rentals at reasonable prices with absolutely no late fees has recently been making some of the most perplexing and miscalculated steps. How did this Internet-based company - which seemed to have a business model that not only satisfied but also predicted their customers demands - fumble the ball in the end zone of their own stadium?

Speaking from personal experience, Netflix arrival on the video rental scene couldn't have come at a better time. A used and abused customer of Blockbuster Video, I had sworn off the chain completely after not only getting dinged for a late rental return, but also having said return reported to a credit agency (complete with a phone call from a debt collector). And in a completely Kafka-esque turn of events, that very same credit report ding also banned me from renting videos at any Blockbuster Video outlet anywhere ever for several months. This wouldn't have been so bad if Blockbuster wasn't the only game in town, practically wiping all of the independent mom 'n pop off the video rental map (ah, the follies of corporate monopoly!)

During that black-ball period, if I wanted to watch a new VHS or DVD release, I had to actually purchase a physical product, which at nearly $20.00 a pop became a very expensive habit. And if the movie sucked, tough shit; an open product with a receipt will only get you a fraction of the money you spent on it at. By the time my Blockbuster ban was lifted, I was soured on the company and never returned.

Then came Netflix. No muss, no fuss. Your rental - delivered by mail no less - was yours for as long as you wanted it, returnable in a prepaid envelope. With a ton of movies just a couple of mouse clicks away - and at a pricing structure that fit your budget - going "outside" to rent a movie was a thing of the past (goodbye getting in the car, driving to a store and milling about for hours looking at empty boxes indicating the rental you wanted was "out"). Netflix' business model gave long-suffering Blockbuster customers/victims exactly what they wanted: convenience, selection and - above all - respect.

Eventually, the Netflix brand became so successful that they started taking considerable chunks out of the 'Busters' wallet (so desperate to keep up, the lumbering Blockbuster even copied Netflix rental by mail model). Netflix' success eventually led to the shuttering of several Blockbuster stores across the nation.

So, given their success, how exactly did the once promising Netflix go from that intuitive company to short-sighted corporate clod so fast? In a word: stupidity.

When Netflix introduced its streaming video-on-demand service a couple of years ago, it heralded what some in the industry saw as the death knell for the physical video rental model. Augmenting their DVD rental service, Netflix added supplied streaming content in the form of movies and television shows. Download some software from the company's site and you're good to go. Easy, right?

Well, yeah, it was for a while. Then things like bandwidth restrictions, slower loading speeds and limited content started to become an issue. Add to this Stars (the cable TV distribution company which supplies Netflix with nearly half of its streaming content) and several major Hollywood studios signaled that they were pulling away from the online rental retailer at the end of this year. But in a counter-intuitive move that seemed to only compound Netflix woes, the company sent it's subscribers an email in July detailing a two tiered price increase (one for DVDs and one for streaming content, effectively double prices) starting in September. This cost shift was so cost substantial that the company might as well have gone door-to-door and slapped its customers in the face individually.

It was right then and there that I decided to cancel my subscription. And judging by Netflix plummeting stock index numbers, I wasn't the only one.

Taking stock of their severe marketing miscalculations, Netflix co-founder and CEO, Reed Hastings, sent its former (and numerous) customers an apology email outlining how mistaken he felt  the company's price increases were in a sort of rambling, long-winded mea culpa. But with his "apology," did Hastings take this opportunity to announce a scaling-back of those price increases and persuade Netflix former customers to return to the fold with better products?

Nope.

Instead, Hastings unveiled Netflix' latest blunder: Qwikster, a seperate online DVD rental site that looked remarkably like Netflix, but with an annoyingly misspelled name reminiscent of Internet entities from the early Aughts (Napster, Friendster, etc.) That's right; now if you want to rent physical DVDs, you simple log on to a separate website. Yes, unlike Netflix old rental system, where you could toggle between the DVD and streaming tabs on your queue, you now have to go to two separate sites, and pay accordingly. It's kind of like going to a coffee house and being told pastries are sold across the street. Mildly inconvenient, but still inconvenient, nonetheless.

Now, I'm not in marketing, but if you were going to go this split-up-content route, wouldn't it have been better to keep the name of the platform your customers have become acquainted with with the actual company name they've become familiar with (Netflix=DVD rental)? And that name change: Qwikster!?! God, I'm so tired of misspell-hip! If the company insisted on going down that beaten path, why not call their streaming site something like, I dunno, "Instaflix" and their DVD rental site as Netflix? I mean, I know Netflix will convert to an all-streaming format eventually and they want to keep their brand-recognized name, but c'mon! They already broke their boat in half. Why not christen the end that isn't sinking as fast with a new and more appropriate name?

Am I glad I cancelled my Netflix subscription? Yes I am. Even before the price increase was announced, I was already settling into Netflix fatigue - having felt that I've already exhausted those movies and TV shoes I hadn't already seen before, and that there was really nothing new on the site that was really worth watching. And for a while there, I was just going through the motions, re-watching movies I once loved as a teen (The Terminator for example), that now seemed quaint in their old age and stop motion special effects. I was tired of simply looking for something to watch, much less actually watching something - anything. Besides, there's a a whole big world out there that we haven't completely destroyed yet, and I'd like to see it before it finally gets blown to hell.

With the money I'm now saving from my monthly Netflix subscription, that should be easy to do.

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