I’ve always wondered whether Netflix’s strategy of getting out of the data center business and moving to Amazon Web Services would make sense long term. Netflix 2 months ago was considered invincible before they announced their price increase and separation of DVD and streaming business.
2 months ago Netflix stock was approaching 300, now it is close to 150.
One interesting perspective on why Netflix made this move is
So why is the company raising its rates?
Mr. DANIEL ERNST (Research Analyst, Hudson Square Research): The simple reason is because they can.
GREGORY: That's Daniel Ernst. He's an analyst at Hudson Square Research.
Mr. ERNST: They don't really have competition. They have some competition at the margin but the reality is, there is no one offering a full slate of movies and television shows that's digital and in DVD.
If you assume you have no competition what is the big deal where your data center is and whether you have one?
Netflix is offering an apology, but is adding more confusion by substituting the Qwikster brand for Netflix DVD.
I messed up. I owe everyone an explanation.
It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology. I’ll try to explain how this happened.
So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.
We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.
One of the things I have learned working at big brand companies – HP, Apple, and Microsoft is managing your brand is not something that should be taken lightly. Netflix’s moves to introduce a new brand “Qwikster” seems really expensive and confusing. Out of the millions of Netflix users how do you think will easily understand “Netflix DVD” = “Qwikster”
Amazon, Vudu, Hulu, and Redbox must be doing high fives as the watch Netflix decrease the value of their brand.
When you watch all of this does it make you question whether Netflix’s logic for getting out of the data center business and moving to Amazon Web Services may later be a mistake “I messed up.”