Netflix scratches plans for separate Qwikster service

Red Netflix envelopes sit in a bin of mail at the U.S. Post Office sort center March 30, 2010 in San Francisco, Calif.

Jeremy Hobson: It was less than a month ago that we told you about Netflix spinning off its DVD-by-mail service into a website called Quikster. That way Netflix could focus on its online video streaming business. Well today, those plans have been abandoned.

Here to explain is the host of Marketplace Tech Report, John Moe, who is with me live in our Los Angeles studio. Hi John.

John Moe: Hey Jeremy.

Hobson: So tell us what is going on with Netflix?

Moe: I think Netflix wanted to kill off discs -- they're expensive to store, they're expensive to ship, they are not the future of how we will be entertained. But while Netflix was ready to do this, people weren't, and they complained. And I think Netflix heard them and had to do a reversal.

Hobson: But it seems like a very strange way to run a company -- to come out and say one thing, really anger the customers -- then just weeks later decided you're not going to do it.

Moe: Well, new Coke seemed like a good idea at the time. The movie career of Rob Schneider seemed like it would've been a really bold move. I mean, and in technology, everyone's guessing -- everyone's guessing at what the next thing is going to be and it's moving fast. And I think Netflix wanted to keep the goodwill of customers.

I mean, the way to run the company -- the way it was supposed to work, I think -- if Qwikster started to falter, which it inevitably would because people are going to use fewer and fewer DVDs, then Netflix would have been in a position to say, "All right, we're just going to get rid of that line of our business. We don't need that." And it wouldn't have suffered.

Hobson: Well John, you made an interesting point when Facebook made the changes to its website, which made things more complicated for the user, and you said, "When you evolve with technology, it's got to become simpler." Is that the problem here? The users thought that this was more complicated?

Moe: It was more complicated. They were going to have to go to a different website, register their credit card information in a different place. Ultimately, it's one more website, but still. It was simpler for Netflix to run these two parts of the business differently, but it was more complicated for the customer -- the customer let Netflix know it.

Hobson: John Moe, host of the Marketplace Tech Report, thanks so much.

Moe: Thanks Jeremy.

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