In July, I argued that the previously announced Netflix price increase is a good thing. And boy, did I get some negative feedback on that video.
Well, I’m back for round two and it’s Netflix/Qwikster versus its customers. And you can bet I’m taking Netflix’s side in this battle.
(If you haven’t read the details of the changes, be sure to read this story first).
(Netflix Mailers. Courtesy of Netflix.)
First, I agree with just about every Tom, Dick and Harry that separating the DVD-by-mail and streaming content services into two different entities is very customer unfriendly. I mean, seriously, having to manage two subscriptions on two different websites is totally uncool.
But Netflix currently faces a big problem, the DVD-by-mail service costs too much to operate. About a dollar to mail a DVD round-trip, with an average volume of 2 million DVDs mailed per day. It doesn’t take a mathematician to see that the cost can quickly add up in the hundreds of millions every year. Compare that to the five cents it costs to stream each movie. With that kind of cost savings, you can easily see why Netflix would want to push customers to stream content only.
But what’s not helping the problem is that too many customers are still picking DVD’s-by-mail over streaming content. Who can blame them? Not all the content available on DVD is available online, so naturally, subscribers would stick with DVDs.
With this impasse between what their customers want and the need for Netflix to lower their operating costs, someone had to make the first move. And that’s Netflix. This change was made, I believe, to ensure the future survival of the company.
In fact, I believe by creating Qwikster, Netflix is designing the service with planned obsolescence in mind. (Commonly defined as designing a product or service with a limited life.) See, Netflix knows that DVDs will be used less in the coming years, and we’ve seen what happened there with Blockbuster. They also know that more customers will stream content in the future as they start to acquire more licensing rights to streaming content.
In response, Netflix is making a transition now by isolating a part of the business they know will become a liability in the future. Soon enough, maybe 5-10 years down the road, I predict that Netflix will shut down Qwikster as streaming content becomes the primary way we watch movies and TV shows. Thus, leaving the main Netflix brand and the streaming service unaffected.
Netflix made a bold move and the right move for the long term to ensure it’ll be around to serve customers for many years to come. Although there isn’t hard evidence to support my predictions, it’s hard to deny that the problems facing Netflix could likely point them to such a decision.