Why the Netflix Pivot Will Fail

2011-09-19 12:12:27 by jdixon

Netflix has always been about convenience. They killed Blockbuster on customer service, convenience and price. They've continued to compete against up-and-comers like Redbox thanks to their streaming offering. Netflix CEO Reed Hastings feels that now is the time for an epic pivot, allowing each product to stand (and compete) on its own.

As a cohesive unit with simplified billing, and offering customers the flexibility and choice they're accustomed to, Netflix is ubiquitous. Thanks to a loyal and addicted user base, they've made inroads with a multitude of video and gaming appliances. Consumers pushed for Netflix access on their TiVos and Xboxen, and TV manufacturers are starting to include Netflix support in newer "smart TVs".

And yet, I predict that Netflix/Qwikster will be dead within three years. The move to independent business units a) results in higher prices, b) makes it less convenient for viewers, and c) removes operational and marketing efficiencies found in their current business operations.

Redbox will continue to chip away at the Qwikster "legacy" DVD market. Who wants to wait 2 days for a DVD when I can pick one up in 10 minutes from the corner Walgreens? And how long before the movie studios push Netflix aside for more lucrative, direct partnerships with the appliance manufacturers and vendors?

Hastings is trying to sell the vision that this is a necessary pivot to remain viable in the market. Rather, I suspect this is their attempt to increase short-term shareholder value. I chose to stick with Netflix through the recent price hikes for the continued convenience of one-stop shopping. But with the lack of streaming choice, separate bills, and less convenient DVD rentals, I don't see myself sticking around for long.

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