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YOUR FRIENDS' ACTIVITY

    Netflix details new strategy: become HBO

    By Jeffrey Van Camp | Digital Trends – Tue, Oct 25, 2011

    When you’ve just become the top movie subscription service in the world, you don’t raise rates without explanation. That comes off as greedy. And if you’re going to apologize for that mistake, try not to announce that you’re splitting your company in half and renaming half of it Qwikster. These actions will lead to 800,000 subscribers jumping ship and send your stock price tumbling from more than $300 a share to about $87 bucks in a couple months.

    So what’s next for Netflix? Well, according to CEO Reed Hastings, it’s more problems. Just as we pointed out way back in February, Netflix is just now realizing that it has a problem: its business model is too limited. Without being willing to charge users extra or include ads in programming, it can’t own stream all movie and TV show content (like it does DVDs). The movie and TV studios are beginning to charge an arm and a leg for content. In a way, Netflix is at the mercy of these companies. If they decide not to sell it content, Amazon Instant Video, Hulu, or any other upstart service could easily take over the top spot. Amazon especially, has already built a fairly extensive library of films.

    Hastings has a solution though: Less content, more exclusivity. His plan is to become like HBO and buy up exclusive streaming rights to really good TV shows and movies. Netflix will even produce its own content as well. The risk with this new strategy is that people really have to like the smaller amount of exclusive shows. The first TV show Netflix will produce is called House of Cards and is produced by Kevin Spacey.  

    Here is a snippet from a letter Hastings sent out to shareholders (via AllThingsD): 

    In television… the networks (ABC, FX, etc.) have long relied upon exclusive content to differentiate among themselves. As video moves online, so too has this practice of exclusive content. HBO has an exclusive license to recent Universal movies that includes its online HBO GO, for example. Netflix has signed exclusive licenses for DreamWorks Animation, for Relativity, and others. In episodic television, exclusives are also the norm. Netflix doesn’t license “Deadwood” from HBO because they see strategic value in keeping it exclusive. Netflix licenses “Mad Men” and “House of Cards” exclusively for much the same reason.

    …We don’t have to “beat” Starz or other networks to succeed…We won’t have every movie or TV series; but we do provide enough value that consumers also want to subscribe to Netflix.

    Any given consumer will have only one of DirecTV or Comcast, say, for their video service. That is classic either‐or competition. But with premium television networks like Netflix, the more good experiences there are, the more consumers are willing to spend to have multiple channels from which to get enjoyment.

     We have to say, it seems odd that Netflix is refusing to do what could be a very good option: add in streaming rentals for new movies and TV episodes. No, people don’t like paying extra, but they like getting what they want when they want it more. 

    This article was originally posted on Digital Trends

    More from Digital Trends

    Netflix backpedals: Qwikster is no more, DVDs staying at Netflix.comNetflix signs big streaming deal with DiscoveryNetflix CEO explains price hike, renames DVD service ‘Qwikster,’ adds video gamesAmazon adds Fox TV shows to Instant Video streaming service
     

    8 comments

    • Richard
      Richard  •  7 mths ago
      When will they figure out that customers want ONE service that will provide access to ALL movies and shows?
      • HakunaKahuna
        HakunaKahuna 7 mths ago
        Actually, what makes sense is that there be many comparable services, giving customers the option to choose which one (or combination) works best for them. Healthy competition is always good, which is one reason why Netflix is suffering now. Their monopoly is falling apart. However, if they had just done the right thing in the first place, nobody else would have been able to touch them, because they would still have customer loyalty.

        This is also why GM totally missed the boat with electric cars. They could have been miles ahead of Toyota -- literally. Their greed messed it all up. It's ironic, karmic, and sad.
    • Brett
      Brett  •  Salt Lake City, United States  •  7 mths ago
      TV shows that sign with Netflix will lose viewers because no one wants to use Netflix anymore. I cancelled my account with Netflix and on principle, no matter what shows they have exclusive rights to, I will not sign up again unless they lower their prices significantly. They can't seem to get anything right these days.
    • Rigo
      Rigo  •  Fort Worth, United States  •  7 mths ago
      Quit being dumb Netflix!! Just add some ads in there, ppl wont mind!! Look at the free hulu thats quickly kicking your butt!! Plus all the good stuff is only on DVD whats up with that?
    • HakunaKahuna
      HakunaKahuna  •  7 mths ago
      I'm not the first to say it. Netflix' demise is a classic example of what happens when you don't put the customer first. Here's a list of my Netflix peeves:

      1. If you try to report a problem, the links take you in circles, and the FAQs rarely answer your question. It is impossible to resolve the problem without human input, so you must call them to get anything fixed. Good luck with that, by the way!

      2. They completely scrapped the Netflix Community, where you could network and make friends with other Netflix users, as well as find your existing friends and compare your movie tastes. This was an awesome feature, and I could never understand why they got rid of it. Their reasoning was that Facebook would do this. But the problem is that they did not give you an easy way to exchange personal information, so how can you connect with people later on Facebook? They also did it without asking users how we felt about it, and without any advance warning. Also, people should be given a choice. A lot of us don't want Facebook linked to every single thing we do. Oh, and after all that, the Facebook app for this never provided the same functionality. They should have left it alone!

      3. They suddenly decided to hide your Saved Queue. This is your wish list of streaming movies you would like to see but are currently unavailable. This means that, unless you had the foresight to print off this list before they started hiding it, you have no way of referencing movies on your wish list -- so you can't even move them to your DVD queue. Since I pay for both streaming and DVDs, this means they are not giving me the full value of my money. I can understand if they want to clean up the page, but it is very easy to provide a link giving you the option to view them on a separate page. I have worked many years as a web programmer, so I can tell you there is no excuse for this. It leads me to believe that they are doing it because they are embarrassed by how many streaming movies are unavailable, or because they want to discourage DVD mailings. This is shady, dishonest behavior that insults the intelligence of the user community. As stated in the article, they would have been much better off by just being honest with their customers. I remember reading where Netflix stated they wanted to phase out DVDs completely, but that's just not realistic right now, because of the nature of the streaming business. Oh, and Blu-Ray sucks. For the amount of money you pay, they're not much better than standard DVDs.

      As for raising prices, that's actually one thing I'm not complaining about, because my membership only went up by one dollar. The extent of the increase depended on what type of package you were subscribing to. Netflix needs to stick to doing what they are good at. By making such extreme changes without asking their customers what they wanted, they didn't just shoot themselves in the foot. They strapped a bomb to their backs and lit the fuse.
    • bigtop
      bigtop  •  7 mths ago
      Netflix steaming service sucks, old movies and shows.
    • jo
      jo  •  7 mths ago
      Another bad idea. Good riddance slimeballs.
    • SRV
      SRV  •  7 mths ago
      Too late dipshit. You are losing customers like a drain. Corporate greed at its finest. You don't raise prices in a recession....
      • LibertyAndJustice4All
        LibertyAndJustice4All 7 mths ago
        Good point, but you lose it with your potty mouth. One thumbs up for point, five thumbs down for inability to express it like an adult.
    • Barbara
      Barbara  •  Lineville, United States  •  7 mths ago
      I loved Netflix's,I use to tell all me friends to try it.They handle this business so wrong.They should tell people if you just want DVD's and not Streaming,Then you can have it,are the other way around.Give the people the choice.Not if just say this is going to happen.If they would have at least have told people Hey! the flim co.want more money for the movies.Most people would have understood.But you treated us like crap.And who ever is in charge should be fired.He has destoried Netflix's.This is what happen when you make Billion's and think you can do whatever.People take their hard earned money somewhere else.This was a great company it is ashamed to see it fall..
     Post a comment
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