Netflix announced yesterday that it would end Qwikster, the company it spawned last month to handle its mail-order DVD service from its streaming service (splitting those apart happened over the summer).
As you might imagine, there was a hearty round of, “I told you so!”, “Finally! Netflix does something right!”, etcetera, etcetera, etcetera. As you may have already guessed, I disagree with this decision.
Netflix proved this summer that it was a company that would choose to grow and adapt before the future arrived when it separated its streaming and direct mail services.
I could write an entire book on that decision (which I applaud), but I’ll stick to the topic at hand.
Ending Qwikster and bringing the direct mail segment back under the same roof simply confuses people as to which direction the company is heading.
Netflix CEO Reed Hastings (I’m paraphrasing here) said the company moved too quickly in spinning the direct mail side of the business into a different company.
What’s really amazing here is that practically everyone agrees that streaming media is the way of the future, and that DVDs are destined to become Gen Y’s version of the VCR.
If that’s true, then why is Netflix constantly beaten down for trying to push all of its customers towards online streaming?
There are different fees paid for streaming media and DVD, right? So, why wouldn’t you separate those two entities? It allows you to focus on these as two different companies, making negotiating easier and to take each business in the direction it needs to go.
Are DVDs going anywhere anytime soon? Probably not. And as long as there’s a demand there, you should be filling it.
When decisions regarding the future of your company are made based on shareholders, who are less concerned with the health of your company and more concerned with the stock price, that can end up crippling the company.
To be clear, I’m not saying this cripples Netflix.
In fact, Hastings basically said this is a mea culpa in a few months of what were, while correct business moves, terrible PR moves. All that said, I still believe that Netflix was on the right path.
I supported the decision to split DVDs and streaming and to launch Qwikster. It’s a shame that the right business moves were nullified because those moves were handled with the grace of a drunk elephant in a china shop.
What do you think? Am I off my rocker? (On second thought … don’t answer that one.) Let’s have it out in the comments.