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Enter Qwikster, the brand designed to fail

Qwikster LogoHere’s a branding move that will be taught in school. Netflix has just announced that it will be splitting its company into two divisions—and its DVD-by-mail service will be named “Qwikster.” This is a name with failure written all over it. It practically rhymes with Friendster!

Netflix is rapidly burning through the customer goodwill it has built up over the last five years. With the recent pricing split/increase, Netflix undermined its reputation for good customer care. The risky move cost Netflix heavily in its subscriber count and share price.

Now comes Qwikster. The most remarkable thing about the launch is that in his letter to customers (pasted below), Netflix CEO Reed Hastings compares the company’s DVD-by-mail service to AOL dialup and Borders bookstores. Qwikster is a new brand he expects to die.

I admire Hastings’ newfound candor, but can you imagine being an employee at his company assigned to do a good job with this service? Moving from Netflix to Qwikster is a demotion. You wonder if they’re even going to order new business cards for these people.

Netflix was immediately beset by more criticism from customers. The comments on Facebook, Twitter and YouTube reflect huge volumes of sincere, polite expressions of simmering annoyance. It’s just shy of pitchforks and torches.

Netflix is now all-in on streaming, a service currently plagued by poor selection. This gamble might pay off, but I wouldn’t bet on it. Why not? It benefits the company and annoys the customer.

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Here’s the letter to customers that Neflix CEO Reed Hastings sent out late Sunday, framed in the form of an apology for poor communication about the price hike:

Dear Daryl,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

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And here’s a video featuring new Qwikster CEO Andy Rendich trying to look like he’s happy with being asked to run a brand that his boss wants killed:

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Update, October 10: Netflix is killing Qwikster.

— By Daryl Lang. Filed under Marketing

6 comments

  1. roma sohn says:

    Talk about dumb moves. Having been a DVD by mail customer for years, I would rather have seen the streaming customers a new name. I am not interested in streaming and I realize that I am in the minority. How about Streamflix? for these other guys. This new name is going to cause all sorts of problems. Hope you guys realize what you are doing to your company.

  2. Peter Magedanz says:

    This is ridiculous nobody wants to have two websites for the same service. The only way this is not going to piss people off is if you heavily increase the amount of available streaming content and make it so when series become available on disc they are also immediately available on streaming.

  3. Craig says:

    I am a Netflix customer, and I just cancelled my DVD rental, and kept the streaming.

    I was not too concerned for the recent price increase, but I will not tolerate paying 2 bills with the new service, and eventually these both will increase like all other cable net works did over the years.

    Secondly, I can find plenty of free movies and tv shows online, and go back to renting a movie for $1 if I need a quick fix.

    Ha. Too bad Netflix, Roku is pumping in
    plenty of movies and you are making a big mistake. Customers are getting smarter and this is why we switched to Netflix from Cable and Dish in the first place.

  4. Anonymous says:

    I am (or at least, I WAS) a Netflix employee. After the official split, I will be a Qwikster employee, and I am very, very nervous about this whole thing. I couldn’t believe what I was reading when the announcement from Reed Hastings hit the internet.

    I was around the 100th person to view the apology/explanation video linked from the blog onto youtube. Common sense told me that eventually, my job would be obsolete. I knew this, and I have been prepared for it. However, if Qwikster does not succeed at all, I am out of a job. I guess I just did not expect to see Netflix make this streaming move so soon.

    However, it has been rumored for a long time that Reed Hastings had planned on making Netflix streaming only from the get go. (hence the name Net-flix) I guess we, the employees will just have to wait and hope for the best. I for one am planning to stay until the end, as it seems we all are. I MUST say it is an EXCELLENT company to work for. We are treated with so much respect, and we all truly appreciate it. They really do treat us very well, and this is far more than I can say of my past employers.

  5. Qwikstupid says:

    Stupid new name which is very close to Qwikstar (a cover company for Amway). Also, the content on streaming doesn’t include any movies past about 1987 for the most part. Also, streaming is plagued with some serious problems. Namely, when someone doesn’t have THE fastest Internet service, it jumps and the audio gets separated from the video.

    I am keeping the DVD rentals for now, but if the service becomes as goofy as the name, I will go to the Redbox/Blockbuster express only route.

  6. Kathleen says:

    I have been with Netflix from their inception and have only used their DVD service, watching streaming once in a while on my home computer. So when I was asked to decided between DVD in home, or streaming, for me it was a no brainer. In home DVD’s all the way – so many titles to choose from! I have never been disappointed with Netflix and I am hoping that Quikster will not disappoint me either.

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