Tuesday, September 20, 2011

Netflix vs Qwikster

Reed Hastings recently sent out an email apologizing for the price increase that came with splitting the streaming and DVD services at Netflix.

Some interesting points. First:
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).
Hastings is worried about the Innovators Dilemma. There are many big guns aimed at the streaming business, including Amazon, Walmart, the cable companies, Apple, and Google. That's a tough crowd to win against.

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.
Bold. Hastings has decided that the DVD business, with its associated baggage, means that he will not be able to win the streaming market, so he's cut the company in two.

Streaming is about #9 on Amazon's priority list. #12 on Walmarts. #4 for the cable companies. #7 for Apple. #83 for Google.

It's #1 on Netflix because Qwikster has DVDs as its #1 and video games as its #2.

This, ladies and gentlemen, is management.


Blogger Matt P. said...

Agreed. He is catching some flak here and there but you are spot on.

10:36 AM  
Blogger STF said...

I was thinking the same when I got the email. Poorly executed tactically in terms of informing customers about the split initially, but (very) good strategy overall.

8:46 AM  

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