Netflix Reverses on Spinning Off Their DVD Business

Well, it only took about three weeks for Netflix to reverse course and kill “Qwickster” as reported in today’s Wall Street Journal. Netflix announced today that it is reversing its decision last month to separate its movie streaming business from it’s DVD-by-Mail business, “Qwickster.”


The separation was not just a “name only” issue: but it would have forced all the Netflix customers to maintain separate account information and movie lists on two different websites. This turned into a losing proposition. Customer outrage went up as Netflix’ stock price went down; and numerous other movie services (Dish Network’s Blockbuster, Amazon, Apple) were using the customer frustration generated by Netflix to step into the vacuum with new service offerings to try and make the dissatisfied Netflix customers switch to other services. Netflix share price dropped 40% since announcing the Qwickster spin-off last month, and on news that they were going back to the Netflix for both streaming and DVDs by mail, their stock went up 7% in early trading today.
So, Netflix’ CEO Reed Hastings admitted they made a mistake in creating the Qwickster spin-off, and reversed course. I think Netflix has enough goodwill in the marketplace, as well as a quality product, to ride this out. They may even be able to turn this into a positive development in the next few months.
This has a number of similarities to Coca Cola, when about twenty five years ago, Coke decided to change the formula to make Coke sweeter, and created “New Coke” to replace their classic beverage. Well, the public outcry was deafening, and very soon after making the switch, Coke reversed its decision and came back with “Coke Classic.”
The controversy actually seemed to help Coke. By having “New Coke” and “Coke Classic,” Coca Cola got twice as much shelf space in stores, their name stayed in the news for months, and in the end, they got to claim that they were loyal to their customers, “heard their voices,” and made the switch because they wanted to take care of the people who embraced their product.
It’ will be interesting to see how Netflix comes out of this. This could change the narrative in their favor, and they could potentially use this as an opportunity to tell their customers that they’re valued, their voices were heard, and Netflix made the change to serve their loyal followers.
[Technorati]
So you can hive a sigh of relief.