Netflix has backtracked on plans to spinoff its DVD-rental business into a separate company, Qwikster — a bad move that has been resoundingly ridiculed everywhere bad moves can be resoundingly ridiculed. The cost is that CEO Reed Hastings now looks like a nincompoop, whereas before the Qwikster debacle he looked like a man who knew the future.
That's part of the problem, of course. Hastings grasped that the DVD business wasn't sustainable over the long haul. The future lay with online streaming. But to build that business, Netflix needs to license more content from TV and movie studios. The game plan was to raise subscriptions to generate the needed revenue and begin to phase out the old DVD business.
Hastings has been speaking directly to customers via Netflix's blog. His message is small miracle of concision in the ongoing hell that has been the needless messing-up of once-beloved, now-embattled Netflix:
It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.
This means no change: one website, one account, one password… in other words, no Qwikster.
While the July price change was necessary, we are now done with price changes.
So why was Qwikster — a name that I'm convinced Hastings and his team thought up late on the Sunday night before they unveiled plans for the new website — even necessary? Maybe because Netflix isn't confident that it can really drag it customers into the new world of streaming — although it was obviously concerned that the effort would drag down its share price.
In the end, it didn't matter. The share price fell $200 anyway. Maybe Netflix should have just said, "Look, we can't grow this business and continue to serve you if you don't take this journey with us and wean yourselves off DVDs. Also, we're going to need to charge you more. It will be worth it in the end. Believe us. Trust us."
Does that sound insane? Perhaps. But in retrospect, "Qwikster" — the failed alternative to not talking straight — was a lot more stupid. I thought this had "New Coke" written all over it, but at AllThingsD, Peter Kafka says Hastings took action before the awful decision could get that far.
He's probably right. New Coke screwed with an American icon, whereas Qwikster just showed that an allegedly masterful CEO could manage a very good company and then threaten it by giving in to a supressed urge to spell things in funny ways.