Tuesday, September 20, 2011

Netflix to compete with... Netflix
(OR: Hasty Hastings)

I remember before the 1997-98 Asian financial meltdown (known locally as "the IMF Era"), a time when many Korean corporations foisted upon us whatever the heck they wanted us to buy, irrespective of whether it was ready for primetime and worth the money we, their captive audience, had to pay in the trade-protective South Korea of that time.

It was as if the various chaebol were working off of Dana Carvey's "Grumpy Old Man" character on Saturday Night Live: you're going to pay high prices for low quality, and you'll like it! (Um, we were the Grumpy Old Men who accepted our fate in this analogy that I'm beginning to realize was ill-conceived, and the chaebol were making us Grumpy Old Men who accepted our fate... Um, just pretend you never read this paragraph, and don't watch the video.)



I was reminded of late-20th century Corporate Korea's ham-handed and tight-fisted approach to the goods- and services-buying hoi polloi when I read the latest in the possibly suicidal public relations fiasco that is unfolding at Netflix.

In this 2010 post, I explained why I had earlier switched from Blockbuster to Netflix, largely a protest when Blockbuster no longer let me turn my mail-in movies at one of their brick-and-mortar stores in exchange for a new (and free) DVD to watch while I waited for the next to be mailed in. Netflix enticed me with their budding online service. As its offerings grew, so did my love for this service.

The problem is, everybody loved this service, which was only $2 more than the basic service of DVDs-only. Ultimately, Netflix decided it was unsustainable and they announced in July that henceforth (from September) the mail-in DVD service and the online streaming service would be separate services on your bill: $8 for either or $16 for both. This was a 60% markup for those who had been enjoying both at $10.

The cinemaphilic masses were ready to revolt. Many complained that they were going to quit Netflix altogether in protest (but like me with Blockbuster, they would realize they had few options). When Netflix lost the rights to stream Starz, many rightfully complained that they would be paying more money for less service.

But I decided to stick it out. I like Netflix on my iPhone (I also have a Hulu+ subscription, also $8), and between the two, it makes up for not having cable (there's no app for that).

But then came yesterday's email from Netflix CEO Reed Hastings (a copy of which can be found here, though it lacks the personalized "Dear Kushibo" right before "I messed up" and "I owe you an explanation," which was changed in the blog to "I owe everyone an explanation").

In a nutshell, Mr Hastings said that he did a poor job of explaining to all the Netflix customers why they were raising the prices sixty percent, going into some detail about how DVD mail-ins and streaming services were very different services and the latter never really worked at $2 a month add-on. Please understand.

So far, so good. You had me at hello. Yadda yadda yadda. Yes, despite being a starving grad student on a shoestring budget, I got where they were coming from. I accepted it. It was merely the cost of three cups of brew coffee at Starbucks or Coffee Bean which I probably shouldn't drink anyway because I tend to add too much sugar... so they were kinda sorta doing me a favor.

But then I got to the second half of the letter:
So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.
Okay, so let's get this straight. We raised price because we had no choice, and then the public revolted because they didn't understand. So to make them understand, we're going to add insult to injury by splitting this more expensive service into two different websites, thereby stripping the service of the convenience of being able to coordinate your movie-watching preferences between mail-in and online.

Whiskey tango frack! Are they now daring us to stay with Netflix?! The ability to so easily choose mail-in when something is not available through online streaming, or vice-versa, is one of the greatest things about Netflix. I'm sure they have sound technical reasons for splitting them in two, but this is being penny wise and pound foolish: I'm sure there are a lot of people who have just decided to write them off.

Let's say I want to watch the movie Poetry (Shi in Korean). Right now, I go to netflix.com and look it up and see if it's there. Oh, lucky me, I can watch it online. If it weren't available online, I'd probably add it to my queue. But if the two are split, then I'd go to the online service first (still netflix.com) and see if it's there. If it is, then goodie for me, I can stop. If it's not, then I have to go click on to qwikster.com, log in, and then go through the process of looking for the same movie.

At the risk of sounding like the precious little lotus blossoms I'm always grousing about, that's too much work. I don't mind pay $6 more for quality service (seriously, when they added the online streaming virtually for free, I thought they were on crack), but jiminy frickin' Christmas, don't make it harder for me. What's to stop me from axing my mail-in service altogether and going with Blockbuster, which seems to have a few titles you don't? Yeah, I came to you, Big Red Envelope, when I was jilted by Blockbuster, but maybe I should consider going back to the blue envelope. They've suffered long enough. (Too bad Netflix's mind-numbing screw-up didn't happen before the Blockbuster stores went under.)

Yeah, yeah, this will allow them to offer greater service, like video games. But I don't care about video games. They are a vortex sucking all time from my life, which is why I avoided connecting the Wii all last school year.

So, in conclusion: Netflix is punishing us for their mistakes. This is the straw that broke the camel's back for a lot of people, possibly including me.

Boy, I do sound like a grumpy old man.

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