Tag Archives: Netflix

The Qwikster Joins the Dead

I’ve been wondering how many of the Occupy Wall Street squatters are actually enraged Netflix subscribers or retirees with Netflix stock in the 401K?

The timing is about right. In August Netflix increases the fee for plans that include video streaming and DVDs by a shocking 60 percent. In September the company announces it’s amputating the DVD side of the business and naming the new entity Qwikster. And in October Netflix was planning to introduce beer commercials during streaming programming for everyone not subscribing to the new ‘premium plan.’

No wonder protesters are preparing to punish capitalists and any corporate employees above the level of ‘barista.’ But participants in the March for Generalized Outrage are too late. The market has worked its magic and bulls bearing sell orders got there first.

Netflix stock was at $300/share last July. After investors had more time to evaluate the inspiring leadership of CEO Reed Hastings, the stock price dropped to $111.62 in early October — a plunge of 60 percent in value, strangely mirroring the August price increase.

Try to match that economic damage by dressing like zombies, pooping in the shrubbery and hoping Congress will invite you to a hearing.

It’s rare that a company becomes suicidal in such a brief period of time, but Netflix appears to subscribe to the theory that any publicity is good publicity, even if customers are burning car tires in the street outside corporate headquarters.

The first signs of a management woefully out of touch actually appeared months ago, way before the price increase and Qwikster cwazyness. The tipoff was testimony before a House–Senate hearing on the elimination of Saturday mail delivery.

Netflix is the USPS’ largest customer, spending over $600 million yearly. In my business our largest customer has amazing clout, up to and including “is it OK if I use my tongue to shine your shoes?” Yet Netflix appears to believe USPS is doing it a favor by taking the money.

In fact Netflix sent a representative to the hearing to cheerlead for the post office, claiming that eliminating Saturday mail delivery would have little, if any, impact on subscribers.

I’m sure it won’t bother Hastings — a lackey delivers his DVDs before Reed leaves the office. But for customers, eliminating Saturday delivery means no mailing a DVD back on Thursday and getting a new one in time for the weekend. Customers lose 17 percent of the delivery service with no corresponding decrease in price.

This sort of tone–deaf decision making is only possible if you are an “industry thought leader” that reads too many of his own press clippings. Lucky for Netflix government will bail it out, because elected officials are not going to give up Saturday mail delivery as long as elections are held on the next Tuesday.

Netflix mistakes should be instructive for those confused about the free market, starting with the ‘Occupy’ crowd. After the August price increase I didn’t call Uncle Sam and demand government intervention. In September, when the new billing rate began, I called Netflix to cancel the DVD portion of the plan.

In addition to being unaware that his customers like new movies on Saturday for weekend viewing, Hastings is also evidently unaware of competition from Redbox (he really must do something about the tint level on the limo windows).

Redbox rents a new movie for only a buck a day, without requiring a visit from the postman. In fact I would have to rent 17 movies a month to equal what my old Netflix plan cost. And I was not alone in this decision. Over one million other customers dropped at least a portion of their Netflix service in response to the price increase.
When management followed the price increase with the Qwikster stupidity, Netflix made the fatal mistake of complicating something that was already simple: making two websites, two passwords, two lists of movies, two sets of recommendations, two bills.

Before another million or so customers jumped to Amazon, iTunes or other streaming services, Netflix backed off and Qwikster joined the dead. Although even then Hastings did something foolish when he said, “While the July price change was necessary, we are now done with price changes,” a statement that will haunt the company in the future.

A big corporation offends customers. The media covers the controversy. Customers punish the company by dropping its service and choosing an alternative product. Investors punish the mistake by selling the company’s stock. The company learns from the mistake or it falls by the wayside.

Proof that a free market offers options — and competition, not government, is your best protection in the marketplace.

Streaming Video: What You Need to Know

Streaming video in its infancy was not considered an entrainment product by most, as the quality of video was even lower than standard definition (SD). People did not warm up to streaming video until a few years ago, when mobile media became popular with the invent of smart phones, and portable devices like the iPhone and iPad, Even the ability to stream video using video game systems and smart TVs.

Netflix (NASDAQ: NLFX) first offered streaming video to their customers roughly 4 years ago. With a subscription, you could not only rent movies and have them delivered to your house, you could also stream video to your TV, PC, portable Device, smart TV or game systems like Xbox and PS3, to name a few. And for years, Netflix enjoyed prosperity with little competition. But that has changed, with Hulu Plus (a joint venture of Comcast, Fox Entertainment and Disney Television), Vudu (acquired by Walmart in 2010) and Amazon’s (VOD – Video On Demand) Instant Video service.

Within this group there are two types of streaming video services: A Monthly Subscription service, including Netflix and Hulu Plus and a Pay Per View service such as Vudu and Amazon VOD.

With the monthly subscription service you gain access to the entire database of movies (and shows) and are able to watch them as much and as often as you desire. The pay per view service, you pay for a movie or episode and that is all you have access to, is that one purchased or rented movie or episode.

Which is better? They both have their Pros and Cons. The subscription service gives you more, but new movies and shows take longer before they are released. The pay per view you get the latest movies and episodes usually as soon as they are released.

Which do I use? I use both when I am not using my cable DVR (Digital Video Recorder). Subscription offers me unlimited entertainment on my TV, Laptop, mobile device and game system. But when I need to watch my latest episode of Burn Notice when I am away, I use pay per view so I don’t have to wait.

A recent development with Netflix, due to financial issues, has increased prices (moderately) and are separating their rental business from their subscription (streaming video) business and re-branding the rental business to an independent subsidiary company called Qwikster, which will also rent video games. Subscription based business will remain as the original name of Netflix.

Netflix currently offers streaming video for $7.99 a month, offering unlimited movies & TV episodes to watch instantly over the device of your choosing. Hulu Plus currently competes at the same price as Netflix, touting more shows and movies and more ways to watch. The truth to that is yet to be determined.

With Vudu, you can rent a movie for $3.99 (SD, HD for $4.99) or own it for $14.99. Amazon offers their VOD movie rentals for the same price. Both offering the latest episodes as well.

There are other streaming video companies in the market, but I find the ones I listed to be the “Mainstream” providers.

With mobile devices, smart TVs and video games systems, even PCs, one can access all of these and have good quality entertainment at very inexpensive rates, regardless of where you are. Of course, internet service is required, unless you download the movie or show to your portable device using the pay per view services.

Will streaming video every replace cable or satellite TV? That is hard to say. For now, they do not offer core programming such as news, local channels, weather and sports, or any “live” program.

As opinion goes, I find streaming video to be very convenient. I am not one to sit around waiting for my favorite show to start, or have to schedule my life around my TV schedule. Simply put, I like watching my favorite shows whenever I want, where I want.

Streaming video is here to stay and has become a mainstream entertainment product. Check them out, I’m sure you will find it to be true.

UPDATE 10/10/11:

Netflix announced today that current Netflix.com members can continue to rent DVDs in addition to their streaming video subscription. This change was made due to customer feedback concerning ease of usage. Consumers not interested in subscribing through two different websites, with two separate accounts and bills which only add to customer hassles. Consumers prevailed with their feedback. It is good to know that consumer activism is not dead, and that Corporate America is listening!