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19 Sep 2011 / Julie

changes to Netflix & thoughts about pain

A few months ago Netflix announced it’s separation of it’s DVD delivery and streaming services and with it, a price increase. TONS of people flipped out. I was not one of them. I understood the need to focus on different things in order for the company to not die a painful death. And although people were screaming over “a 40% price increase,” for us, that amounted to a mere $6 more bucks a month – nothing to scream over.

This morning, Netflix subscribers got an email. Here it is in its entirety, i’ll meet you at the other end of it:

Dear Julie,

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.

I wasn’t annoyed before (maybe i just wasn’t paying attention?), nor did I think I was owed an apology. But now, having gotten both an apology and an explanation, i’m a little peeved. Why? because of this: “the Qwikster.com and Netflix.com websites will not be integrated.” Which means I will have to maintain two queues of movies- which is the exact opposite of the simplicity I was describing life suddenly had in my last post.

Having just canceled our TV service, Netflix was/is going to pick up the slack when we really did just want to veg in front of the screen. I had always enjoyed when movies on my DVD queue were suddenly available for streaming- it allowed me to watch it right then AND remove it from my ever-growing and very-not-simple DVD queue.

I’m not sure why this decision was made – to forgo simplicity and the wonder that is a single, integrated interface in order to accomplish this maneuver- but it’s not what I would have chosen. That said, we’ll be sticking with Netflix (and/or Qwikster) until we figure out what the deal is and how it’s going to function in our lives.

I file this move under “pain inducing” instead of “pain reduction.” It’s our job – when we’re in a service professor or providing a service to customers (like Netflix)- that we look at our services and products and make decisions based on LOWERING the amount of pain a customer has to go through to do things. Five clicks before they can log in and renew a book? Painful. Having to log in twice when doing two different things on the same website? Painful. It’s these moments of pain where the customer gets to make a choice – is this amount of pain worth the effort or is there an easier way (path of least resistance) to accomplish my goal? If there’s an easier way somewhere else – you’re losing business.

This serves as a moment for libraries and vendors to think about not just our interfaces and the pain we’re causing (or keeping from) our customers but also how we make decisions, handle problems, and respond when the community reacts. Are we meeting our own expectations? Our customers?

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