By Quentin Fottrell
In his own words, Netflix CEO Reed Hastings “messed up” when he decided to raise the cost of Netflix’s streaming and DVD-by-mail services. Annoying, cried customers, who faced higher bills and a more complicated billing process.
But is Hastings’s newest move any better? Netflix will spin off its DVD service into a separate company called Qwiskster, but doesn’t that still mean two services, two bills, and now, two individual companies and memberships to deal with?
It’s hard to understand the logic, says Michael Pachter, an analyst for equity research firm Wedbush. “They have made the service immensely more complicated.” Before, he says, customers could choose streaming/DVD services on the same web page. Not anymore. “There is an extra step to use the DVD service. It will cost them even more customers. Do you know what’s dumber than that?” What? “The market’s reaction to it.” (Netflix shares are up nearly 5% early Monday.)
In Hastings’s defense: “It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes,” he wrote on the company blog, adding, “So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
In other words, it’s a short-term inconvenience for customers for a long-term goal for the company. “Streaming is the growth and long-term future of the company,” Steve Swasey, vice-president of corporate communications for Netflix, tells Pay Dirt. He says Qwikster will be able to offer other services like video games. “We’ve made it simpler for people who want DVDs.” He brushed off criticism of the Qwikster name and spelling, saying the brand will be built up over time. “It’s clever,” he says. “It’s quick.”
Do you feel any different about the Netflix/Qwiskster?
Updated at 1.14pm EST to include comment from Netflix.