Netflix Renames DVD by Mail Service Qwikster

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Netflix, Inc. has sent out an email to its subscribers, directly from Reed Hastings (Co-Founder & CEO), apologizing for the many missteps in the past few months and vowing to do better. However halfway through the “I’ll Do Better Email” it is announced that the DVD by mail service will become its own separate service known as Qwikster, complete with its own website and billing. For a company that has taken a lot of heat in the past for their business decisions, this seems like another issue that will cause a lot of controversy with current Netflix subscribers. Read the full email after the jump
I messed up. I owe you an explanation.

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. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

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.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

  • He should have stopped at “I

    He should have stopped at “I messed up.” Not only do I have to pay more for the same service, but now I need to go to 2 different websites to look at Netflix movies.

    It’s clear to me that they want to get rid of the dvd model as quickly as possible. It’s bad enough I have to wait 30 days for a new release when the local drug store has it in blu-ray the same day it’s released for 79 cents on Mondays. How can they screw up Netflix anymore?

    This just makes me want to cancel my account even more.

  • After reading that, the

    After reading that, the pricing changes (read:  increases) make perfect sense…  from a business perspective.  Simply put, there’s no way they could have used the same pricing model for a completely separate business.  In essence, one service was subsidizing the other, but, once you decide to operate those two services as independent companies, you can no longer do that.  Of course, that surely doesn’t help customers who now have to pay more and I absolutely understand their feelings about it.

  • Did you ever go to Netflix to

    Did you ever go to Netflix to look for what was streamable and what was physical at the same time?  I never did, and for that I am happy but they could have figured out how to separate the listings w/o splitting the company.

    Either way nothing but the names have changed.  I still have BD and streaming, managed in two queues, billed as separate services.  Just wish I hadn’t woken up this morning and been forced to check the calendar to make sure it wasn’t April.

    • yeah all the time…  I check

      yeah all the time…  I check for a movie I want to watch.  I have a list of movies I want to watch.  Then I look at the disc I have in an envelope and compare that to my choices on streaming.  They are all movies I want to watch I just choose the delivery system at the time that I watch it. 

      I have to think that is how most people that are more traditional (my parents, etc) use netflix.  People on the cutting edge might be fine with this, but for those couples in Kansas, that just get a movie in the mail, are going to be really confused by this whole thing.

  • Wow…  this seems like a

    Wow…  this seems like a really bad idea…  This would be a real pain if I was still both a streaming and disc member, which reminds me that I need to get rid of streaming on my account.  Even if it was free I don’t think I would want to try to manage two queues, one is hard enough.

    Really strange strategy if you ask me…

    Edit: the comments on the netflix blog are completely one sided, with Reed trying to answer some of them, pretty funny.  Like if a movie isn’t available in streaming, you have to go over to the other site to put it in your quickster queue, which is an obvious example of why this was a mistake.

  • I’m glad I cancelled when I

    I’m glad I cancelled when I did.  The kids used Netflix streaming quite a bit but school started and..well better to not have it.  And the winter in Houston is time to be outside anyways…summer is too hot.

    I think it will be a matter of time before the teams split completely and you won’t be able to manage both queues from Netflix-enabled devices.

  • Decoupling everything also

    Decoupling everything also makes it possible to sell the business in the future.

  • The names sounds corny, the

    The names sounds corny, the workflow is bad. Its like they are intentionally trying to lose customers. 

  • This pretty much kills things

    This pretty much kills things for me.  I often put stuff in my DVD queue that I’ll never get sent to me; I use to park certain shows so I remember what they are for when/if they become available for streaming.  I then move the shows I really want to see to the top of either queue based off my current moods/interests.  Having to maintain two separate viewing lists pretty much ruins this for me.  I might as well use a 2nd competing service then if I have to maintain 2 lists.

  • I only Quickster have new

    I only Quickster have new releases available right away without waiting period, otherwise it will make no sense at all to sign up for their service. If not, I will cancel DVD service and move to Blockbuster, however I will keep Netflix streaming.

  • I’ve got Netflix’s NASDAQ

    I’ve got Netflix’s NASDAQ info running off to the side on my computer as I work away.  Kinda of interesting to see it bouncing around.  Looks like investors were excited by the announcement for about an hour or so until the reality of pissed off customers began to sink in.

  • Well I finally

    Well I finally decided…Streaming + Redbox…for now.

    If Netflix didn’t have a nice little icon in MC I would have disregarded it a while ago.

    Streaming better have something significant to offer sooner than later or that’s getting cancelled too.

  • Interesting read on why

    Interesting read on why Qwickster could do better than Netflix.  http://techblog.dallasnews.com/archives/2011/09/why-qwickster-might-do-better.html

    • I have to agree with the

      I have to agree with the article.   I think Netflix as a streaming only business is in a precarious position.  If they can get the content deals they need, they could easily come out on top, but if the studios decide not to play ball with Netflix, then Netflix dies.  Right now the trend doesn’t seem to be in Netflix’s favor.  The studios don’t want the middle-man aggregator and would rather host their own services it seems, which sucks for you and me the consumer.

      I think Netflix’s only hope is to provide access to the back catalog, the proverbial “long tail.”  I don’t see the studios allowing for all-you-can-stream access to new releases any time soon, but if a service like Netflix can provide a big enough revenue stream on the older stuff and the less popular fare, then the studios might go for that.   Of course, Netflix’s prices will need to stay low to reflect that they don’t have the new and/or popular content.

      Eventually, the discs will go away and we’ll all be streaming content, but who will provide those streams and what the pricing model will be remains to be seen.   It certainly seems like Netflix wants the disc-by-mail model to die sooner rather than later or they’d have come up with a better name for it.  I’d hate to be in charge of marketing “Quickster”.   I think Reed Hastings wanted to call it “QuickDeath” and got overruled 🙂

       

  • I’ll agree that I’m kinda

    I’ll agree that I’m kinda annoyed about having to manage 2 different queues as I’m also the type of person who parks stuff on their DVD queue in order to stream it. It will be a royal pain in the ass to figure out if/when something on DVD is on streaming as well. Other than that though, the only issue I’ve got with this whole thing is the stupid name. I don’t get what all the fuss is about beyond those two things though. And the announcement of adding gaming to the mail service is pretty huge. I’ve been wondering for years why they hadn’t already bought out Gamefly. 

    Months ago there was an article with Hastings talking about how they were going to focus on the streaming service in the future and eventually phase out physical media as the market dictated, so none of these moves are at all surprising. And the recent price increase wasn’t that big a deal… Netflix is still the best service around and very reasonably priced. Geez, I remember the days when I had to pay $5 for a rental that I had to return in only a few days. People apparently just want to have everything and pay nothing for it these days. I think Netflix is a great service and I’m going to continue to support it.

  • Personally, I don’t have a

    Personally, I don’t have a problem with the way NetFlix has split the two services.  I don’t use streaming services and only rent actual discs so the change is in my favor with the new lower rates.  I don’t stream because the vast majority of titles are older and ones I’ve probably already seen.  Audio and video quality simply isn’t up to the same level as Blu-Ray yet so I have no interest in it.  It’s getting better, but there’s still the old title issue.

    My solution is simple, at least for me.  Server + Blu-Ray/DVD rentals + AnyDVD HD = Video On-Demand.  I’ve got literally hundreds of movies and TV shows that I’ve accumulated over the years but haven’t had the time to watch.  Ironically, by the time I do get around to watching most titles, they’ve already been shown on HBO or Showtime or Starz or even some of the other cable channels.  Once watched, they’re purged from my server.  It’s basically timeshifting of rental movies.  I realize that, technically, it’s not legal, but they’re only watched once and then deleted.  When I actually watch the movie should be irrelevant to anyone but me. Besides, I don’t have a Blu-Ray drive in my HTPC so the only way I have to watch BD movies is to rip them to my server.  It sometimes just takes me a while to get around to watching them.

    I rarely have time to watch more than a few movies per month so it would actually cost more if I went to a streaming only service.  Chances are I still have better access to newer movies via my method even with the long delay.  I also don’t have an issue with the 30-day delay in availability of some titles since I probably won’t watch them right away anyway.  Patience has it’s own rewards.

  • Netflix lost revenue on us

    Netflix lost revenue on us when it changed the price structure. Instead of discs + streaming, we dropped the streaming portion and ended up saving money every month.

    We tried streaming and the experience just did not compare to discs. With our Blu-ray player, even standard DVDs look better than anything we saw via streaming. Plus (and more importantly), we found the rewind/fast-forward function in streaming to be quite clunky. It might work OK if you’re at your keyboard, 18 inches from the PC screen, but not when you’re sitting 15 feet away with a Media Center remote and trying to hone in on that tiny dot. Worst of all, every time we would rewind (say, to review some dialogue) and then try to go back forward to where we were, we’d have to twiddle our thumbs while the entire movie downloaded all over again from scratch. Streaming was not a satisfactory experience for us, and we are not missing it.

    So with this splitting of the disc and streaming services, I guess we’ll be saying “goodbye, Netflix (don’t let the door hit you as you’re leaving)” and “hello, Qwikster (hope you stick around for a good long time).”

     

  • I wonder if these changes are

    I wonder if these changes are an attempt to appease the studios so that they can get the license deals that will keep the streaming service viable?