It’s not the first time I’ve said this, but I just did NOT see this one coming!
Today NetFlix announced that their much-discussed and much-embattled price hikes were actually just the precursor to splitting out the DVD and Internet Streaming services as essentially two different companies with two different CEOs and separate respective teams running/focusing on each. The original NetFlix business will be rebranded “Qwickster” and the Internet Streaming service will retain the NetFlix brand.
Within the coming weeks, the two services will further split physically. Each brand will have its own dedicated web site and once and for all split apart the online features and functionality. The two services will no longer interact and work as one. You will no longer be able to log in and view your Instant Queue and your DVD Queue side by side.
Although Netflix is nowhere near the size of Coca Cola, for some reason this strikes me as a gaffe nearly on scale with Coca Cola’s changing of its formula in the 80′s. However, Coca Cola was able to issue a mea culpa and merely re-introduce original Coke as “Coca Cola Classic” side by side with “New Coke” and keep trucking — it was merely a product offering change. In this case, Netflix is changing it’s entire business operation and dealing a major blow to its brand. I doubt recovery will be so easy if it turns out to be a misstep.
And in my eyes, this is a massive misstep, to say the least. In one fell swoop they have just gutted the brand that they’ve spent years and millions (hundreds of millions?) to build. Not only that — they’ve done it at a time when that very brand is already battered and bruised from the massive upheaval caused by the pricing changes. After nearly a decade entrenching NetFlix as the leading player in DVD rentals, the company is now starting all over with $0 in brand equity in Qwickster. Aside from the fact that it’s a stupid, meaningless, forgetful name, in my opinion.
Add in the fact that NetFlix lost its rights to Starz content for the Internet streaming service as of February 2012, which is the source of the bulk of its most valuable new releases and top-line Hollywood titles.
In my opinion, Netflix has gone from an Internet darling to a slow motion train-wreck-in-progress in a matter of months. Can it be saved? Is it too little, too late? Are there any more surprises forthcoming?
I think they have completely destroyed hundreds of millions of dollars in brand equity, and disenfranchised millions of customers. I expect this latest announcement to be received about as well as the last one (the pricing changes) and I smell the death of the DVD business. I think it’s all over but the crying.
The chinks in the armor have been revealed, and it won’t be long before Blockbuster (which has been purchased by DISH Network and is being reincarnated to once again go after the Netflix mailorder DVD business) and Internet streaming companies such as Hulu jump on the bandwagon and start capturing market share from the once invincible Netflix.
As I’ve said, it’s just my opinion. But I see these moves as major brand gaffes.
Now Netflix is wounded. And it’s self-inflicted.
UPDATE: This blog entry was written as the news was unfolding. In hindsight, a month or so later, we now know that NetFlix has doubled-back on its plans, scrapping Qwikster entirely, and said: “Mea culpa! Don’t worry folks, we’ve listened and changed our minds — things will stay as they were.” As a customer, I’m thrilled. And as a pundit, I’m smiling… 
