Top 10 Film Industry Stories of 2011: #2

Netflix Falters

By Kim Hollis

December 30, 2011

Goodbye, New Coke.

New at BOP:
Share & Save
Digg Button  
Print this column
Qwikster.

The above word will become synonymous with ruination in future years. This is the new punchline that will replace DIVX when people scoff at digital failure. In one fell swoop, Netflix fundamentally switched from being a rising player in media to a laughing stock who didn’t even make sure a Twitter account was open before naming their entirely new company with the newly coined phrase. Incompetence, thy name is...

The story of how Netflix flipped the bit from miraculous stock gains to “Qwikster? LOL! WTF?” is an odd one. In last year’s Top Film Industry Stories, the ascendance of Netflix was named our third biggest story. As I detailed at the time, the technology company went all-in on the premise of streaming media and was rewarded with an unprecedented year over year increase in customers. Netflix roughly doubled in subscribers in 2010 due in large part to a combination of winning the video rental war with now deposed Blockbuster and the sudden ubiquity of Watch Instantly.

After the first quarter of 2011, Netflix totaled 23.6 million users, 3.3 million of them new subscribers. Another million were added in the second quarter; ergo, 24.6 million people were subscribed to Netflix at the start of July, over 10 million more than there had been in March of 2010. Perhaps this is the inverse of always being darkest before the dawn. While sitting on top of the media world, Netflix decided to commit stock suicide.




Advertisement



With the release of the second quarter numbers on July 12th, they announced a decision that effectively alienated their entire customer base. There were two facets to this unwanted declaration. The first was that all members of Netflix were facing a price increase. Depending on the membership plan of the user, their monthly expense would rise by as much as 60%. Also, some plans were terminated, meaning that even if a customer were willing to pay that much more for their current service, Netflix would not let them. There would be no grandfathering of current subscriptions. Instead, if a membership plan were to be discontinued, the Netflix customer was forced to get a new one. Stating the obvious, this is not good customer service.

The bigger bombshell, however, the one from which the company may never recover, is Qwikster. For those of you trapped in an area that lacked Internet for the past six months (which would be Mars, I guess, since even residents of the highest mountain in Nepal know about Qwikster), this is the plan through which Netflix cuts all ties to physical media. Yes, they would own Qwikster, a new company that continues to rent DVDs by mail. But after establishing that business, there was a plan in place to tie it off by selling Qwikster to the highest bidder and thereby place Netflix solely in the cloud.

All of Netflix’s digital media would be served sans physical transactions, a forward thinking plan in and of itself but one that was akin to Wal-Mart closing all of their stores and putting up signs that say “We’re not selling this stuff here anymore. Go to WalMart.com instead.” Actually, that is not quite accurate. For this comparison to be totally accurate, Wal-Mart would have to create an entirely new web site and then direct all of their customers to it, something like, “We’re not selling this stuff here anymore. Go to Animatronio.com instead”. And everyone who doesn’t watch Futurama would be going, “What’s an Animatronio and why would we shop there?” Amazingly, no one in Netflix’s board room connected these readily apparent dots with the end result being that overnight, everyone on Earth hated Netflix. And Qwikster. Whatever the hell that is.


Continued:       1       2

     


 
 

Need to contact us? E-mail a Box Office Prophet.
Friday, March 29, 2024
© 2024 Box Office Prophets, a division of One Of Us, Inc.