Tuesday, September 27, 2011

NETFLIX/QWIKSTER SEPARATION REVEALS COMPANY(S) REAL PROBLEM AND IT'S MORE DISTURBING THAN EVEN WE THOUGHT

Well, if you haven't heard the latest news about Netflix's new plan, their blog is posted below:

http://blog.netflix.com/2011/09/explanation-and-some-reflections.html

and it's a rather intriguing and apologetic blog by Netflix CEO Reed Hastings. Among many things, it expresses some regret about the reaction of many of its members over the recent price hike, but the more important news is that Netflix is now two different companies. Netflix, starting next month, will now only provide Streaming movie content to its viewers, while a new company named Qwikster, will provide the more traditional DVDs-by-mail service. This separation of companies will coincide with their price separation, where there's a different price for the DVDs-by-mail service and the streaming movie service. As many of you know, I've posted a couple different blogs complaining about certain Netflix practices in the past few months, and I'm presuming many of you have already figure that I probably have something to say in response to this, and I do. In fact, I posted what I wanted to say directly to Netflix on this blog, clearly pointing out the actual problem with the company, and I had every intention of posting my comment on this blog. However, I was one of 27,000 people who thought of commenting on their blog, and despite many attempts to try and find the exact comments I posted I wasn't able to find it immediately enough, so I gave up sorting through all those comments; I'm not 100% sure my computer can take it. (If anybody feels like sorting through the comments on the blog to find my exact comment, be my guest, I'd be grateful, but I do not encourage anybody to do so.) Most of the comments, as you may imagine contains such notes as, "I've cancelled my subscription," or "Why the separation, but the price hike is still the same?", to even a few that rather appreciate the decision. Is the pricehike a bad business decision? It's not one that I am personally in favor of, but it'd still be cheaper if I got the same amount of product from Blockbuster and/or Redbox over the same month, so that's actually not a concern. I've already made my dislike and critiques of streaming movies public in an earlier blog:

http://davidbaruffi.blogspot.com/2011/08/streaming-movies-sucks-why-everyone-who.html

It's clear though that Netflix is trying to be a major player in the "Streaming". If I may quote exactly from their blog:

"For the past five years, my greatest fear 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) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly."

It's now become abundantly clear what the problem with Netflix actually is, and it's a bigger problem than I thought it was, and even worse, they don't realize the problem yet. Is it a stupid idea to separate the company like this? Of course it is, it's unbelievably stupid, and I'll get to exactly why it is in a sec, but it actually underlines Netflix's real problem; one that is an essential part of the basic business knowledge and logic. They don't know what their product actually is?

They're under the impression that the product they're selling is the way they get movies to people. Originally, they thought it was the DVD-by-mail service that they originated, and now they think the product is the streaming of the product. That's not the product! The product, is the movies themselves. Let me make this somewhat more understandable, we don't just stream anything online randomly, we make a choice what to stream. Same with DVDs, they're not all blank, and we don't just buy the machine and put them in for the action of putting them in, it's what actually is on the DVD that we're watching. This is one of reasons I'm critical of streaming, people act like because the format is different and that one is going to outdo the other, when in reality, it doesn't matter how you watch the film, it's the movies themselves that you're selling. Imagine, Netflix is an actual video store, bricks and mortar et. all., which is really what it is, a video store, it just happens to be online instead of next to your local supermarket. This is somewhat personal for me 'cause my family used to run a video store. Anybody who's lived in the Las Vegas area long enough, will probably remember "Video Tyme," that was my family's video store chain, and when we were coming up, the two main formats for watching movies, were VHS and BETA, and every video store, I knew, ours and our competitors had copies of both until finally BETA became extinct, and while I have more doubts than most who believe DVD is going to die out to streaming, the thing was, it didn't really matter. Either way, you were watching a movie, that you obviously must have wanted to see because they borrowed it from the store. What Netflix has just done, essentially, is have one store, where all they sell are VHS, and on the other side of town, they have a second store, where all they sell are BETA. If any other company, started selling their product like that it would be looked upon in the business community as though whoever's running their company doesn't know what they're doing, (and they would be right). Can you imagine, if at Smith's, they only sold Coca-Cola products in 12-packs, and at Albertson's they only sold 2-liters? Everybody would think Coca-Cola was going insane! Tt's the same coke, but they're selling it two different ways in two different places, and probably losing certain customers who might prefer one or the other, but its more convenient to go to another store. So here's two problems, one the separating of the company like this, is just plain stupid, but it happened because they don't understand what their product actually is. They also don't know what actually distinguishes them in the marketplace. Is DVD by mail actually more convenient? Not really. It takes a day by mail to get a movie, (And longer if there's a Sunday or a holiday). I could probably get a movie at Blockbuster or Redbox, be back home in fifteen minutes at most, and watch the movie, if I all wanted to do right then was watch a movie. Is Netflix cheaper? It is for someone like me who watches about 40 movies a month and thinks that's not enough, it might be too much for other customers who might only rent two movies a month. The one thing that actually distinguishes Netflix, and which is coincidently the one thing that I believe DVD will always have over streaming is that Netflix has an unlimited selection of DVDs to choose from. It doesn't have every single DVD that's available, and I've about certains titles they don't have, but it has basically has everything short of "Song of the South," which will probably never be re-released on any format. Those that prefer the DVD-by-mail for this reason, enjoy the the fact that they can watch almost any film they choose. I have films from six different continents on my Netflix queue. That doesn't mean that I don't like streaming, it just doesn't have all the films I want, currently and it's not always a viable format for me. I'll stream a movie occasionally, when there's a movie I would like to see, and when streaming is a viable option, and at this moment, I'm going to have both a Netflix account and a Qwikster account. But, this company, or companies now, they need an intervention. This is Business 101, know what you're selling. They don't know that right now. Maybe they did at one point, but it's clear now that they don't. Sure, Reed Hastings isn't wrong about wanting to jump into the future instead of trying to save the past, but his own actions have made that point moot. Motion pictures have been in nickelodeon machines, in halls with a screen and a piano player, in theatres with sound, in Black-and-White, in Color, on widescreens, on television, VHS, HBO, Pay-per-View, On Demand, DVD, Blu-Ray, and now streaming online, and that's just a few formats that I named. I will guarantee that streaming is not the last format we will see movies in my lifetime, but whatever that next generation format is, it's still not a product. The product is movies, and what an amazing product they are. Netflix should treat them with more respect
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