Netflix (USA) announced it will be splitting up it’s company into two parts and spin off its DVD by mail rental service into a New Company called Qwikster.
Netflix CEO Reed Hastings remarked during a Nightline interview on ABC the reason they chose the name Netflix was that the long run future of video delivery would be streaming over the net and not by mail otherwise they would have originally called the company DVD-by-Mail or something like that.
The announcement to split Netflix into two companies comes hot on the heals of their recent price increase this month and speculation that Amazon.com is negotiating to purchase Netflix.
Netflix customers aren’t happy about the pricing increases or the decision to split the company into two parts. Since July of this year Netflix stock has plummeted by almost 50% and Netflix USA has lost more than 600,000 subscribers and some key movie streaming rights.
Netflix CEO Hastings commented on a Youtube video apology to Netflix USA customers that perhaps the company moved too fast and poorly communicated it’s intentions to it’s customer base. “It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes,” Hasting writes. “I messed up.”
Speaking of messing up – I can’t think of a bigger company marketing disaster since the introduction of New Coke in 1985.
According to the Netflix blog, “Qwikster” is sort of a play on words. “We chose the name Qwikster because it refers to quick delivery,” said Reed Hastings really?
The name Qwikster is confusing if you ask me. First it’s not spelled Quickster or Qwickster but Qwikster – no ‘U’ and no ‘C’. Then there’s the Quixtar multilevel marketing scam (do a google search for more info). It’s also been pointed out that Netflix didn’t even own the @qwikster Twitter account and many blogs and media outlets have dubbed the new Netflix company “Trickster” inciting that Netflix adopted the new name to ‘Trick it’s customers’ - wow it certainly looks like Netflix may have created another New Coke marketing blunder.
So where does Netflix go from here? Moving forward Netflix faces increased competition from Google, Apple, Amazon, facebook and other companies who currently offer or are planning to offer streaming video services in the near future.
In addition to Netflix’s base price increase, streaming video customers are also facing Bandwidth Caps and price increases from Internet Service Providers. As streaming video continues to grow ISP’s are frequently experiencing bandwidth capacity issues causing internet speeds to slow down or drop out during peak hours. Increasing bandwidth to meet demand is costly commented one ISP and the cost of increased usage due to internet streaming must be passed onto the end user.
So what does all this Netflix commotion mean to Netflix subscribers north of the border here in Canada? Well first off Netflix Canada does not offer DVD-by-Mail service here in Canada so the decision to split Netflix into two companies Qwikster and Netflix is a moot point north of the border.
What about a price increase for Netflix subscribers in Canada? Based on Netflix’s falling stock price and CEO Reed Hastings apology Canadian Netflix customers may receive a reprieve from a price increase this fall however don’t rule out changes coming in the new year. I still predict Netflix Canada will increase their monthly pricing in Canada sometime in the first quarter of next year.