Tag Archives: netflix

The Quick Death Of Qwikster

Qwikster may go down as one of the great business screwups. It made no sense, and angered their customers (again). Fortunately, it’s short-lived. Netflix just took Qwikster off life support and let it die a quick death:

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password… in other words, no Qwikster.

While the July price change was necessary, we are now done with price changes.

We’re constantly improving our streaming selection. We’ve recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros., Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we’ve added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.

We value our members, and we are committed to making Netflix the best place to get movies & TV shows.

Thank you.

-Reed

I’ll update with reactions from around the web as they hit. I, for one, welcome my newly reunified streaming video overlords.

Netflix, You Confuse Me

Last week, the Netflix CEO introduced Qwikster in an apology that confused people more than anything. I’m one of those confused people. There’s nothing about this change that makes sense, because it contradicts everything that Netflix has preached over the last year. Let’s wander over some history to spell it all out.

Netflix brought a large selection and a great recommendation engine that helped people find new DVDs that they liked. When Netflix added streaming video, it was side-business to the DVD shipping business. Soon, the streaming video catalog expanded and the internet economics began to make sense. It costs about a dollar to ship a DVD, but five cents to stream a video, but this was traded off against the still limited streaming selection. Streaming succeeded by using the recommendation engine to steer people toward streaming videos that they might be interested in even if it’s not the most recent material.

Netflix has been successful with this strategy. During the Starz contract negotiation, Netflix revealed that the Starz videos represent less than 8% of their total viewing hours, and that Netflix expects the Starz material to drop to less than 6% of the viewing hours. A Netflix exec also revealed that folks rate Netflix recommended movies and TV shows higher than the latest releases. This shows that their recommendation engine is helping drive viewers toward content that the viewers are enjoying, and this let’s Netflix tune their streaming video content acquisition strategy.

So, what has Netflix done with this Qwikster split strategy? They’ve broken the funnel that brings information into their recommendation engine. Netflix won’t be able to tie DVD rentals to streaming users, something that should be helpful for identifying new content to license.

Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.

I also am confused by Netflix kicking their customers while they’re down. The price increase angered people, though I can imagine it being necessary. Now, the customers that they didn’t anger enough with the price increase will have to work harder to stream and rent DVDs. Two bills to pay, two websites to sign into, and two separate recommendation engines.

Netflix’s Qwikster split weakens their recommendation engine, angers their customer base.  I can’t imagine what they’re getting for it. While it’s always possible they’re playing ten moves deep in some three dimensional chess game, it seems more likely that Netflix just plain screwed up.

Other folks writing about this:

Netflix Price Increase In Proper Perspective

Yes, the Netflix price increase was a tragedy. You can do something to help. Spotted on What’s Trending.

Netflix Relief Fund with Jason Alexander from Jason Alexander

Spotlight On Netflix

Netflix Streaming Video

The Netflix streaming video service provides on-demand video to just about every TV connected widget out there. Netflix provides mostly older or B-movie content. Netflix also provides a DVD rental service to complement their streaming offerings.

Offering Price
Streaming Video $7.99 / mo
1 DVD At-a-time $7.99 / mo

Netflix have been aggressively expanding their streaming content offerings into current TV seasons and first run movies. Netflix has also angered their subscriber base by raising prices on the combined streaming video and 1 DVD plan.

Places To Watch Netflix

Netflix supports just about every platform under the sun – iPad, Android phone, Wii, Roku, Bob’s discount TV box. Android support for individual device can be dodgy because of all the various Android platforms, but Netflix is continually announcing support for new devices supported.

PlayBack Device Netflix
PC YES
Android Devices YES
iOS Devices YES
Roku (TV) YES
Playstation 3 (TV) YES
XBox 360 (TV) YES
Wii (TV) YES
Blue-ray Players YES
HDTVs YES

Netflix Video Bitrates

Netflix has used two generations of encoders. The first generation was based on Microsoft’s WMV3 codec. Netflix has more recently adopted Microsoft’s VC-1 Advanced Profile, which reduces the bandwidth requirements.

High Def Audio Quality Bandwidth
1 HR TV Show Size
Better 720p Stereo 3.80 Mbps 1.70 GB
Good 720p Stereo 2.60 Mbps 1.15 GB
Standard Def Audio Quality Bandwidth 1 HR TV Show Size
Best 480p Stereo 1.50 Mbps 0.65 GB
Good 480p Stereo 1.00 Mbps 0.45 GB
Ok 480p Stereo 500 kbps 0.25 GB
Bad Stereo 375 kbps 0.15 GB

Before using Netflix, check that your internet provider gives enough bandwidth to get the video quality you’re expecting.

Netflix Conclusions

The Good: Netflix is available on every platform out there and provides a large (thought dated) library. It’s a great way to test the video streaming in their household.

The Bad: Netflix’s catalog is dated, and doesn’t bring provide current TV shows or new movies that would allow someone to cut the cord. Another service will likely be needed to complete the deal. Netflix is moving aggressively to expand their content, which gives hope for an improved service.

Netflix Raises Prices: Oh Noes, The Sky It Falling

Well done to Engadget for first spotting the rumor that Netflix was raising prices. Netflix has made it official:

First, we are launching new DVD only plans. These plans offer our lowest prices ever for unlimited DVDs – only $7.99 a month for our 1 DVD out at-a-time plan and $11.99 a month for our 2 DVDs out at-a-time plan. By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members. New members can sign up for these plans by going to DVD.netflix.com.

Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.

Netflix Customers Rend Clothes, Dress In Sackcloth

Netflix’s rather prompt and large change has shaken up their loyal following. The internet angry mob is very much out to get Netflix at this point. For a good feel of the anger out there, I recommend the ZDNet article’s summary of Facebook and Twitter posts. Some choice nuggets:

First, there are the comments on the announcement blog post itself. These are pretty dire.

“Are you F#**!!@! kidding me?”

“Way to go again Netflix – Divide and Conquer – EPIC FAIL!!”

“I know I’ll be cancelling my service and going with Blockbuster soon.”

“Sept.1 I’ll be canceling.I do without cable I think I can do without Netflix.”

“Peace out. You’re streaming selection is horrible anyway.”

“Thanks netflix, you just increased my bill too! Currently I am paying 9.99 for 1 DVD and Unlimited Streaming and you want me to pay 15.98!? Tell me how that is cheaper than 9.99.“

Let’s not forget Facebook

the only way that this is terrific for the customer is if you plan to offer your entire collection available for streaming…. otherwise this is just yet another way to choke more change out of your customers…. I mean… are you guys really that strapped for cash? or are you just greedy? ALSO, what a great way to treat you long term customers, we REALLY appreciate it…i can understand you applying it to new customers… but please, explain to me who’s brilliant idea this was… I hear it going like this ” Hey I have an idea of how we can show appreciation to our long term valued customers… let’s take MORE of their money, that way they REALLY feel valued!”….IDIOTS.

Yes, they really are that cash strapped, but I’ll get to that in a minute.

I think that folks are so pissed because the Netflix Streaming + 1 DVD deal was amazing. It was effectively Hulu Plus ($7.99 / month) but without ads and running on a TV combined with the Blockbuster 1 DVD a month plan ($11.99 / month) for 10 bucks. It was a steal. Now it’s just a good deal at $15.98. After the dust settles, people are going to grumble and go back to their Netflix crack.

Basic Netflix Costs and Financials

Netflix is cash strapped and trying desperately to land new streaming content deals, and the streaming content is getting crazy expensive. Look at the signs:

  • Hulu disclosed parts of their Q2 results, and noted that they spent about $8 on content costs per Hulu Plus subscriber (which explains the ads). Hulu is paying for first-run shows.
  • Netflix originally signed content deals that were costing it a total of $180 million per year. That figure is expected to jump 10x to $1.8 billion.
  • The Starz deal included a cap on the maximum number of streaming video users who can access the videos. Netflix crossed that number. They’ll be crossing it in other deals soon.

DVD aren’t cheap either. It costs Netflix about $1 to ship a movie out and back. If Netflix’s streaming package was well priced at $7.99, two DVDs will eat the price difference between the current streaming-only ($7.99 / mo) and the streaming + 1 DVD ($9.99 / mo) packages. This move is signaling that Netflix wants first run content and that they’ll be using up a good portion of that $7.99 streaming cost to pay for that first run content.

Also consider that Netflix doesn’t appear to have as much money to play with as it should. A Seeking Alpha analyst has concluded that despite Netflix reporting a profit, they’re cash-flow poor and are short on cash to use in funding new endeavors:

In other words, over the last quarter, Netflix earned around $116MM in operating cash flows but most of this (at least $77MM in rising payables) is not actually real cash flow. That means Netflix only earned about $39MM in operating cash flow last quarter.

But wait, it gets even more strange. Of that $39MM the company earned, another 22MM of it came from “accrued expenses” and another $15MM came from “deferred revenue.” I know it seems pretty crazy, but Netflix didn’t actually earn any money last quarter.

This is why Netflix is making the move in a drastic fashion. It’s a large increase for a segment of the Netflix users and the increase does not grandfather in existing customers. Netflix cannot afford to take their time with a transition band or bleeding for a bit. Netflix’s CEO has said that they’ll treat DVD and streaming as two separate business units. By breaking into the two clear services, it allows Netflix to upgrade the streaming and give both sides what they really want.

Stick It To The Netflix Man

One thing I did see in all the angry outbursts were threats to go to other competitors, start using Redbox more aggressively, and so on. “That’ll show Netflix!” they cry. Probably not. I suspect that the customers who are most upset are those that Netflix was losing money on. If the customer was running streaming video and burning a hole in their Unlimited DVD plan, that $1 per DVD shipping costs was killing Netflix. You leaving will not upset Netflix. It’ll increase their profitability.

All that said, if someone wanted to stick it to Netflix, they’d rent as many movies as they could right up to the September 1st changeover deadline.

Other Summaries From Around the Web

Update: Lazy Man & Money blog had the most rational take I’ve seen so far.

Netflix on XBox 360 Brings Roku Disappointment

I had an opportunity to go traveling this weekend and visit family. While there, we were watching Netflix videos. Unfortunately, I had never realized that the Roku box was not amazing until I browsed around on an XBox. Night and day difference. The GUI was polished and responsive, making the Roku box feels downright sleepy.

Admittedly, the XBox has some things going for it. It costs more than the Roku box (at least $199), and that higher price tag brings some serious processing power along with it. Also, there are 55 million units out there. This makes a much larger target for Netflix software writers, so they’ll spend more time on it.

The Roku box does still have a few things going for it. For folks who are just dabbling with internet streaming, it’s the cheapest way to get in the game at $59.00.

It was disappointing that my little Roku box isn’t the end-all of video streaming. I’ll get over it, somehow. I’ve also realized that I need to sample Netflix across a larger number of devices to see how the experience varies.

Update: Destroyed the typos.