The early reviews are in on Netflix’s new DVD-by-mail spinoff Qwikster, and they’re not good.
Netflix CEO Reed Hasting’s decision to split the company’s DVD-by-mail service into its own entirely distinct brand, Qwikster (and add video game rentals to that service), has been met with scant praise from writers and Wall Street, and near-universal condemnation from analysts and customers.
“We think that this letter [from Hastings] reflects how much attrition Netflix is experiencing currently, and think that the separation of the websites is a strategic error,” said Michael Pachter, entertainment analyst and managing director of equity research at Wedbush Securities, in an email to TPM’s Idea Lab.
Pachter also predicted that “hybrid customers” will be especially annoyed by the change. Currently, Netflix customers can pay $7.99 for a base DVD-by-mail or streaming plan only, or pay $15.98 for a hybrid plan.
Under the new Qwikster model, these services will no longer be integrated - the Netflix and Qwikster services will be entirely separate entities, with separate websites, customer ratings and billing statements.
“Separate billing will be damaging over the long run, highlighting what every hybrid consumer [pays] for each service, so that those customers who use one service less frequently than the other will be reminded monthly how much they are paying for the less utilized service,” Pachter explained.
The current consensus is that Netflix made the switch not out of deference to its customers (as Hasting’s apologetic note maintains), but to save its bottom line by putting the area of limited growth and high overhead - mail-order DVDS - into a separate company that can eventually be sold for scraps somewhere down the line. Netflix says it currently has no plans to sell Qwikster.
Customers were already enraged, of course, over the 60 percent price hike and split between DVD-by-mail and streaming movie plans that went into effect on Sept. 1, the same day that one of Netflix’s principle content providers, Starz, walked out on contract renegotiations, depriving Netflix customers of valuable Disney and Sony Pictures movies.
Then, on Thursday, Netflix announced that it was revising its third quarter customer projections downward by 1 million, acknowledging that the price hike had a more negative effect than the company had anticipated on overall adoption.
That resulted in the company’s stock nosediving to $155 from $210, though on Monday it was up 1.17 percent to $157 at the time of this posting.
And as some tech writers have observed, the company made a social media branding 101 mistake by not securing the rights to the @Qwikster Twitter account, which is currently controlled by Jason Castillo, a foul-mouthed, pot-smoking Elmo-Avatared character. (Someone has also set up a fake Reed Hastings Twitter account, which has already begun bargaining with the @Qwikster account for control of the handle.)
Indeed, though the Qwikster website is only a teaser page for now and the change has yet to take effect (or even a date for when it might), customers seem to agree with Pachter that the new move is another step in the wrong direction. The Netflix customer service hotline was busy on three occasions over the past hour when TPM’s Idea Lab attempted to call in.
“Seriously, you thought a good idea to make up for miscommunications was to separate the websites and make it more complicated for us to manages our queues? Really?” one customer named Jospeh J. Finn posted.
“We think the separate websites (a link away from each other) will enable us to improve both faster than if they were single websites,” Hastings responded in the comments.
“If a film I search for on Netflix is not available for streaming, will the website still tell me if the DVD is available? Or must I search twice?” asked another commenter, Kenneth Kufluk.
“ouch. You’d have to search the second place if we didn’t have it in the first place,” Hastings responded.
“Got netflix stock? SELL SELL SELL,” wrote a user on YouTube.
One commentator even compared the decision and subsequent outcry to retail outlet The Gap’s failed attempt to introduce a new logo last October only to scrap the idea less than a week later when it was clear that customer backlash wasn’t going to subside anytime soon.
When asked if Netflix would pull a “Gap,” and retract its own plans to launch Qwikster as a separate service, Pachter said “Anything is possible, but they seem like they are pretty set in their ways.”
Watch Netflix CEO Reed Hasting’s “apology” video here, in which he announces Qwikster.