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Qwikster?

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Like a lot of people, I am perplexed by Netflix splitting its home-delivery service from its online service:

Which raises the question: What is Reed Hastings smoking? As far as anyone can tell, he seems to have rolled up pages from The Innovator’s Dilemma, Clayton Christensen’s influential 1997 book about the ways that successful companies die at the hands of upstarts. Christensen, a professor at Harvard Business School, coined the term “disruptive technology,” which describes innovations that come out of nowhere to undercut a market leader’s dominant position. Christensen cited the way that Digital Equipment, the leader in 1970s-era corporate minicomputers, completely missed the 1980s boom in personal computers. But a better example may be Netflix itself—its all-you-can-eat business model disrupted, and eventually killed, the previously dominant Blockbuster model for movie rentals. Hastings is likely paranoid, then, that Netflix is vulnerable to the same kind of disruption. And that’s the logic behind the mail/streaming separation. Hastings would prefer to kill his own golden goose before anyone else beats him to it.

I think it’s an idiotic strategy. Most of Netflix’s customers subscribe to both DVDs and streaming, and if they’re like me, they like the service because it enables both not-so-picky instant gratification and well-considered delayed gratification. I use the DVD service to select movies that I really want to watch and am willing to wait for; I use the streaming service when I want to watch something—and pretty much anything—right now. I can keep doing this after the DVD plan is renamed Qwikster, but it will require more work. If I search for a movie on Qwikster, it won’t tell me that the movie can be seen for free, right now, on Netflix. If I search for a movie on Netflix and don’t find it, it won’t let me add it to my DVD queue.

It seems likely that the ultimate goal is for Netflix to sell off its home delivery service and commit fully to online. And I’m no capitalist, so what do I know? But this seems like a very bad idea. I am very bearish on the viability of streaming film online over the long haul. Netflix had to raise prices recently without any improvement in service in order to raise money to continue buying online content. It then went out and lost access to Starz, its biggest supplier. As distribution companies and studios demand higher prices for streaming, Netflix and other providers are going to have to continue raising prices to the point that I’m not sure who will pay it. Even if the prices don’t rise that high, I still can’t get more than 20% of my Netflix queue online. Something has to give here.

But what I really don’t understand is splitting the two services. I use both, but I use the home delivery far more. I suspect a lot of people use one far more than the other. Won’t this convince people to cancel either the home delivery or the online? If I am receiving 2 charges on my bill, can’t integrate my lists, and have to go to different websites to use the two services, I don’t have a lot of incentive to keep the one I don’t use.

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