Home > JoeRants > “Netflix” – get it?

“Netflix” – get it?

September 23, 2011

People keep trying to figure out what Netflix is doing and why they keep upsetting customers. I think people have gotten so used to Netflix being in the DVD rental business, that the name has become just the name of that company that mails out DVDs. “Netflix” – it’s all there in the title. They originally formed to put “flix” on the “net,” but as they dug into it, they realized that the internet wasn’t ready for what they wanted to do, so they decided to build the brand by mailing out DVDs for rental.

There are at least four reasons they’re now turning the DVD portion of the company over to “Qwikster”

1) Right now, they negotiate with movie companies based on how many people have streaming in their account. If every Netflix member who just gets DVDs gets counted in that number, they’re paying who-knows-how-many times more to include a film in their streaming catalog than if they only negotiate for the people who actually stream. By splitting off the DVD portion of the company, they’re negotiating for their actual customer base. Hopefully, this will make more movies available for streaming soon.

2) They don’t want you constantly reminded of the movies and shows that they have on DVD that you can’t stream. The main issue people have with streaming is that the stuff they want isn’t available. If there were anything to watch, I’d like it a lot. :) This way, they’re not themselves showing off what you can’t stream.

3) Both sections were holding the other back. The DVD company was losing money with streaming, which holds back the stock price.  And the DVD company wasn’t likely to expand in the future, which also holds back the stock price. While splitting off the most profitable part of the company doesn’t help the stock in the short run, as that part grows, it will. As streaming grows, and DVD rentals drop, the stock would likely sit still, which doesn’t help the company make money. Now, the only place they can go is up. Unless, of course, they fail spectacularly. :)

4) They never wanted to be in this business to begin with. They were just really, really good at it because they’re really, really smart. Check out their manifesto: go to http://www.netflix.com/Jobs and click on “Freedom and Responsibility Culture.” It’s a pretty amazing philosophy.

I still don’t quite get the anger people have with the price increases and the company splitting. I was on a 3 DVD a month + streaming plan. I bumped down to a 2 a month + streaming for the same price. It’s still a pretty amazing deal. Some people who were getting an INCREDIBLE deal, to me, are now just getting a good deal. That’s still a good deal, and I’m not sure why the anger.

Hoping to break the internet by defending Netflix,

Joe.

 

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