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Netflix Service: Now Even More Complicated

Netflix splits its DVD/streaming services.                                                                                 iStockphoto

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.


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Comments (5 of 31)

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    • Netflix has lost its touch. I laughed when they sent me an email the other day, cleverly timed after Mr. Reed’s sorry excuse for an apology, beggging me to ‘come back to Netflix’, the email reeked of desperation. I have found Blockbuster to be a great alternative and the rates to rent from them have come down significantly. Worth a second look, in my opinion

    • The new pricing didn’t bother me as much as now having to maintain two queues. Seems like Netflix wants out of the DVD business, so I did them the favor and cancelled my DVD membership.

    • I dropped Netflix when I saw my Amazon Prime offered me plenty of options. True, I have to spend $75 a year for Amazon Prime, but I’d do that anyways even without the free video streaming – I easily save that in shipping charges for 3 months of orders. Netflix is out of touch for streaming, and with 3 Redboxes within 2 minutes of my home, I can always go rent something. I rarely rent more than 1 movie a week on top of all the free streaming at Amazon Prime. Wake up Netflix (and investors) – your 15 minutes are over.

    • how soon are backfeed fix up sites gonna hit this thread?

    • Streaming poor? wait till starz bails out. I quit the dvd, may quit the streaming too based on what content they get.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.