Let’s start with a video to sum things up:

That’s right, Netflix has relegated Qwikster to the circular file. The overwhelming anger from the customer base has seen to that. In an age where user experience is so important, it’ hard to understand how the company thought that making things more complex would be a good idea.

The timing was not good. Not at all. Localized USA takes note:

This is the second decision made by Netflix recently that has caused controversy. The first was Netflix’s decision to eliminate its subscription plan that offered unlimited streaming and DVD rentals for $9.99. The subscription plan was replaced by two separate plans that were both priced at $7.99 that offered one DVD rental at a time or unlimited streaming, meaning that users that wanted both services would have to pay an increased cost of $15.98 instead of $9.99.

While Netflix may have practically invented its industry from scratch, it now faces severe challenges as online media delivery becomes more widespread and sophisticated. For one thing, the company’s rapidly expanding customer base has inspired the various studios to hike their licensing fees, which made it lose the streaming content from Starz. The more popular Netflix becomes, the higher the price is has to pay for content.

Additionally, savvy media conglomerates and tech companies are banking on people’s tendency to like everything on one bill. Many of them have their own online streaming services in the works, and I predict that market will become a lot more crowded over the next few years.

The numbers here are dramatic. The Montreal Gazette has a nice summary:

Netflix has seen its U.S. subscriber count grow from more than 12 million at the end of 2009 to 19.5 million at the end of 2010 to 24.6 million at the end of June.

Netflix had expected that number to grow to 25 million by the end of its third quarter.

But on Sept. 15, Netflix announced that instead of growth, it expected to see its domestic subscriber count slip to 24 million, with losses on both the streaming and DVD plans.

The company’s stock has taken a beating of late, falling more than 50 per cent in the past six months.

One million lost customers. I’d be willing to bet that there are some really uncomfortable board meetings going on at the Netflix HQ.

Though Netflix is a revolutionary company that carved out its own groundbreaking niche in the digital landscape, it is also a company that needs to get in touch with its customers. Even I, a subscriber for over six years now, have scaled back my service and stopped recommending it. This is not the way any company wants its customers to view its brand.

There is also the brand tarnish acquired by the company’s lack of attention to the obvious. When launching a new service, one should always make sure the name is available on social media networks. To its chagrin, Netflix soon discovered that Qwikster was the Twitter handle of an outspoken pot smoker. This does not inspire confidence.

Source: “Qwikster Cancelled By Netflix Before Launch (NASDAQ: NFLX),” Localized USA, 10/12/11
Source: “Netflix battered by angry customers, rising competitors,” The Montreal Gazzette, 10/12/11
Source: “R.I.P. Qwikster; Netflix Scraps Separate DVD Rental Unit After Angry Customer Reaction,” YouTube

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