Netflix's Focus on Streaming: Too Soon?

Categories: Internet TV,Uncategorized

Written By

September 19th, 2011

Netflix was the golden child. Everybody loved it. Then Netflix announced it was restructuring its subscription prices in a way that made the service more expensive for many of its customers. Internet (and customer) backlash ensued.

Last night Netflix CEO Reed Hastings blogged & emailed that he had messed up the way the pricing changes had been communicated. At the same time Hastings announced that the DVD service was being re-branded as Qwikster (a name that many on the interwebs are mocking) while the streaming service will keep the Netflix brand. The business issues make sense to me, but I have a couple of reactions to Hastings' post:

  1. C'mon, the backlash wasn't about poor communications, it was about people not wanting to pay a lot more for the same service they had before. No matter how it was communicated it was going to be a tough pill to swallow for subscribers impacted by the rate hike.
  2. While I understand Netflix's business issues and the motivations both for the pricing changes and the rebranding of the DVD product, I do wonder if the focus on streaming that led to all of this is a bit too soon. Did Netflix drink its own Kook-Aide too quickly?

Among early adopters, its really easy to drink the Kook-Aide, but... I am an early adopter. I've been beaming video from my computer to my TV since 2004, I pretty much have the best DVR money can buy, and I'm sure I'm in the 95th or higher percentile of people who have streamed video to their mobile phones and other gadgets like iPads. I have thoroughly enjoyed and love Netflix streaming, but, but, but... Practically speaking, everyone has a DVD player, but most people definitely still don't have setups that would allow them to enjoy streaming as much as I have.

Things change, but usually not swiftly enough to satisfy early adopters. When we first launched this site four years ago, some of our smart early adopter friends chided us "why did you pick a dying business to chronicle, TV is going the way of the dinosaurs." But while the flight from broadcast networks to cable networks that's been going on for more than three decades continues, and while it's pretty clear that young adults don't watch TV nearly as much as their parents, TV is certainly surviving, and from the looks of things thriving. Its 2011 and most homes and most people still don't have DVRs and most television is still watched live as its telecast.

I have little doubt that the future of Netflix's business is in streaming, but I have a lot of doubt that things have changed enough for the future to be "now." From the perspective of profit margins, the future may already be now, but from the perspective of customer acquisition and retention? I don't question the decisions, but the timing of them seems too motivated from the early adopter perspective and as a result, too soon*. Time will tell.

*Definitely not too soon for me personally, but I am an early adopter, had already phased out DVD usage for the most part and have been a Netflix "streaming-only" subscriber for months.

 
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