<story><title>Netflix kills Qwikster</title><url>http://allthingsd.com/20111010/qwikster-is-gonester-netflix-kills-its-dvd-only-business-before-launch/</url></story><parent_chain><item><author>uptown</author><text>While this rights the ship, Netflix made the colossal mistake of rocking the recurring-billing boat.&lt;p&gt;Smart businesses know that when you&apos;ve got a customer setup for recurring monthly billing, there&apos;s a certain percentage of these customers who will continue to pay even though they&apos;re not actively using the service.  Part of it is laziness of figuring out how to cancel.  Another part is the thought that they may someday use the service more than they are.  This has been the model for gyms forever.&lt;p&gt;What Netflix did was force people to re-evaluate whether they truly were getting what they paid for, and in the process they added complexity to their branding by spinning off part of the service into a hard-to-spell company that had nothing buy a landing page.&lt;p&gt;While this may be good for today&apos;s stock price, I suspect many of Netflix&apos;s customers that re-evaluated their needs may not come back for quite a while ... if ever.  There&apos;s more options available for media than there likely were when they first signed up for Netflix ... and if those competitors are smart, they&apos;ll target those customers to ensure they&apos;re aware of the alternatives.</text></item></parent_chain><comment><author>macrael</author><text>The most convincing explanation of their actions I read was essentially:&lt;p&gt;1. they made streaming a free add on to DVDs to get people using the service, which resulted in streaming becoming popular.&lt;p&gt;2. The media owners started to (or perhaps always had) cut their deals with Netflix on a &lt;i&gt;per subscriber&lt;/i&gt; basis rather than per view.  So Netflix was paying the networks for everyone who subscribed, including evyone who only watched DVDs. This became unsustainable.&lt;p&gt;3. So, they needed to separate these people, thus the split.&lt;p&gt;I honestly don&apos;t see how they could have handled this differently, they needed to tack the service on to DVDs to get people on board, and they needed the services to be separate to actually make money on streaming long term. It might have worked if they had been able to pay for videos on a per view basis, but I&apos;m not sure they have the clout to make that happen.</text></comment>
<story><title>Netflix kills Qwikster</title><url>http://allthingsd.com/20111010/qwikster-is-gonester-netflix-kills-its-dvd-only-business-before-launch/</url></story><parent_chain><item><author>uptown</author><text>While this rights the ship, Netflix made the colossal mistake of rocking the recurring-billing boat.&lt;p&gt;Smart businesses know that when you&apos;ve got a customer setup for recurring monthly billing, there&apos;s a certain percentage of these customers who will continue to pay even though they&apos;re not actively using the service.  Part of it is laziness of figuring out how to cancel.  Another part is the thought that they may someday use the service more than they are.  This has been the model for gyms forever.&lt;p&gt;What Netflix did was force people to re-evaluate whether they truly were getting what they paid for, and in the process they added complexity to their branding by spinning off part of the service into a hard-to-spell company that had nothing buy a landing page.&lt;p&gt;While this may be good for today&apos;s stock price, I suspect many of Netflix&apos;s customers that re-evaluated their needs may not come back for quite a while ... if ever.  There&apos;s more options available for media than there likely were when they first signed up for Netflix ... and if those competitors are smart, they&apos;ll target those customers to ensure they&apos;re aware of the alternatives.</text></item></parent_chain><comment><author>uptown</author><text>And if Netflix is smart, they&apos;ll figure out how to leverage their pervasive device-integration to offer one-off non-subscription-based rentals.  Price it aggressively enough to compete with Amazon and Apple ... and after re-earning the trust of these customers, make the case to convert them to subscribers by showing them the financials.  Simple emails with messages like: &quot;For $2 more than you spent last month, you could have access to X million more movies&quot; or &quot;If you were a subscriber you could have saved $6 last month?&quot;.</text></comment>