Why Netflix Is Splitting-Up

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The Oatmeal has a great cartoon on why Netflix is splitting into two entities. If you've not seen it, then please, go look now! :)

While the cartoon certainly puts a fine point on what most of us are thinking, I do think there are 2 clear reasons why Netflix would want to decouple the disc-rental business from online streaming. Those are:

1) Shipping Rates Are Killing By-Mail Disc Rentals.

This one is pretty obvious. Netflix relies heavily on the postal service, which is itself seeing dire times. I don't imagine that their margins are all that great on the by-mail disc rentals as it is, and all this uncertainty around postage rates and the future of the postal service has to be registering as a major risk on the quarterly reports. Ultimately, I'd be shocked if Netflix Qwixster didn't move to purchase or create one of those rental-box companies and then move strongly away from mail-based delivery of movies. Imagine a passcard with a PIN that let you check out N movies at a time, return them, and rent more, for an unlimited amount. For more rare movies, you then pay a premium for mail-based service. Or something like that.

2) Netflix Has a Multi-Login Problem.

The other great annoyance with this change is that there will now be 2 separate logins and web sites, rather than the single one we see today. Now, personally, I disagree with the complete decoupling of the online interface as single sign-on has existed for a while. But, while that's annoying, I do think I understand their motivation. As of today, multiple people can simultaneously login to Netflix using a shared account, and they can all stream shows at the same time. This has to be problematic for Netflix, not only because they're not seeing as much revenue as they should be, but I'd also wager that the movie studios are holding back a bunch of content because /they/ also don't see the revenue in the same way. In order to solve this problem, Netflix needed to find a way to allow multiple logins to manage the DVD queue while only allowing N logins (based on account level) to stream video. By completely splitting the site, they've probably "solved" this problem (though, albeit, in an incredibly inelegant fashion). I fully expect to see new account tiers from Netflix once the sites are split that forcibly limit users to 1 active login at a time. On the flip side, I also expect that they will increase and improve their online content (and it had better be a dramatic improvement).

Anyway... just my quick thoughts on this Netflix/Qwixster business... I can't say that I find it the most elegant solution, but if it helps them achieve their goals, then so be it. *shrug*

1 Comment

The Oatmeal is awesome :) But yeah, poor solution.

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This page contains a single entry by Ben Tomhave published on September 20, 2011 9:18 AM.

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