Netflix and its users have been going through a lot lately.
First, they split streaming and DVDs into separate services, almost doubling their prices. Then, the Starz channel announced that they wouldn't renew their contract with Netflix. And this week, it turns out Netflix is splitting into two companies, with their DVD service being turned into a company called Qwikster.
Qwikster will essentially be the same as Netflix's current DVD delivery service, right down to the red envelopes. However, it will also rent out video games for an additional fee. The queue systems will be separated between services, meaning if users subscribe to both services they will have to look at each one separately to know whether or not a movie is available.
In an email, Reed Hastings, Netflix co-founder and CEO, said the company was "done" with price changes, so the prices of the new service will be the same as they are now. Hastings cited the different business models of online streaming and DVD delivery as a reason to split them and allow each to grow independently.
Unfortunately, this announcement was thrown in halfway through an email apologizing for the recent price hike. Not the best way to get people excited for your new product.
Reactions to the Qwikster announcement have been largely negative.
"I don't like it," said Stephen Black, junior graphic design major. "It seems like a lot more to keep up with, having two accounts, but I haven't used it yet so I can't say for sure."
Investors aren't happy with the change either, with a drop in Netflix's stock after the announcement continuing its downward trend. At $128 a share, the company is worth less than half of what it was six months ago.
With increased competition from Hulu Plus, Amazon Prime and the future plans of Redbox and Blockbuster, Netflix has a lot more to worry about in the streaming game. While neither Redbox nor Blockbuster offer streaming right now, Blockbuster has a streaming announcement planned for today, and Redbox has hinted at streaming plans for months.
Another issue Qwikster will face is not having the name recognition of Netflix anymore. They'll have to get this new brand name out there through advertisements and marketing schemes. Existing customers will also be a problem. After losing some to the price hike, the inconvenience of moving to a new service will lead to more lost revenue.
It won't be all bad though. With the split of the two services, Netflix will finally have a chance to overhaul their queue system, which, in its list-like layout, is completely ill-suited for streaming. This will allow them to focus Netflix on acquiring more content deals, meaning higher selection and an overall improved experience.
On the Qwikster side, video games will be a nice, new service, but existing companies like Redbox, Blockbuster and Gamefly, which exclusively rents video games by mail, will be an issue. If they can get the price right, it might be enough to entice people to use the service.
Zaveus Dabney, business administration junior, said that he might be interested in the video game portion of the new service.
"If it wasn't too expensive, maybe another $8, I'd get it then," he said.
While they have a lot of challenges, I personally think Netflix can come out of this on top. They have a popular brand name and their service has a lot of content no one else has. Qwikster may be hard to adjust to, but the addition of video games will help expand the service into something more appealing.
This also gives Netflix an easier way to eventually kill off their DVD rentals. Physical rentals are on the way out; streaming is becoming easier and more convenient and is not viable in the long run. It may be a while, but eventually the market is going to shrink and shrink and maybe, eventually, disappear.
It probably won't happen for a while, but this way they can get rid of it without it sounding like they lost a big part of their business, because Netflix will just be streaming.
While the change in service may be inconvenient for users, it's a necessary step for Netflix.
Just a poorly handled one.
