By Luanne Teoh on 09-20-2011

Yesterday, Reed Hastings, CEO of Netflix sent out a long and convoluted email message to all Netflix subscribers and wrote an even longer blog post justifying the split of Netflix into two separate businesses.

1) Netflix – For online streaming only.
2) Qwikster – For DVD subscriptions only.

This announcement to split Netflix’s business into two companies after its price hike fiasco is like watching a scenario which can only end badly — yet you can’t peel your eyes off from watching as it makes blunder after blunder.

What if you are a subscriber who want both streaming and DVD? — Here’s going to be your reality;

1. Log into Netflix to manage your streaming queue.
2. Log into Qwikster to manage your DVD queue.
3. Receive a billing statement from Netflix.
4. Receive a billing statement from Qwikster.
5. Credit card charge from Netflix.
6. Credit card charge from Qwikster.
7. Receive e-mail notifications from Netflix.
8. Receive e-mail notifications from Qwikster.

Interestingly, in Hasting’s blog post he said, ”In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, “Actions speak louder than words,” and we should just keep improving our service.”

Hmm…. how does inconveniencing the customer with twice the logins, account management and billing culminate as service improvement? Maybe Reed Hastings has never heard of seamless integration — but the recent over 1 million unsubscribes definitely have. When Netflix first announced the restructure in July, its stock was worth almost $300 a share. Today, it’s selling for less than $150 — Go figure.

Not only does this have negative implications on the consumer — The effect of this split is detrimental to Netflix’s own brand equity. Hiking the service price, splitting the brand and introducing a half-baked new brand when the business is clearly in jeopardy will only serve to weaken its position and consumer perception.

Reed Hasting’s mea culpa blog post and email was also probably crafted by an equally ineffective PR agency who totally buried the story with twists and turns. However, it’s pretty obvious that Netflix is dealing with more than just a PR nightmare.

1) Its Qwikster website is not live — Clearly shows that this was an afterthought for Netflix as it tried to figure out how to deal with its angry customers and defections. Here is a current screenshot taken 30 seconds ago.

2) Netflix doesn’t even own the Qwikster Twitter account (to date) — Another fact to show it launched Qwikster in haste without crossing all the “T”s and dotting all the “I”s.

3) The name Qwikster — or was it Kwikster? wait, maybe you meant Quickster or Kwikstar?

Here is a comment from a Netflix customer who posted his opinion right after reading Reed Hasting’s blog post. It pretty much says it all…..

Good luck Netflix/Qwikster — I can almost see Amazon, Walmart, Hulu and YouTube circulating above like Vultures as they await Netflix’s demise.

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

3 Responses to “Netflix’s Corporation Suicide With Qwikster?”

1. Mahesh Grossman, ghostwriting guru Says:
   September 26th, 2011 at 10:57 am

   The only problem with this article is that you will be able to access Qwikster from the Netflix website– and the billing will be the same. It didn’t seem nearly as big a deal as you’re making it– renaming a section of the business and changing the envelopes. As to suicide, I think this may be intentional suicide– eventually the DVD side of the business will be a niche specialty they can sell and delivery of everything will be streaming, though that may be split into specialty streaming (which would include everything that currently is only available on DVD) and ordinary streaming. Netflix does such a good job on the streaming side, it’s hard to imagine anyone else coming close. Certainly Amazon prime doesn’t compare.

2. Melissa Lande Says:
   October 10th, 2011 at 1:43 pm

   I agree with Mahesh (above) that this splitsker via Quickster may be intentional suicide (i.e. the disappearance of the DVD), we all know in the land of PR and SALES that as long as someone will buy, why sully the brand? I don’t understand why a company basking in success would not be intentionally strategic. Mea culpas are for special occasions — this one never should have happened. Basically the whole company was asleep at the wheel. This mea culpa led to a special drop in sales. It’s really a shame that the brand basically blew smoke up its own brand and its customers’ simultaneously…and then apologized for any inconvenience… Bad PR, bad strategic planning, bad, dumb and really a shame to take such a great company that literally changed the way we view and changed the way we view IT.

3. Luanne Teoh Says:
   October 10th, 2011 at 5:45 pm

   Update Oct 10, 2011: There will be no Qwikster after all as Netflix changes course….AGAIN!

   http://cnettv.cnet.com/netflix-changes-course-once-again/9742-1_53-50112963.html

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