Before Launch, Netflix Scraps 'Qwikster'

Netflix announced Monday it is reversing its highly controversial move to create two separate companies, one for its streaming service and another for mailing DVDs. The company now says customers will be able to keep just one account and one password.

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Good-bye, Qwikster. We hardly knew you. Netflix announced today that it's dropping its plan to split its DVD and streaming services. Qwikster was announced less than a month ago.

And as NPR's Ted Robbins reports, it was received with close to universal scorn.

TED ROBBINS, BYLINE: You may have a problem when you get negative website comments, emails and blog posts. You can be pretty sure you made a big mistake when "Saturday Night Live" takes you on.

(SOUNDBITE OF SHOW, "SATURDAY NIGHT LIVE")

JASON SUDEIKIS: (as Reed Hastings) Hi. I'm Reed Hastings, CEO and cofounder of Netflix.

FRED ARMISEN: (as Andy Rendich) And I'm Andy Rendich. I head up DVD rentals for Netflix.

SUDEIKIS: (as Reed Hastings) Uh-huh. We knew you loved Netflix because it was an easy to use website for all your movie needs. To make it better, we split it into two separate, slightly more confusing sites.

ROBBINS: Netflix for streaming video and Qwikster for DVD rentals. That part was real. Then the SNL skit satirized Netflix by saying it had split into three new sites, then merged with a nut company and the insurance business, Aflac, which uses a duck for its spokesman.

(SOUNDBITE OF SHOW, "SATURDAY NIGHT LIVE")

SUDEIKIS: (as Reed Hastings) Announcing the merger of Quakster and Nutflix. Welcome to Nut-Quak-Qwikster.

ROBBINS: Netflix violated a cardinal rule of marketing. Don't make it harder for your customers to get your product.

STEVE SWASEY: We completely underestimated the appeal of the simplicity of the Netflix website.

ROBBINS: Steve Swasey is spokesman for Netflix.

SWASEY: It'll stay just as you've known it all along. One website, one sign in, one account, one set of ratings, one simple service for everybody at Netflix who wants both unlimited streaming and unlimited DVDs by mail.

ROBBINS: A price hike announced this summer remains in place. Customers are now paying $8 a month each for streaming video and DVD compared with the old base price of $10 a month for both.

Netflix lost a million customers in the U.S. when its prices rose, even though, as Steve Swasey points out, customers understood Netflix needed to raise prices to cover the rising costs of acquiring content and mailing DVDs.

SWASEY: Most reasonable people understand that, but we did not do a good job communicating and explaining that.

ROBBINS: Even as it was losing U.S. customers, Netflix gained a million customers when it expanded its streaming business into Canada last year and it's just begun offering its streaming business in Latin America. The U.S. is the only place Netflix offers DVDs by mail.

Andy Hargreaves, an analyst at Pacific Crest Securities thinks the decision to kill Qwikster is the right move. The PR problem caused by the mistake is another issue.

ANDY HARGREAVES: The problem is this is a management team that, for a long time, was perceived as being able to do no wrong and kind of the smartest guys in the room and I think that that image is definitely getting tarnished.

ROBBINS: Hargreaves says Netflix still offers a lot of content for customers at a reasonable price. Even though it will soon lose Starz movies, it is gaining DreamWorks Animation. He still likes the company.

HARGREAVES: You know, as long as they don't make any more bad decisions, I think that they can kind of get back on the horse, so to speak, but it'll take a while. I mean, they've definitely done brand damage.

ROBBINS: Tony Wible thinks it's more than brand damage. He's an analyst at Janney Capital Markets. He calls Netflix the AOL of streaming, predicting it will slowly fade among expanding online streaming competitors like HBO, Hulu, Apple and Amazon.

TONY WIBLE: Netflix is the first person to walk through that door, but they certainly won't be the last. And the people that are now getting ready to start launching services have billions and billions of dollars on their balance sheet to spend.

ROBBINS: It'll be a battle over the next few years for companies to acquire rights to movies and TV shows. But as of today, you won't be able to watch any of it through Qwikster, an idea whose time never came.

Ted Robbins, NPR News.

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