Engadget's Editorial On Netflix's Spinoff

[Richard Chao]

<div class='os_post_top_link'><a href='http://www.engadget.com/2011/09/19/editorial-reed-hastings-netflix-spinoff-isnt-about-dvd-succes/' target='_blank'>http://www.engadget.com/2011/09/19/...out-dvd-succes/</a><br /><br /></div><p><em>"If you've just casually glanced over the mass reactions to Reed Hastings' decision to split the DVD-by-mail business of Netflix into its own brand and company, you've probably been duped into thinking that it's the second questionable move that the world's most famed movie delivery service has made this year."</em></p><p><em><img height="400" src="http://images.thoughtsmedia.com/resizer/thumbs/size/600/wpt/auto/1316583807.usr117680.jpg" style="border: 1px solid #d2d2bb;" width="600" /></em></p><p>Engadget's Darren Murph published an editorial about Reed Hastings' move in splitting the DVD part of Netflix from the streaming. &nbsp;Darren's take on the move is similar to those voiced by a few other tech journalists in that while Reed's response may seem as if he has lost control of the situation, it is actually quite the opposite and the move is a pretty brilliant move. &nbsp;</p><p>Hit the read link for the whole article.&nbsp;</p>

[Chris Gohlke]

While I can certainly see the intelligence of this decision for the very long term, in business, you can't forsake the short and medium term for the long term without a great deal of risk. They could have made all the same moves with just a few minor tweaks and there would have been very little outrage and the stock price would probably not have dropped from $300 to $130 in two months.

1) When they first announced the new pricing plans, they should have offered some type of token discount to those who signed up to both services. Something like $1 off each service if you signed up for both.

2) When they just announced that the services were truly being split, they still could have put in place a unified queue manager/recommendation engine. They could simply develop this as an extra layer on top of the two separate sites and had it available to those who signed up for both services.

What these recent announcements and price increases have done is made customers re-evaluate how much they actually use each service and cut back accordingly. With the price increase I cut from 2 out at a time with streaming to 1 at a time with streaming, negating most of the price increase. For the most part I only churn through 2 or 3 physical disks a month, so I'm thinking about even cutting that to their 1 at a time (limit 2 disks a month plan) or just going to redbox. So from a business perspective, they got exactly what they probably wanted, pushed people to streaming, but in my case, they gave up the cash cow since they were making a good profit on the DVD side of my plan.