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Home » Technology

Netflix, Qwikster, & the Official Guide to Killing your Customer Base

Last updated by on 16 Comments

Watching Netflix management make mistake after mistake has kind of been like watching a painful blooper reel of a viral YouTube video that makes you cringe – e.g. some guy doing a backflip off his roof only to impale himself on the white picket fence. You know that even if he lives, he’ll never be the same man.

First, the BIG Price Increase

Two months ago, I highlighted the second Netflix price increase (less than a year after the first) as Netflix unbundled its DVD and streaming services and cranked up total price for those who used by (half of its customer base) by 60%. I predicted at the time that Netflix would lose a ton of customers over the move.

They did. Over 1 million in less than two months.

At that time, I also noticed something a little bit fishy. You couldn’t see pricing for DVD’s on their home page anymore. It was buried deep on another page. More on that later…

What happened other than losing a million customers? At the time of the price increase, the Netflix (NFLX) share price was at its peak at just under $300. Today, the share price now sits at $130. Ouch.

Business Lesson #1 on how to Destroy your Customer Base: Raise prices on your loyal customers by 60% in troubling economic times while offering a weak service offering (streaming) when your very identity is to be an alternative to pricey cable providers and movie theaters.

What is a Qwikster?

netflix qwikster

This week brought another painful-to-watch move.

Netflix CEO, Reed Hastings, issued a public apology for the way they raised prices without giving full clarity for splitting the DVD and streaming bundle.

In the same apology, Mr. Hastings explained that they are completely splitting the DVD and streaming services and renaming the DVD service you have come to know and love “Qwikster”.

Oh… and by the way, customers will now have two separate bills, two separate accounts, and have to manage two separate movie queues.

That “apology” and move has been blasted by investors (the stock has dropped over 30% in just the last week) and customers (only about 25,000 commented on the blog post with almost all of them being frustrated and angry).

Did I mention Mr. Hastings sold off $41M worth of stock before all the changes?

Business Lesson #2 on how to Destroy your Customer Base: Skirt around the issue, apologize about it, and continue skirting around the issue (we get it, you’re going to sell off the DVD business).

Business Lesson #3 on how to Destroy your Customer Base: Sell $41M worth of your stock when you are CEO before making widespread changes to your business model that send the share price into the ground.

Business Lesson #4 on how to Destroy your Customer Base: Bash your customers enough times to wake them from their subscription autopilot-paying coma to say “OK, I’m done now”.

If you are a Netflix customer, was this the last straw for you?


About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


16 Comments »
  • JP says:

    I’ve had netflix since ’06 and been happy and loyal… until this. I’ve cancelled my DVD by mail service and for the time being sticking only with the streaming option. Basically just waiting until another company pops up offering a larger/better streaming movie/tv show library to jump ship. This has been a perfect example of how NOT to run a business and treat your customers. They’ll be lucky if they can even find anyone to buy Quikster (dumb name, but that’s another rant) for a decent amount after this mess.

  • Leigh says:

    I’ve cancelled my account. I liked the combined queues between DVD+streaming and that’s what kept me with Netflix, so I’m done now. I’m patient for when Amazon Instant Video improves their movie/TV show selection.

  • Snapperhead, PhD says:

    I commented on the last article you posted about Netflix. As promised, I have canceled the streaming portion and will only use their DVD service now. Their streaming library is terrible and getting worse as they lose content providers.

    I’m also very annoyed that they’re making this two separate services and don’t think that people who want DVDs or streaming are mutually exclusive. That was part of what made their service convenient…having everything in one account. I don’t understand how, in this day and age, you take a service and make it less convenient and less valuable, then raise the price by 60%.

  • Alex says:

    I have been a Netflix customer since around 2002.

    For me the last straws have been the cavalier attitude when the Starz negotiations fell apart and then the splitting of the website.

    Two queues and bills is not for me.

    Soon I think the Blockbuster/Dish Network offering will be better for me.

    Also, rewind to when Netflix stopped getting new releases. That was the first time I reduced my financial commitment to Netflix.

    I am giving streaming only a month trial run before fully cancelling.

    • G.E. Miller says:

      Yeah – the streaming negotiations is going to be a real troubling point for Netflix moving forward. All the leverage is with the content creators. They all know that Netflix is in a dogfight and will try to get every dollar they can out of a deal. This contrasts to having the entire DVD-by-mail market to yourself. Regardless of how they’ve treated customers, this is a big problem for them. The problem with customers only magnifies it.

  • Ron Ablang says:

    I have been pondering on joining them for many months now before the fiasco began. I haven’t had much time since having a 14-mo old to take care of. All of the Netflix/Qwikster stuff has forced me to put my plans on hold indefinitely.

    It seems like corporate greed has ruined what was once a fine company. It’s a shame but they did it to themselves.

  • Romeo says:

    Has everyone forgotten that Blockbuster still offers the same service that Netflix does (did)? Haha. Poor, Blockbuster.

    “Don’t Prevent Wealth, go to Blockbuster Online DVD and On Demand options”

  • Jeremy says:

    Crappy business practices aside, what about that super shady move?

    Haven’t people gone to prison for less than selling off $41m before dropping a game changing bomb about their own company? Isn’t that the definition of insider trading?

  • Brian says:

    We totally dropped our Netflix right before the price hike. Glad we didn’t stay with them because the un-coupling of services would have been the final nail in the coffin for us! Glad we are done with them.

  • Briana @ 20 and Engaged says:

    The email definitely was irritating. Once the price increased, I canceled the DVD portion and stuck with streaming only. I definitely won’t be looking to the CEO of Netflix for business advice.

  • Trevor says:

    We canceled our DVD option, but are now thinking we made the wrong choice. Last night my wife and I talked about just doing away with it all together and just using the library and/or redbox or hulu.

  • bbatson says:

    Netflix Stakes Its Comeback on Cartoons: http://finance.yahoo.com/blogs/breakout/netflix-stakes-comeback-cartoons-dreamworks-deal-165328095.html

    Really? Cartoons? Such an utter catastrophe. I loved Netflix at $9.99/month for 1 DVD out at a time plus streaming through my Wii console. I thought it was a great deal, happily paid the monthly fee, and sung its praises to friends and family, even though I thought the content available through streaming was pretty poor. Better than nothing, I thought, and kudos to Netflix for exploring this option at no additional cost.

    I can barely comprehend the shenanigans of late with the splitting of services and raising of rates. And now this? Cartoons? I feel like pulling a Lewis Black breakdown in their corporate lobby.

  • Tyler says:

    I think it’s also important to note their awful cancellation policy. Most service based providers that operate on monthly billing cycles allow their customers to cancel their subscriptions whenever they chose, but still honor their agreement until the beginning of the next cycle. This is the way most fair businesses choose to operate, but not Netflix. If you cancel your account 2 days after you were billed for the month, they still shut your service down immediately rather than giving you the remainder of the value of your subscription.

    Very shady in my opinion, my buddy made this mistake and was so annoyed. My next billing cycle is 10/23 and you better believe I’m canceling as of 10/22.

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