Published on: October 10, 2011The New York Times this morning reports that Netflix has decided not to go ahead with plans to separate its DVD rental business, which it was going to rename Quikster, from its online streaming business - a plan that had been derided in the media and that resulted in hundreds of thousands of subscription cancellations.
In a prepared statement, Netflix CEO Reed Hastings said, “Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”
The separation of the two businesses was seen as being even more offensive because it came right after a 60 percent rate increase, which had already outraged subscribers.
- KC's View:
As the Times writes, “The planned break-up was rooted in Mr. Hastings’ and Netflix’s belief that DVDs and online streams have different cost structures and different consumer demographics.”
Netflix screwed up. No other way to put it. The company, which had behaved almost flawlessly since its inception, totally misread the marketplace.
It happens. (New Coke or a Newton, anyone? ) The question is whether Netflix can recover ... or whether it has done irreversible damage to its relationship with subscribers.
There’s something to be said for admitting you made a mistake and changing your mind. Now, let’s see if maybe they offer subscribers - and those who bailed out - some sort of financial redress. Like a discount? Or a rollback of the rate hike?
Because it is my prediction that we’ll see something like that next.