Netflix, reacting to customer anger, has reversed its decision to split its mail-order DVD service from its Internet streaming and will continue to run both from a single website. On 7/12, Netflix said people who want streaming and DVDs would have to pay $7.99 a month for each service, a 60% increase for people who previously got both.
“Consumers value the simplicity Netflix has always offered and we respect that,” co-founder and CEO Reed Hastings said in a statement. “There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”
Explaining the split originally, he said the DVD and streaming operations 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.”
Netflix on 9/18 said people who wanted DVDs would have to sign up for a new service called Qwikster, requiring a separate account and billing.
“We’ve ruffled a lot of feathers,” Chief Financial Officer David Wells said on 9/21 at a Goldman Sachs conference. The company has been “humbled” by customer reaction to the changes, he said.
Now, customers will be able to access the streaming and mail- order services from Netflix.com, with one account and password. Netflix on 9/15 cut its projected subscriber numbers for Q3 by 1 million, a reflection of customer reaction to the price increase. Of those, the company said 9.8 million streamed movies, 12 million received both services and 2.2 million ordered DVDs by mail only.
RBR-TVBR observation: Netflix had originally come across as such a revolutionary way to deliver up movies conveniently and inexpensively, but many of their subscribers wanted to do a little of both—streaming and mailing. A bit of market research would have borne that out before the decision was made. The good news is because of the internet and blogging, they got their market research quickly delivered to them anyway, and smartly ate some humble pie.
