Netflix is calling a do-over.
Last month, CEO Reed Hastings announced that the company's DVD and streaming businesses would be split: The DVD-by-mail service would be rebranded as Qwikster, while the streaming service would remain under Netflix. Consumer reaction was overwhelmingly negative, just as it had been for the company's recent price hikes. Many found the announcement confusing (customers would now have to deal with separate websites, usernames and passwords, movie queues, credit card bills, and ratings systems), and senior Netflix execs came out to reaffirm the decision, calling it a "natural progression" and part of a "long-term marketing opportunity."
But despite the company's eager defense of the decision, Hastings announced today the two brands would be getting back together. "DVDs will be staying at Netflix.com," he wrote. "This means no change: one website, one account, one password ... in other words, no Qwikster." While members are likely to welcome the news, it won't change the fact that Netflix created the boondoggle in the first place—another case of if it ain't broke, don't fix it. And another example in Netflix's recent history of fumbled decisions and bumbling communications.
"It was a very bold move forward, without considering the effect on our members," says Steve Swasey, Netflix vice president of corporate communications. "We just looked at the strategy. We said we want to be able to brand DVDs—to give them their own life, to give them their own advertising and marketing—and we thought the best way to do that was to give them a name and its own company that would be a subsidiary. We were wrong."
In other words, the move might've been good for Netflix, but not ideal for Netflix's customers. As Netflix frames the issue, there are three types of companies: those that don't move fast enough, those that move fast, and those that move too fast. The business world is filled with examples of companies not moving fast enough—indeed, Hastings even cited examples of such (AOL, Borders) in his original blog post announcing Qwikster. On the opposite end are companies that move too fast, and stumble along the way—such as Airbnb, and, more recently, Netflix.
"We just moved too fast," Swasey says. "We did spend a lot of time on the strategy, and we thought it was good to have the significant long-term benefits from having DVD and streaming services organized separately. But our mistake was allowing these changes to affect the consumer experience. Our members didn't like it. When we heard the feedback, we decided quickly to abandon the plan."
Still, there's always the chance that this was the right decision strategically, as some like venture capitalist Mark Suster have argued, but done at the wrong time. Yet when asked whether Qwikster might make a return in the future—whether the DVD and streaming businesses might again be split—Swasey said no. "We made a decision to keep the simplicity for Netflix members, so we're not going to go back and change it again," he says. "This is the vision going forward."
Swasey acknowledges that during the last few months, Netflix has hit its share of snags, especially in communicating with its members. (Saturday Night Live even lampooned the company's recent blunders.) He says the price increase announcement "was poorly done," for example.
"Let's just focus on what we've focused on for the last 12 years," he says. "I would say that Netflix has to—I don't want to say get back to what we were—but focus on the simplicity, ease, and value for our subscribers."
[Image: Flickr user Leandro]