Netflix to split DVD business? Not any more!

New Netflix business model, explained in sandwiches!...

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:D :popcorn
 
Just got this in my email

Dear Scott,

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 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.
 
I suspect Netflix views this as a short term loss, long term gain. I suspect Dish, with it's acquisitions, will be a MAJOR threat to Netflix.
 
Got the same email as Scott. Did not get the first email, but I only subscribe to streaming video.

I'd like to think they have some strategy, but it sure does not look good. I really hope the streaming service lasts -- I watch a lot of tv on it. LOST, Numb3rs, In Plain Sight, Dresdan Files, Jericho, all the star treks, the Stargates, etc... Yeah, its not NEW stuff, but it kept me very busy all summer, and its cheap entertainment at $8/month.
 
The problem with Netflix is that their main competition is DISH Network and their 13 million subscribers. Its DISH Network who holds the major contracts with Starz, HBO and other video service providers, and im sure they get cheaper rates to provide streaming content.

Hopefully this is the beginning to the end of Netflix.

Why would you hope that?

I don't want to see it go away.
 
That argument doesn't hold water because it would apply to any provider, especially Dish Network.
It does hold water because Dish is wholly independent of ISPs and their charges and caps. The ISPs could all go to blazes, and Dish could still sell TV as they do to millions of souls out in the boonies with no internet at all.

Part of what made Netflix so great was it's low flat rate pricing. Once the content providers get done holding them up, they won't be nearly so attractive. They could charge as much as Dish, and still be vulnerable to the ISPs, many of whom are cable TV providers who are in direct competition with Netflix.
 
Got the same email as Scott. Did not get the first email, but I only subscribe to streaming video.

I'd like to think they have some strategy, but it sure does not look good. I really hope the streaming service lasts -- I watch a lot of tv on it. LOST, Numb3rs, In Plain Sight, Dresdan Files, Jericho, all the star treks, the Stargates, etc... Yeah, its not NEW stuff, but it kept me very busy all summer, and its cheap entertainment at $8/month.

I have yet to receive an email from Fletnix... Guess they forgot I'm a current sub...
 
It does hold water because Dish is wholly independent of ISPs and their charges and caps. The ISPs could all go to blazes, and Dish could still sell TV as they do to millions of souls out in the boonies with no internet at all.

Well OK, Bob Haller, I mean TheKrell, you win your debate when the world deletes the internet. How often do Bob's stupid predictions come true? Hey, Netflix doesn't have to sell to millions of people who live without the internet, they just need to dominate the world market of those who do have the internet. Don't forget, Netflix as with Dish, is demonstrating they have the willingness to survive any change in the way the world does things. Dish is moving toward streaming too, not away from it. Don't rule out Netflix launching their own satellites if the world outlaws the internet or all ISP's go up in a blaze as you suggest.

I do believe I may see a day where I have to make a choice between a satellite service and a streaming service because the rates of both are so high I can't afford to keep both. On that day we will see the bulk of the content to be similar if not identical. We saw this likely scenario before with subscribing to cable, DirecTV and DishNetwork. Today I have dropped DirecTV and Cable and remain with Dish due to increasing rates and similar content. Redundancy is an expensive luxury.
 
To quote Reed Hastings, CEO of Netflix: "Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD".

He can't be serious with that statement. If I had to guess, I'd say that less than 20% of all the movies ever made are on DVD. Get a clue, Reed. :rolleyes:
 
Dish is moving toward streaming too, not away from it. Don't rule out Netflix launching their own satellites if the world outlaws the internet or all ISP's go up in a blaze as you suggest.
Oh for crying out loud! I was using hyperbole; I do not expect anybody to "outlaw the Internet". And I certainly don't think all ISPs will simultaneously go up in smoke, though a few smaller operators, or smaller sections of bigger operators, have indeed gone "poof" taking their customers offline for days at a time.

What I was saying was that Netflix (the streaming-only option) is wholly dependent upon 3rd parties (the ISPs) to deliver their product. When they included disks by mail, they could still sell to people who don't have adequate, affordable Internet service. I'm still one of their <cringe> Quikster customers, even though I have 30/5 service, because (1) I've never seen acceptable quality streaming from them and (2) what I want to watch generally is unavailable via streaming. This can and I hope will be fixed for those of you who are keeping Netflix. But you (and Netflix) are at the mercy of your ISP. They could throttle Netflix tomorrow. They could change their TOS tonight and start charging an arm and a leg for any downloads greater than some lowball figure that won't bother anybody but those pulling down videos. And you could get an astronomical bill next month and have no recourse but to end your Netflix addiction.

Dish Network is not beholden to ISPs to deliver their primary product.
 
Oh for crying out loud! I was using hyperbole; I do not expect anybody to "outlaw the Internet". And I certainly don't think all ISPs will simultaneously go up in smoke, though a few smaller operators, or smaller sections of bigger operators, have indeed gone "poof" taking their customers offline for days at a time.
No problem, when others go down the road of absurdity I participate with equal absurdity. Sorry you got upset for me following your lead.

Dish Network is not beholden to ISPs to deliver their primary product.
true- but based on last night's issues here, they seem to still be dependent on the weather. Ok more bad humor, but my point is that all business are dependent on some outside influence and can hit us unexpectedly without notice. We choose what we feel is the best for our individual situation and this can change with time as conditions change. I guess the point of not being emotional and just looking at the facts is to determine our needs and who is most efficient in supplying those needs. I just posted this in one of the many threads here about my objective evaluation on my media services. I left out Sirius as it is not video and only in one car.
I had decided in August to cancel the BD/DVD mail end of the Netflix account but then got interested in about 16 new releases in BD that were not carried by BB so I have a cue now and will probably close out the service when I get through all the BD in it unless more come out that I can't get through BB. It's a month by month evaluation. Blockbuster movie/game pass is my primary service here as far as time watched per day. My secondary service is Dish Network and last Netflix. But, DishNetwork is my most expensive by a factor of 3 times. Netflix is my least costly service. ( I'm rating them by cost per viewing hour, not by monthly charge. ) If I rated them by monthly charge, the ratio would be the same.

1. Dish Network is $114.58 per month ( Basic AT250 service with HD, no premium channels 2 DVR's )
2. BB is now $37.44 per month ( store movie/game pass: up to 60 BluRay or Games per month possible, I average 45 )
3. Netflix is now $19.24 per month. ( unlimited streaming plus 9 BD per month possible, I average 7 BD mail )

If I dropped anything I would consider dropping DishNetwork and buying a DVR for OTA TV, I will soon consider dropping Netflix mail DVD but will continue streaming service. But right now the service I have is within my budget. Netflix streaming would be the last service I would drop as budgets get tighter. No emotion here, just number crunching.

I never had Netflix until about a year ago when all of you convinced me it was god's gift to satelliteguys other than a temp trial period years ago. I always said it was too few DVD's for the cost when compared to the competition. Turn around 2 years ago was pathetic and the wait for new releases was worse, sometimes waiting for months. But I tried it again in the summer of 2010 and things improved. Better turn around and no waiting. I seem to never get a BD passed over as not available and they here are next day. For the price it seems like a decent backup option to my movie pass with Blockbuster. PLUS, Netflix had this streaming HD that looked pretty good and has been getting better both in quality and quantity. They had titles I couldn't get at Blockbuster too. I was hooked. Then in the Spring of 2011 BB went throughj the scare of going out of business and everyone here was down on them for being so lousy. I never saw it but did agree their business was run poorly on a debt to income ratio. DishNetwork comes to the rescue and makes no real changes other than a slight 5% price increase on my movie pass. There was a 6 week period of no new releases I suffered through too. Things have settled down a bit now but the fickle satelliteguys have nowt turned on the once beloved Netflix and I haven't heard where they are running to but rather they are just running away from Netflix. So, I see it as a panic emotional fear packed response to something that is led by negative hype. If it weren't so sad it would be funny to see the reaction here if Netflix goes under and Blockbuster ironically is the remaining streaming service ( currently shut down by Dish but is suspicioned to turn it back on) to offer a subscription rate, jack their rates to 3 times what it is now because there is no competition.
 

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