Have you been following the implosion of Netflix lately? I know, it’s not easy! The video rental business built its name on home DVD-rental delivery. More recently, they have also been offering streaming content to their higher-tier customers, basically for free. Well, them days is done, son! And the fans are irate.
The problem is that they tried to build their streaming service by giving it away for free, as an add-on to their snail-mail DVD service. This was a good way to add customers. But the history of the internet indicates that once you convince people something is supposed to be free, or close to it, you will have a devilishly hard time getting them to pay for it. Megan McArdle, Atlantic Monthly
Particularly when Netflix apparently knew from day one that home-delivered DVD’s were a short-term gateway drug to eventually get us hooked on streaming video. They always knew they would have to start charging for this content eventually, so how did they screw it up so badly? Jacking up the price by 60%, enraging their customers, then splitting the business in two, with Netflix as streaming only and Qwikster for DVD’s. Bottom line, they are expecting to lose 1 million customers in the short term!
So, let’s hear it, Netflix fans. Were you shocked, angry, or indifferent? Let us know!
Update October 10, 2011… Now they have scrapped the whole idea! What a head-scratcher!