The Netflix Two-Step

Last month, Netflix CEO Reed Hastings announced that Netflix would be splitting into two companies: Netflix (which would handle streaming video) and Qwikster (which would handle DVD rentals).  The move was near-universally panned, especially coming off the heels of an unpopular price increase.  At the time, I called it shooting one foot, reloading and shooting the other.

Yesterday, Reed announced that they’ve scrapped the split concept.  Netflix will remain one company.  Users won’t have to manage two different queues in two different accounts on two different sites just to differentiate between Streaming and DVDs.  Still, I have some concerns.

Moving Too Fast

Reed released a statement in which he said: “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.”  That “too fast” line concerns me.  Does he still think splitting the company was a good idea?  Were all the customers’ shouts of “No! Don’t do this!!!!” interpreted as “Hmmmm….. Maybe try this a little later, perhaps?”  Is Qwikster really dead, or is it just waiting in the wings for a better release opportunity?

Granted, I’m not going to write off that a DVD-Streaming split can’t be done well.  The current “let’s split things up” plan seems to have been as detailed as, well, “let’s split things up.”  Basic user questions in the comments of his initial split announcement were answered with “not sure about that”-type responses.  Perhaps if they go over the plan again and fully flesh it out, they could succeed.  If they decide to do so (or even if they don’t), here are five pieces of advice that might help them repair their image.

1. Get a focus group

I’ve made my share of jokes about focus groups, but when they’re done well, they can help a company avoid a fiasco like this.  Problems with ideas could be hashed out in a small group instead of on an Internet-wide level.  If your entire plan needs to be scrapped after major modifications, nobody will see you turning left, right, left again and then just canceling the whole thing.  You’ll actually look like you know what you’re doing.

2. Focus on the customer

Yes, you need to make nice with the studios to get content.  I appreciate that.  Still, keep in mind that we are your customers (either current or prospective).  If our experience is significantly impacted, even for something that you consider to be an improvement, we might not react well.  Think about what you can do to make us enjoy using your service more.  After all, us using your service is what earns you money, not us canceling because we see less value in your service.

3. Change isn’t always good

People are creatures of habit.  Small changes, even ones for the better, can often face significant resistance just because “It’s always been done the old way.”  Don’t introduce too many radical changes at once.  If you need to do a major overhaul, let people “preview” it as a stable beta and gradually make it live after people have gotten (somewhat) used to it.  If possible, give users the option to use the cool new feature or fall back to the older, but more well-known way of doing things.

4. Customers like bundles

If you want a Streaming Only plan, you pay $7.99.  If you want 2 DVDs at a time, you pay $11.99.  If you want both plans, you pay the total of the price of both plans ($19.98).  Take a page from the cable companies and phone companies and offer bundling discounts.  Got a Streaming plan?  Add 2 DVDs at a time for 10% off ($10.79).  A 2 DVD at a time subscriber getting the same total price for adding Streaming would see Streaming being added at a 15% discount!  Sure, this is only a $1.20 a month savings, but people will see “10%” or “15%” and think “What a great deal!”  It will act as an incentive for people to add DVDs to their Streaming plans or vice versa.

5. Limits are bad

There’s an issue with Streaming plans: They are limited to one stream at a time.  In a world where people stream Netflix shows via Roku boxes, smartphones, iPads, XBox 360s, Nintendo Wiis, and more, why are we limited to only one show at a time?  Why can’t my wife stream a movie in one room while I stream a completely different one in another room while my kids stream some cartoons in a third room?

Currently, the only way around this 1 Device At A Time restriction is to buy the DVD plans.  2 DVDs at a time gets you 2 streams.  3 DVDs buys you 3 streams, etc.  Wasn’t the Streaming-DVD plan split supposed to address this issue?  If you must impose limits, provide us with reasonable ways of increasing those limits.  Paying $11.99 a month more just for 1 more stream (assuming you don’t want DVDs) isn’t reasonable.

Why not let us pay $1 extra per month to add additional concurrent streams to our account?  I realize that there’s a problem with people sharing their streaming account with family and friends, but don’t punish your good users to get at your bad users.

What We’re Doing

Over the course of the price hike and split, we went back and forth as to what to do.  Canceling completely was never really an option.  We’ve all grown too fond of streaming via our Roku boxes to go Netflix-free (for the moment).  DVDs were on a short leash, however.  What began as a fun way for all of us to quickly get movies and TV shows morphed into a way for *ME* to get movies and TV shows (sometimes to share with the boys).  B had a limited amount of shows she wanted to watch and, once those were through, the queue was pretty much all-me.

Another strike was when I realized that I didn’t have much time to watch the DVDs.  They would sit unwatched for a week or two before I watched them.  I would then forget to return them for a week.  Two DVDs at a time is nice, but not if it winds up being 3 DVDs a month for $12 a month.

The third strike was our local library.  They have a decent selection of DVDs to choose from.  The ones they don’t have, I can either get from RedBox or perhaps find elsewhere.  (And no, I’m not talking about piracy.  I meant legally get elsewhere.)

In the end, our DVD plan was an expense with little return.  Though it pains me, since I still love the depth of content there, we’ll be cutting back to Streaming Only on our next billing cycle.  Netflix, the ball is in your court to win us back as well as keep us from ditching Streaming as well.