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Reed Hastings responds to criticisms and announces Qwikster
- rachelbythebay 15y agoI bet the Quixtar (Amway) folks will object to this name.
- whatusername 15y agoAnd Australia has a "QuickFlix" that sounds pretty similar: http://www.quickflix.com.au/ http://www.quickflix.com.au/
- nullentropy 15y agoDoes Netflix operate its mail DVD service outside of the US?
- yequalsx 15y agoI can't see how this is a good decision. Their streaming service is cheap but lacks titles. I use DVDs to get the shows and movies I can't get from the streaming service. Obviously streaming is the future but the DVD part generates profits. The streaming only service - if it truly stands alone - is soon going to be competing with Amazon, Google, and Apple but without as much cash as these companies. With their stock's price drop maybe Google or Apple will be willing to buy them. I don't see them surviving on their own without being bought out.
- waterlesscloud 15y agoAwful, awful decision. I have no intention whatsoever of maintaining 2 accounts, one for streaming and one for dvds. I'm straight out lost revenue.
- male_salmon 15y agoJust out of curiosity, why would maintaining two accounts be so painful? If that were so, wouldn't it be equally painful to maintain different social network accounts (assuming you have two or more).
- waterlesscloud 15y agoBilling will be separate, which is a minor annoyance, but an annoyance nonetheless. The bigger issue is splitting my ratings and thus my suggestions. I already ignore other places to rate movies since only netflix provided a tangible benefit to me. Split it, and it won't.
- male_salmon 15y agoWith billing, most of us already maintain different accounts with different e-commerce sites. One more is not that bad. Ratings on either Qwikster or Netflix will benefit you because of the improved recommendations. Yes, it's a shame they won't be integrated, but overall the split will benefit the company and its customers.
- foobarbazoo 15y agoDo you work for Netflix? On what planet does any of this make sense for customers. Hastings is the very definition of stupid: hurting himself, his company, and his customers -- all at the same time, and totally oblivious to it all. His method to "fix" his previous mistake is to make an even bigger one. Unbelievable.
- tlianza 15y agoEveryone on this thread knows that there is no technical reason to split the ratings. It's implausible that a company of this size couldn't break that subsystem into a shared service. The reason for the split has to be business-related, and my best bet is to create a very clean separation of intellectual property. This among other things is why I find the post disingenuous.
- nosequel 15y agoMost successful business don't make huge decisions like this if there wasn't a reason. And instead of speculation, we know why this split is happening. Think back with "The Social Network" was pulled from Netflix. The reason was that Netflix and Stars in their contract was limited to a certain number of viewers. In Stars' eyes, Netflix's total userbase was the number of viewers even though Stars was only concerned with streaming. So, to appease both the DVD licensing where they pay the studios per rental (and streaming shouldn't count against that) and to appease streaming licensing where they also pay by the size of the viewership (such as the case of Stars), they had no choice but to not only split the subscription model, but the company itself. Thinking that Netflix would kill a good thing is pretty dumb and I sort of expected more from the HN audience in this case. Netflix is doing what they have to do, not what they want to do.
- yequalsx 15y agoYour last paragraph seems to suggest that companies don't make dumb decisions by "killing a good thing". Maybe you think only Netflix doesn't make dumb decisions of this sort but there is a long history of companies making dumb decisions by killing 'a good thing'. As stated I don't see how Netflix will survive long term.
- nosequel 15y agoCompanies in the past have definitely made dumb decisions you are right about that, but typically they don't just kill off their main cash cow for no apparent reason. That's all I'm saying. All of the "why would he do this?!?" posts are dumb for thinking that someone like the CEO of Netflix doesn't know that this would be a pretty stupid split of the business if he didn't have to do it to survive.
- iand 15y agoGood analysis
- pyrmont 15y agoWhile they seem to be going to great pains to be genuine and upfront about what they're doing, why does Netflix need to create a separate company in order to innovate? Apple doesn't have a separate Mac and iPhone business and they seem to innovate just fine. What really seems to be going on is that Netflix is getting ready to spin off its DVD business. That this seems so obvious makes the repeated apologies feel like an insult to our intelligence.
- male_salmon 15y agoAs Reed says, the streaming business is global, but the DVD business is US-only. Maintaining code that services functions that apply in some locales but not others will slow down Netflix's ability to innovate.
- pyrmont 15y agoAgain, Apple runs businesses (eg. Macs) that operate in some jurisdictions that their other businesses (eg. iTunes) do not. You don't need a structural separation to 'innovate', you need a structural separation to ease a sale of a business.
- elq 15y agoI honestly don't care how Apple runs it's business. I don't work for apple, I do, on the other hand, work for netflix, and not having to worry about DVDs will be a nice relief.
- foobarbazoo 15y ago^^ This is why Netflix is fubar'd. Totally internally looking -- not giving a shit what it means for their customers. Yeah, we all love paying two bills each month, having to search for content two places, having our ratings queues forked and kept out of sync. Thanks, we're all so glad to hear that it's easier for you. We'll make it even easier: find new customers. We're gone.
- Jarred 15y agoI think the challenge for Netflix here will be to disassociate Netflix with DVD rentals. People will go to Netflix's website, and expect their DVDs to be there alongside their streaming movies.
- Vexenon 15y agoWhen I think of the term Netflix, I think of watching flicks on the Internet. I'm sure a lot of people don't look at it that way, but the term Netflix makes a lot of sense when referring to a streaming service (as opposed to a service that rents out physical media). I know a lot of non-savvy people probably can't make that connection, but I think the company will make it clear that Netflix is no longer the place for DVDs.
- grourk 15y agoWhen I think of Netflix, I think of renting flicks on the net... which is, um, what the original name meant. Also there's the whole last decade of this association. When I think of Qwikster, I do not think of anything related to DVD by mail. The only associations that come to mind are Friendster and Quixtar. It sounds cheesy and cheap and fly-by-night.
- flyosity 15y agoThis is not something you see CEOs write every day. Hell, this isn't something you see CEOs write ever in their careers. It took a lot of guts to write it, and regardless of the huge controversy surrounding their pricing strategies, I hope that this split succeeds. Also, video games!
- MartinCron 15y agoAlso, video games! This has the potential to be pretty large, actually, and GameFly is pretty terrible, in my experience.
- Lewisham 15y agoIf Netflix/Quikster can get games right, Gamefly should get pretty scared. They can't afford to keep large stock (so you often don't get the game you want), and their turnaround on games is poor (usually about a week round trip, and I live in CA where they have a distribution center). Oddly, Gamefly just launched a streaming service for the PC, so just as Gamefly is beginning the move away from discs to streaming, Netflix is moving right into that spot. I don't think game discs have much of a long-term future, but then neither do movie discs either. I wonder if this structuring is not just so that Quikster can be killed or sold to a chump (or someone willing to settle for scaling back the business) as soon as they begin to see the tipping point on streaming.
- foobarbazoo 15y agoQwikster is a joke and will be dead or acquired in 5 years. And Netflix streaming is not ready to carry Netflix forward. We won't be subscribing to Qwikster, and we're already looking for alternatives on the streaming side -- most likely, Amazon, who would never do something this idiotic.
- iand 15y agoYour statement would be stronger with some backup argument and justification. Why is it a joke and why will it be dead in 5 years? Why isn't acquisition a winning outcome?
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- ctingom 15y agoI bet a lot of customers evaluate Hulu and Redbox now.
- rhizome 15y agoThere are probably worse gambles than leaving the disc business to redbox and the mom & pops.
- ryannielsen 15y agoWhy? Current Netflix DVD+streaming customers will seamlessly have Netflix+Qwikster accounts. Those who care about just DVDs or just streaming would probably have already left or already transitioned to the appropriate Netflix account option which would leave them with a Netflix or Qwikster account in the end, no action on their part. So how would this move motivate anyone who hasn't already left to look at other services? I've seen other people on HN complain about needing to maintain two accounts, but switching to Hulu+Redbox has that same downside, removing that as a motivating factor to look at those options. Switching to just one has the downside of losing recommendations and setting up a new account. I don't see why anyone who hasn't already left Netflix after the pricing changes would leave because of this decision.
- foobarbazoo 15y agoNo, we'll be dropping our Kwikster accounts immediately and looking for an alternate streaming provider (cough Amazon cough). Honestly, it feels like this board is being trolled by Netflix employees or paid PR, who see "no" problem with this move. I don't know a single person in meatspace who thinks these changes are good. Not one. And people who were putting up (but unhappy) with the 60% price hike are now actively looking to switch. Hastings is destroying shareholder and customer value at a pace only matched by HP's CEO at this point.
- elq 15y agoI am a netflix employee. I hold my employer to certain standards and I do not defend anything they do automatically - for instance, I thought the way the plan split/price hike was communicated was just awful. So I'm not trolling. When I first heard this plan many months ago, my immediate reaction was to look for another job. I have, perhaps obviously, decided to stay. One of the biggest reasons I've decided to stay is that I believe Reed is one of the most honest, hungry, and intelligent CEO's around. These changes will cause short term pain, but I honestly believe the products will be much better after the split.
- Vexenon 15y agoI really, really liked the way Hastings wrote this post. It takes a lot to own up to your mistakes, but he seems dedicated to making Netflix succeed, and the decision to split the service into two is really... interesting, to say the least. I'll probably stick with streaming and forget about physical media, to be honest. It's much more convenient to drive to the Redbox down the street than wait a few days and have to deal with mailing discs back and forth. Kind of glad to see video game rentals coming; too bad they're late to the party and will have to compete with Blockbuster, Gamefly, and Redbox.
- Lewisham 15y agoKind of glad to see video game rentals coming; too bad they're late to the party and will have to compete with Blockbuster, Gamefly, and Redbox. All of these services have trouble. Blockbuster has a tarnished name (and I personally have never used the service), Gamefly has poor turnaround time and stock, and Redbox has awful stock and a high price. Netflix/Quikster have been in a prime position to totally disrupt this for years. That they haven't pounced on it sooner has always been odd to me. It's like they consciously decided not to make money.
- foobarbazoo 15y agoHe's not "owing up", that's pure PR. This was hatched back in May, and it was stupid then, stupid now, and will be stupid 5 years from now when what's left of Qwikster is sold off in a fire sale and Netflix shareholders start wishing they had bought Yahoo!
- zoowar 15y agoLet's hope Netflix can compete without having to splatter advertisements throughout the stream.
- elq 15y agoI feel pretty comfortable saying that will NEVER EVER happen, at least as long as Reed is still the CEO.
- redthrowaway 15y agoI'd be okay with a two-tiered system: a Netflix Light that is cheap and ad-supported (hopefully at the beginning, not interspersed throughout), and a Netflix Full that offers no ads. Mostly though, I just want to have a decent selection in Canada. I was chatting with a friend about the possibility of doing a movie streaming startup, and I couldn't get past the fact that Netflix's biggest problems are not of their creation; they come from the studios. I wish them the best of luck, and hope that someday I might be a customer, but I'd hate to have to deal with the rights hassles that they do.
- arohner 15y ago> I just want to have a decent selection in Canada. As an American, don't worry, the selection isn't very good here either.
- deyan 15y agoMay be this is the wrong decision, may be it is the right decision - it is quite unclear and only time will tell. However, from an entrepreneurial perspective, Reed has all my respect - it is incredibly difficult to disrupt yourself and he has certainly placed his bet. That takes balls and I respect that. As to why separate, I assume that from an operational perspective it makes running the businesses easier. It is strange that some things e.g. ratings, accounts, etc. will be separate though, that's for sure. I can't wait to see this play out!
- lazerwalker 15y agoTo me, the classiest thing about this post is how Hastings is taking the time to personally respond to the blog comments. You don't see that very often from a CEO of a company as large as Netflix, and it's pretty darn cool.
- wmf 15y agoIt wasn't that long ago that it was "illegal" for CEOs to blog.
- sandieman 15y agodvdflix would have been a more appropriate name
- puredemo 15y agoUntil the medium changes.
- jfarmer 15y agoThis move is uncomfortable but necessary. The two businesses are different at every level (supply chain, cost structure, technology, user experience, etc.), and the DVD business is on its way out over the nest 3-5 years. Better to disrupt yourself now than wait for some upstart to do it and react.
- waterlesscloud 15y agoAnd yet somehow Amazon manages to stream video and sell DVDs at the same time. Heck, they sell lingerie and organic tea at the same time.
- dangrossman 15y agoBut if Amazon's DVD business, or selling organic tea, doesn't perform well in the long run, they'll still be in business. If renting DVDs or streaming movies doesn't perform for Netflix, they're out of the game.
- CamperBob 15y agoThat is a reason to diversify, not to Balkanize the organization even further.
- philwelch 15y agoAmazon built the company around having a million services and products. Netflix built the company around having one service, and then around having two services.
- waterlesscloud 15y agoOr two methods of delivery for the same service.
- true_religion 15y agoThey're a generic store. Netflix doesn't want to be the equipment of an online department store. They're a boutique shop that has gradually realized they have two competing interests under the same house, and would rather have two shops side by side than one.
- pnathan 15y ago+1 to Mr. Hastings, sheerly for the courage and grit it took to write that.
- ryansloan 15y agoI have to say, I think they blew it with this one. Spinning DVD-by-mail off into a separate business might make sense, but I just don't get splitting the ratings/suggestions up by not integrating the services. Considering that one of Netflix's greatest strengths is the (very good) rating system this is a questionable decision, and I think they'll catch a lot of heat for it from the crowd that maintains accounts on both services.
- ben1040 15y agoNetflix has 8 years worth of ratings I've made, so it's gotten very good at suggesting me new movies. Amazon is the only other company that has a longer history of what I buy and what I like, and they're making some decent inroads into streaming movies now too. As soon as Amazon beefs up their selection and gets streaming videos available on my Xbox 360, I'm going to find it hard to justify Netflix altogether.
- DevX101 15y agoNetflix should be able to walk and chew gum at the same time. There are a lot of successful companies that are much more diversified than Netflix is right now. This honestly strikes me as a panic driven move in response to the customer rage and their precipitous drop off in stock prices. I'm trying hard but can't see the upside to this move. And I think this will cause a big hemmorhaging in profit for the short/medium term. Netflix has 12 million members that are on both the DVD and the streaming plan. These are the folks that got the 60% price hike. Although Netflix lost some customers (~5%) after the pricing change, that massive price hike put them in a position to increase profits, even with less members.. But now that Netflix is splitting itself in two, I can guarantee you a sizeable chunk of people who were just happy with the dual plan will end up picking one or the other. That being said, I like that they're tackling video games. They ought to take a serious look at getting into competition with Steam, which is making $1Billion in revenue and growing, with high profit margins.
- 0x12 15y ago> I can guarantee you a sizeable chunk of people who were just happy with the dual plan will end up picking one or the other. But the upside for netflix is those people that end up picking both. The time to analyze this is 6 months from now when the figures are in. My personal best guess about what they're about to do is sell off the DVD division.
- 18pfsmt 15y agoI think it's important to realize the difference between these businesses. Qwikster won't have to negotiate with the content providers because they can purchase the DVDs and games and rent them without the content companies having a say. Netflix has to negotiate for all their content, and we all know how reasonable the content companies are. I don't think we'll see a spin-off for at least a year, and probably bit longer.
- jonknee 15y ago> But the upside for netflix is those people that end up picking both. How's that an upside considering that's what they currently have? Instead of one charge on your credit card there will be two that add up to the same thing. At best (for Netflix). This will not raise revenues.
- jobu 15y agoI'm surprised they din't register the domain quickster.com as well. The QW in qwickster is cute, but it's easy to misspell.
- deleted 15y ago[deleted]
- JoshTriplett 15y agoApparently the lack of the 'c' is easy to misspell too. :)
- demoo 15y agoMust have been a though move to make. Renting out DVDs is a different business model and one that will be obsolete in 2-3 years. Putting DVD rental prepares them for a future where they can fade out or sell the DVD business and go abroad with a simple offer for the Netflix brand.
- Hyena 15y agoI was skeptical of this move at first, but I think the argument is fairly sound. I think a lot of commenters are focusimg on the technical aspect of the service and I agree, Hastings is being disingenuous when he says "they're two totally different businesses". What I think makes a sound argument is that they require a separate marketing approach. Streaming is only a separate business model insofar as there are fewer degrees of freedom because of the studios; otherwise it's just a difference in how you deliver data. But that difference could be important from a marketing perspective. As Netflix pushes the streaming model, they risk damaging the DVD business by association. So it may be better to rebrand DVD business and carry it forward with a message concentrated around its (rather massive) benefits. That move is even more important if streaming becomes more competitive im the near future; war between cable companies, studios and streaming companies seems pretty likely, so the streaming space may become even more dangerous even while the conflict extends the life of DVD delivery. So yeah, probably about as sound as a business decision can be. It may not work out but that's not guaranteed avoidable under the old setup either.
- kariatx 15y agoMaybe they should have considered who already has the Twitter handle before they settled on the name: http://twitter.com/#!/Qwikster http://twitter.com/#!/Qwikster
- tsycho 15y agoTo anyone who reads this from the Netflix team: I love Netflix. And so my following criticism is intended to be constructive. The email and blog post that Reed sent out today starts off well... "I messed up. I owe everyone an explanation........I’ll try to explain how this happened." However, after writing the above, Reed doesn't really give an explanation, and based on my colleagues' and other commenters' reactions so far, it seems to have come off as a smug non-apology. Rather than a wordy but empty-ish post, what you should have written about the overall price increases was a simple explanation at how your sourcing costs have increased. You might think that since that information is public, and geeks like us already know about it, but the majority of your customers might not be as news-savvy. And on the DVD side, explain to your customers some of the challenges that you are facing there, how they have become different from the streaming side, and why you needed to separate the businesses. (I personally don't really understand this one - the only reason I can think of for the clean separation is if you wanted the option to sell off one of the businesses later). I believe people would have been more sympathetic had you given a simple, honest explanation of your challenges, especially after starting your post like that.
- 18pfsmt 15y agoI noted this elsewhere, but I believe it has to do with Netlfix relationships and negotiations with the content creators, and how it differs from the Qwikster model of buying discs. Qwikster requires zero relationships and negotiations with the content creators. I can't really understand why people get so upset about these changes because I can't find the catalog size/ low cost anywhere else. If anyone knows of a better service/value, I would be interested.
- wmf 15y agoQwikster requires zero relationships and negotiations with the content creators. This isn't quite true BTW. Remember the 28-day window.
- 18pfsmt 15y agoPrior to Netflix offering any streaming, there was no 28-day window. The window came out of negotiations for streaming rights. So, not only is it true, the streaming piece of the business impacted the DVD-by-mail business.
- mark_l_watson 15y agoAs long as they are splitting the company, why not in three pieces, with a separate movie rating/recommendation service? That way both the separate DVD rental business and the streaming business could make web service calls to the recommendation service. As long as people "joined" their identities on Quickster and Netflix streaming, then customers of both services get better recommendations. The "third company" might also make revenue from additional companies wanting a high quality recommendation system. Doing recommendation well is very difficult.
- msg 15y agoRoll out an "Import my recommendations" API integrated with IMDB and Amazon and Qwikster and other rateable sites, and you might have no trouble. Otherwise this is a very serious regression. The customer wants one interface to rule them all, not to care about the leaky parts within. For the next trick, sawing the millions of babies in half...
- pramanat 15y agoAren't there some synergies they would be missing out on by splitting into two companies? For instance, their recommendation engine.