Joe Rotondi

I don’t usually post reactions to relatively recent developments. (My last post was in reference to some centuries old statues, for example.) But, as a long time consumer and follower of the company formerly, but still in part known as, Netflix, this is an important subject that I wanted to flush out.

There are two parts to my discussion. Not Netflix and Qwikster, but business and branding.

Existing Landing Page (Current as of Posting)

First the business.
A lot changed when Reed Hastings sent me an email at 4am EST on Monday morning. Leading up to Monday morning Netflix’s share price had dropped about 50% in a matter of months, when the rest of the market was moving sideways. The reaction to Netflix splitting their pricing plans for customers was not received well, as it was a big jump from the previously small incremental increases they had come to rely on. But, on top of that, Netflix customers fled the company’s increases in a higher number than the company anticipated (about 1 million). I, personally decided to drop my streaming plan all together and move from 1 DVD at a time to 2 for a lower price than 1 DVD with Streaming. And now, in the post 4am Monday morning world, we have two companies, one for DVD by Mail (and presumably games, wherever that came from) and one for streaming.

So here we are after all these dramatic developments, with two separate brands under the Netflix label. Although I joked about Mr. Hastings sending the 4am email right after he wrote it, I know hes a smart man. The going explanation of the split branding is built on the assumption that the streaming of content and the DVD delivery service are two separate businesses.

While I think that people believe this to be true, to me its kind of irrelevant. Yes, on the back end they’re different businesses, which should have different contracts, fees, infrastructure, etc. But, what is gained by two brand names, one with extreme value and one with almost none?

(As an aside, its also worth noting that adding video games by disk, unless its at very little cost to the company is not nearly as profitable and popular as one would think, and Gamefly is a great example. But for some reason, this will be an added part of the new Qwikster service.)

Share Price from July to September

Branding
The Netflix red envelope is pretty iconic. While the red envelope has been under attack from rivals like Redbox and even threatened through Netflix’s frenetic redesigns of its website, whenever I walk down the street people see my carrying my red envelope to the mail and know what it is instantly. (People even use the name like people use Google: I’ll Netflix it)

Its worth noting that the original Netflix is the DVD-by-mail outfit, where you viewed the online library and created a queue for your by mail DVDs. That was Netflix. That company grew to a billion dollar business when until only recently streaming was more than an afterthought of the product.

This DVD-by-mail service is now spun off (as of 4am Monday morning) under the name Qwikster, with some very questionable preparation and justification. According to CEO Hastings, its called Qwikster because the DVDs come quickly through the mail.

Now, I’m not Brand New, although I eagerly await their review of the new Qwikster identity, but I have a lot of issues with it, apart from the original business losing its name to the new business for the sake of exploiting the existing brand value. Qwikster is just a weird word, and just long enough to be confusing to spell (unlike services like Hulu who have meaningless names that are at least easy to spell). Also, since when has DVD-by-mail held that the DVDs come quickly as a point of pride? While Qwikster/Netflix has an incredible system of distribution, its still the US Mail that gets you your disk in two days. The previous name, Netflix, instead pointed to the infrastructure on the internet for you to view, order and receive suggestions of what to request.

As I alluded to above, why have two names at all? The popular hypothesis that its because the DVD-by-Mail service is from the past and is dying is unsupported by two reasons: one, its still most of Netflix’s revenue, two, the two brands are still part of the same company, and three, what does Mr. Hastings gain from giving the DVD service, literally, a bad name? To me the simplest solution is to just design the website so they are more obviously separated, but not so separated that if you have accounts with both services that you have to rate movies on both sites now to get suggestions.

So while the Netflix name may make a lot of sense for a streaming service, that’s not what it has meant for almost 5 years. And on top of that, adding a whole new name seems like a lot of work when the simplest solution, to me, is a design solution. But I guess when you’re a carpenter all you see is nails.

Disclosure: I’ve been a Netflix customer for 4 years and own shares of the company.