They had meetings about this and someone said it was a good idea
Then you redesign your product and make it harder to use.
I'm speaking, of course, of the Netflix / Qwikster thing. It's is a great day for some grad student. He or she just got a thesis topic.
So you have this brand. It's called Netflix. Your business is delivering movies on DVDs by mail. The envelopes you use to mail them become an iconic symbol. You pour millions of dollars into promoting that red envelope with that name printed on it.
Then streaming comes along and you start delivering movies that way, too. That name you spent millions in promoting? It turns you into the 900-lb gorilla of streaming media. If YouTube was the John the Baptist of streaming, Netflix is the Touchdown Jesus of consumer acceptance. There are other streaming movie services. Lots of them. Yes, there's Blockbuster, Amazon and Google. Can you name another? Probably not. That's the point.
The biggest mistake Netflix made was probably the bundling of streaming with DVD delivery, but it sure didn't seem like it at the time. I don't think they realized that they'd never be able to back away from it. And to be fair, I'm not sure they ever thought they'd have to. Netflix streaming has been amazingly successful. I have a pretty good grasp of the economics of both delivery modes and I completely understand why they had to unbundle them. Like a lot of people we droppped the DVD delivery almost immediately, but we wound up ponying up for the one DVD plan as well. It works for us. Adding videogames to the DVD side might have even gotten more folks to come back eventually, as long as they were cheaper than Gamefly.
The thing is, Netflix's business has never been about DVDs or streaming. It's about on-demand entertainment. It's about being a tool in the modern tool belt that allows you to watch what you want to watch when you want to watch it. "What do I want to watch? Oh, let me look on Netflix. That looks good. I'll watch that. Darn, it's not available on Instant Watch, but I really want to see that, so I'll have them mail it to me, but this other thing looks good. I'll take that now." Or "Darn, it's not on Instant Watch. I'll just watch something else that is."
Now they're breaking that.
The significance of that screenshot I've posted is that you rarely get to see a CEO admit that he didn't understand why people sent him money every month. As I read the e-mail and the even-longer blog post, I kept thinking "I know what this is doing for you, I can't see what it's doing for me." I'm reasonably confident that the folks who make GE lightbulbs and GE jet engines have different operational concerns, but somehow they manage to keep the same name.
And Amazon seems to have figured out how to deliver things physically and online without bothering me with their problems. And what do you know? I can get movies from them too!


