I am guessing most of you have heard that Netflix has been making some changes. Not too long ago, they changed their pricing structure, resulting in a significant increase for subscribing to their DVD by mail plan. This made a lot of people unhappy. Of course, ten years ago Netflix revolutionized the video rental industry. They mailed DVDs to your home, and you could keep them as long as you wanted without paying late fees. Eventually they got into streaming videos on the web, and apparently that part of the business is very busy. So much so that they really want to separate the two business lines. Hence the raising of the prices for the DVDs.
But they apparently didn’t consider how mad people would be when they raised prices. They took a lot of flack, and last week the CEO emailed Netflix customers to explain (and posted his explanation on the Netflix blog). He also announced the DVD service will be renamed Qwikster. I read the explanation, and it made sense to me. But I was interested by the fact that so many of the 16,000+ comments were still so angry–and also so 100% certain that Netflix’s was making a fatal strategic mistake.
So is Netflix blowing it? Maybe. I’ll be honest here–I should not be your top pick for determining the quality of strategic moves in the movie rental/streaming business. So I don’t have a definitive answer as to whether they are making the right move. But I don’t think the answer is clear. Yes, they will likely lose a lot of customers with that price increase (they lost me; iTunes’ gain). But maybe they wanted that. Maybe they are betting that DVDs won’t exist in a few years. Maybe they are jumping to the next S-curve before they are in the midst of the inevitable decline. Maybe they are having the courage to try something before they know it will work.