Netflix has done another 180. Customers got angry about all of the ridiculous changes at Netflix, and now Netflix is trying to un-ring the bell on the stupidest move the company has made in years.
Qwikster was ridiculed as a stupid name, but now the name seems sort of fitting, because the fledgling company did not last very long. The Qwikster spin-off (Netflix's answer to New Coke) proved so profoundly unpopular with consumers, Netflix scrapped the new company, which was really just Netflix in disguise. For now, Netflix plans to keep its DVD-by-mail and streaming services under one name and one Web site.
It is interesting to see how quickly Netflix will backtrack when the company realizes customers have become unacceptably angry. Also note Netflix did not kill Qwikster until well after the consumer backlash got out of control. The Qwikster name was already showing up in advertisements. It was practically a done deal. This mistake had to cost Netflix a lot of money, and it has cost the company a huge amount of credibility. The stakes were pretty high on this Qwikster launch. If the subscribers had not revolted so harshly, there is no doubt they would have gotten stuck with Qwikster.
If you were hoping Netflix is going to take back the 60% rate hike and two separate plans for DVD-by-mail and streaming, keep hoping. The higher fees and service split are here to stay. Although, past behavior indicates that Netflix will reverse its course if enough subscribers cancel.
Netflix has truly failed on this split of DVD-by-mail and streaming. What was once a beacon of innovation (for some) in the business world now looks like a sad, reactive, desperate, and pathetic company. With this whole service-split debacle, Netflix sort of came off looking like, well, Blockbuster a few years ago. Way to go, Netflix. Start imitating the company you once humiliated.
Showing posts with label subscribers. Show all posts
Showing posts with label subscribers. Show all posts
10/11/2011
1/05/2011
Netflix Facing Class Action Lawsuit for Alleged Antitrust Violation with Walmart
No surprise, but Netflix is facing another class action lawsuit. This lawsuit is not due to anything you might have assumed, however. Rather than Netflix being sued over the company's wide array of suspicious business practices, Netflix is being sued for something the company allegedly did in 2005.
If you will think back to that time, Walmart was in the DVD-by-mail business. Walmart shuttered its video rental business and effectively surrendered its subscribers to Netflix. Netflix.com promoted Walmart for DVD sales. Walmart.com promoted Netflix for DVD rentals. It seemed like a wonderful marriage.
The plaintiffs are alleging that Netflix's CEO, Reed Hastings, met with the CEO of Walmart during that period, John Fleming, and conspired to strategically divide the home video market. According to the alleged agreement, Netflix would not sell DVDs (presumably new DVDs) if Walmart would agree to stop renting DVDs. That way, Walmart could secure a larger share of video sales and Netflix could secure a larger share of video rentals. Most importantly, the companies would not have to compete against each other and drive down each other's profits in price wars.
From a business point-of-view, this sort of arrangement makes perfect sense. Why fight your competitor in price wars over two different markets, when you can simply call a truce with your competitor that will allow each of you to have great control over an individual market? After all, as a business leader, which would you rather have: two highly competitive markets with low profit margins or one monopolized market with a high profit margin? If you do not have to compete as much, you can charge higher prices. Higher prices may hurt consumers, but higher prices normally translate to higher profits when proper competition does not exist in any given market.
The most important thing to consider about this alleged conspiracy is that it is most likely illegal under antitrust laws. These antitrust laws are in place to protect you, the consumer, from price fixing, collusion, and other similar predatory business practices. Walmart certainly did not want to be in a big trial over this. Walmart has already settled for an amount that may be $29 to $40 million. At some point, those included in the class action lawsuit will probably receive checks or Walmart gift cards as part of the settlement.
It is unclear what Netflix is going to do about this. Netflix is potentially just as guilty as Walmart in this alleged conspiracy. Netflix, however, may have much more at stake in this controversy. DVD sales makes up only a small fraction of Walmart's profits. If Walmart lost a lawsuit over inflated DVD sale prices, it would mean a hit against just one of its many businesses.
With Netflix, however, this is a different story. Netflix largely exists on video rentals. Videos are not just one business for Netflix, videos are Netflix's business. If the plaintiffs can prove Netflix has been able to charge inflated prices ever since the alleged Walmart agreement in 2005, the penalties could be tremendous. U.S. District Judge Phyllis Hamilton in Oakland, CA has stated, "As a result, millions of Netflix subscribers allegedly paid supracompetitive prices."
Think about the millions and millions of subscribers who have paid monthly subscription fees to Netflix since 2005. If Judge Hamilton or some other judge were to determine those subscription fees were inflated by just 10% as a result of an illegal pact with Walmart, the amounts could be staggering. The penalties could be crippling.
The federal trial is currently set for January 2012. Certainly, Netflix lawyers and managers are carefully debating their options. Netflix must tread carefully on this issue. Given this lawsuit could potentially involve every Netflix subscriber since 2005, even the slightest misstep could lead to a nasty stumble for Netflix.
If you will think back to that time, Walmart was in the DVD-by-mail business. Walmart shuttered its video rental business and effectively surrendered its subscribers to Netflix. Netflix.com promoted Walmart for DVD sales. Walmart.com promoted Netflix for DVD rentals. It seemed like a wonderful marriage.
The plaintiffs are alleging that Netflix's CEO, Reed Hastings, met with the CEO of Walmart during that period, John Fleming, and conspired to strategically divide the home video market. According to the alleged agreement, Netflix would not sell DVDs (presumably new DVDs) if Walmart would agree to stop renting DVDs. That way, Walmart could secure a larger share of video sales and Netflix could secure a larger share of video rentals. Most importantly, the companies would not have to compete against each other and drive down each other's profits in price wars.
From a business point-of-view, this sort of arrangement makes perfect sense. Why fight your competitor in price wars over two different markets, when you can simply call a truce with your competitor that will allow each of you to have great control over an individual market? After all, as a business leader, which would you rather have: two highly competitive markets with low profit margins or one monopolized market with a high profit margin? If you do not have to compete as much, you can charge higher prices. Higher prices may hurt consumers, but higher prices normally translate to higher profits when proper competition does not exist in any given market.
The most important thing to consider about this alleged conspiracy is that it is most likely illegal under antitrust laws. These antitrust laws are in place to protect you, the consumer, from price fixing, collusion, and other similar predatory business practices. Walmart certainly did not want to be in a big trial over this. Walmart has already settled for an amount that may be $29 to $40 million. At some point, those included in the class action lawsuit will probably receive checks or Walmart gift cards as part of the settlement.
It is unclear what Netflix is going to do about this. Netflix is potentially just as guilty as Walmart in this alleged conspiracy. Netflix, however, may have much more at stake in this controversy. DVD sales makes up only a small fraction of Walmart's profits. If Walmart lost a lawsuit over inflated DVD sale prices, it would mean a hit against just one of its many businesses.
With Netflix, however, this is a different story. Netflix largely exists on video rentals. Videos are not just one business for Netflix, videos are Netflix's business. If the plaintiffs can prove Netflix has been able to charge inflated prices ever since the alleged Walmart agreement in 2005, the penalties could be tremendous. U.S. District Judge Phyllis Hamilton in Oakland, CA has stated, "As a result, millions of Netflix subscribers allegedly paid supracompetitive prices."
Think about the millions and millions of subscribers who have paid monthly subscription fees to Netflix since 2005. If Judge Hamilton or some other judge were to determine those subscription fees were inflated by just 10% as a result of an illegal pact with Walmart, the amounts could be staggering. The penalties could be crippling.
The federal trial is currently set for January 2012. Certainly, Netflix lawyers and managers are carefully debating their options. Netflix must tread carefully on this issue. Given this lawsuit could potentially involve every Netflix subscriber since 2005, even the slightest misstep could lead to a nasty stumble for Netflix.
3/17/2009
Throttling Suspicions for Netflix Streaming Content
The latest controversy surrounding Netflix is about the throttling of streaming content over the Internet. Some Netflix subscribers have strong suspicions that Netflix is limiting their ability to view streaming content by forcing unusually long data buffer times that can force a viewer to wait for many minutes or hours before viewing a movie or show. Netflix and their defenders say some Internet service providers must be limiting their users’ data downloads through these buffer delays.
Regardless of who is causing these buffer delays, they are a problem, because they can greatly limit a Netflix subscriber’s ability to view streaming content. The real problem here is we do not know the true cause or culprit. We cannot trust the ISPs, because they are sometimes unscrupulous companies who hide behind technology and defend themselves with nonsensical industry lingo. We absolutely cannot trust Netflix, because, a few years ago, they were caught throttling subscribers through the mail and would not admit it until lawyers got involved.
Both the ISPs and Netflix have the ability to throttle customers and both could benefit by throttling. Since neither side can be trusted, throttled Netflix subscribers are in the dark. As of now, it appears that some Netflix subscribers who access streaming content might be getting throttled over the Internet. The question is: If this throttling is intentional, who is doing the throttling?
Click below to read Riyad Kalla’s article on The "Break It Down" Blog about streaming content throttling at Netflix.
"Netflix Throttling Instant Video Streaming Performance for Viewers"
Regardless of who is causing these buffer delays, they are a problem, because they can greatly limit a Netflix subscriber’s ability to view streaming content. The real problem here is we do not know the true cause or culprit. We cannot trust the ISPs, because they are sometimes unscrupulous companies who hide behind technology and defend themselves with nonsensical industry lingo. We absolutely cannot trust Netflix, because, a few years ago, they were caught throttling subscribers through the mail and would not admit it until lawyers got involved.
Both the ISPs and Netflix have the ability to throttle customers and both could benefit by throttling. Since neither side can be trusted, throttled Netflix subscribers are in the dark. As of now, it appears that some Netflix subscribers who access streaming content might be getting throttled over the Internet. The question is: If this throttling is intentional, who is doing the throttling?
Click below to read Riyad Kalla’s article on The "Break It Down" Blog about streaming content throttling at Netflix.
"Netflix Throttling Instant Video Streaming Performance for Viewers"
3/02/2009
Silverlight Instant Viewer Angers Some Netflix Subscribers
Slashdot is reporting an uproar among Netflix subscribers over Netflix’s instant viewer application, which is powered by powered by Microsoft's Silverlight.
Some subscribers are complaining the new player makes permanent changes to their media viewing options. Many are complaining the new player’s quality is poor and unacceptable. Some subscribers feel Netflix misled them into installing the player. What is your opinion of the Silverlight player employed by Netflix?
Some subscribers are complaining the new player makes permanent changes to their media viewing options. Many are complaining the new player’s quality is poor and unacceptable. Some subscribers feel Netflix misled them into installing the player. What is your opinion of the Silverlight player employed by Netflix?
7/01/2008
You Win, Profiles Feature Will Survive for Now
Amidst a subscriber outcry, Netflix has reversed its decision to eliminate the Profiles feature. For now, the Profiles queue management tool will survive.
This whole episode has been ridiculous. From the beginning, the move to eliminate Profiles never made sense. What was Netflix thinking? Why is Netflix so out of touch with its customers that it was unaware many subscribers were deeply attached to this feature? Besides, what sort of company eliminates features from its service? Isn’t the whole idea of innovation and progress to keep adding features and options to enhance overall service?
This whole episode has been ridiculous. From the beginning, the move to eliminate Profiles never made sense. What was Netflix thinking? Why is Netflix so out of touch with its customers that it was unaware many subscribers were deeply attached to this feature? Besides, what sort of company eliminates features from its service? Isn’t the whole idea of innovation and progress to keep adding features and options to enhance overall service?
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