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Did Netflix make the right decision on Qwikster?

Marketplace Staff Oct 10, 2011

Did Netflix make the right decision on Qwikster?

Marketplace Staff Oct 10, 2011

Steve Chiotakis: Netflix says it’s nixing the plan to split off its DVD movie rental service to a new company called Qwikster. The firm says it moved
too fast on the plan. Netflix stock has taken a beating in the last few months.

Henry Blodget’s in charge at Business Insider, and he’s with us now to talk about some of the Netflix blunders. Good morning Henry.

Henry Blodget: Good morning.

Chiotakis: So Qwikster didn’t last very long — what’s going on?

Blodget: It didn’t. Well, they got panned by both the stock market and their customers the moment they announced it. And this is a company that certainly is willing to take a bit of flak, but I think that even they realized that in the end, it was a big mistake. And the reason it was a big mistake is that a lot of people — a lot of their customers — actually like the fact that they basically have everything. Either you can stream a movie, or a TV show, or you can order the disc. And separating those two things ultimately was a bad experience for customers.

Chiotakis: And nobody wanted to sign on to two different accounts, right?

Blodget: That’s right. It creates a real hassle for customers, and certainly it is the wave of the future — discs aren’t going to be with us forever — but it was a little bit too quick on that front.

Chiotakis: No pun intended, of course. What’s going on at Netflix right now, Henry?

Blodget: Well I think the company is — they’ve demonstrated over the course of their history that they’re willing to make decisions that annoy people or scare people in the short term in order to set themselves up to succeed over the long-term. And that’s very good — I just think that this particular case, they underestimated how many customers really enjoyed the fact that it was convenient, and you could go to one place and be assured of getting something; it was just a question of how you were going to get it.

But the transition that they’re trying to navigate is the transition from physical discs to streaming. Ultimately, everything will be streaming in five to ten years, it’s just a question of how the company gets there.

Chiotakis: Is Netflix back where it started, do you think?

Blodget: I think they will certainly have made customers happy by rolling this back. And it can’t have been an easy decision for them to do that, and it’s to their credit that they listened and did it. So, I think customers will be happy. I think investors, it will probably take a while for them to get comfortable that the company is really set on its future long-term strategy.

Chiotakis: Henry Blodget from Business Insider. Henry, thanks.

Blodget: Thank you.

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