3 Reasons Why Netflix Is Nixing Qwikster

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Netflix nixes QwiksterFare thee well, Qwikster. We hardly knew ye.

Realizing that the consumer is usually right, Netflix (NFLX) is abandoning plans to separate its streaming business from its mail-order roots.

Qwikster -- the site that would serve as the new home for Netflix customers hoping to receive DVDs, Blu-rays, and eventually video games by mail -- was mercifully killed by the former tech darling this morning. Netflix will continue to conduct all of its business through Netflix.com.

Shares are trading higher on the news, so clearly Mr. Market likes it. But why did Netflix nix something that it had introduced just three weeks ago? Let's go over the three reasons why Qwikster is toast.

1. Subscribers and shareholders hated it
Customers and investors don't always see eye to eye. Analysts loved Netflix's decision to begin charging subscribers on unlimited DVD plans $7.99 a month for streaming, sending the stock to new all-time highs three months ago. Customers clearly weren't happy about having to pay more for the service.

Both sides hated last month's Qwikster call, though.

Subscribers were quick to blast the migration plans. Why should someone have to maintain two separate accounts on two separate sites? Wasn't one of Netflix's strongest selling points the recommendation engine that would incorporate both queues and the combined viewing history to serve up timely picks?

Investors also disagreed with the decision. The stock fell by nearly 25% over the past three weeks since the Qwikster move was made public.

Netflix realizes that it can't afford to let either camp down, but when both sides are shaking their heads, it's time to work on Plan B.

2. Qwikster wasn't ready
The plan all along for Netflix was to split its business into two distinct operations. The Qwikster.com domain was registered last year. It was really just a matter of timing.

I don't think Netflix was ready to play the Qwikster card last month. It was little more than a "coming soon" landing page at the time of the announcement. Netflix hadn't even secured the Qwikster handle on Twitter, an oversight that was made worse because the owner had a pot-smoking Elmo as his icon.

However, with the stock still reeling after the company slashed its stateside subscriber target earlier in September, it probably figured that things couldn't get worse if it went public with its Qwikster plans.

3. Netflix needs to prove that it's both listening and nimble
"There is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case," CEO Reed Hastings concedes in a statement published by The New York Times this morning.

Many of the comments on the Netflix blog this morning are still coming from irate users and recently canceled subscribers. They're not applauding the move. They are painting Hastings as a flip-flopper.

They're wrong. It's the fact that Hastings is listening, and that his company is nimble enough to reverse a bad business decision so quickly, that will win many of those frustrated couch potatoes back. Once again, Netflix is ahead of its time.

For the first time in several weeks, Netflix's swift move is the right move.

Longtime Motlley Fool contributor Rick Munarriz does not own shares in any stocks in this article, except for Netflix. Motley Fool newsletter services have recommended buying shares of Netflix. Motley Fool newsletter services have recommended buying puts in Netflix.


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40 Comments

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Pat

Put it back where it was, no price increase!!!!!!

October 11 2011 at 5:46 AM Report abuse rate up rate down Reply
Jim

They have more problems than Quikster. Try streaming a movie from them if your broadband network is slow. Lots of fun there.

October 11 2011 at 5:45 AM Report abuse rate up rate down Reply
reichshulk

Is this CEO "Hastings" trying to live up to his name??. Making BAD decisions one after another every time he opens that pie hole on his face....please fire the CEO now and your stock will rise over $100 per share...at least cut his tongue out or send him to Tahaiti with his top "experts" who help plan these brillant ideas in his ear....is his goal to ruin & destroy Netflix overnite??? Another yearly low for your stock price today again....SUPRISE>>>>and on a strong 300 plus point day...only NETFLIX stock price DOWN again.......Hastily killing the company....Again....get that CEO piece of **** outa there while your beaten down stock still has any value at all......signed..pissed off ex-customer and ex-stock holder.............KEEP UP THE GREAT WORK OF DESTROYING NFLX....now that you are good at....anything else....YOU SUCK....oh yeah....YOUR FIRED..............

October 11 2011 at 5:41 AM Report abuse +1 rate up rate down Reply
Fred

I had an account. To me it doesn't matter if they broke it into 2 or even 3 companies, its still double the price I was paying. Goodbye netflix, hello redbox.

October 11 2011 at 4:06 AM Report abuse +1 rate up rate down Reply
Matheson Al

I remember when the Daily Finance called the DVD users couch potatoes. DF writers supported the split of Netflix. It was most of the DVD couch potatoes (14.2 million U.S.) that spoke out about the split. Thanks to the couch potatoes Netflix won't split streaming & DVD's. The future (anytime soon) was never streaming only. The fact the DF writers don't get this is no surprise. At least DVD users have to go to the mailbox and pick-up the discs. Streamers don't ever have to leave their computor. Oh... and don't give me any of that bull about the impact of USPS ending Saturday delivery. Any long-term DVD Netflix customers knows about "throttling". Loosing one day will have very little affect of "unlimited" at a time delivery if you know what I mean "WINK WINK".........

October 11 2011 at 3:43 AM Report abuse rate up rate down Reply
valgaavmiko

No, the only thing that is happening here is an arrogant CEO is realizing that dismissing his customers as expendable was a bad business move. Now he realizes the impact of making poor decisions and is trying to reverse it. It had nothing to do with Qwikster not being ready. People just plain don't want it. It has nothing to do with with Netflix moving "too fast". It was simply a very bad idea.

October 11 2011 at 1:50 AM Report abuse rate up rate down Reply
richardkenosha

I am tired of the bad DVD's that won't play (older titles). Tired of waiting forever for new releases. Tired of increase after increase. Just plain tired of NETFLIXS.....I'll keep my money and use it elsewhere.

October 11 2011 at 1:14 AM Report abuse +1 rate up rate down Reply
brantaydes

I've supported NFLX for several years, despite ordering only a few movies. Made the big mistake buying shares of the stock at $248 on a pullback. Clearly, this company is intent on shooting itself in the foot ... repeatedly. Time for some one else to take over from Reed. Lost my money on the stock, but sorry to see something that was so good being continually turned into trash.

October 11 2011 at 12:49 AM Report abuse +1 rate up rate down Reply
Pllc15

Shareholders are angry, too. Market Capital of the company dropped about 63% since the initial announcement. That's a big chunk of change valued at about $14 billion. Ouch!

October 11 2011 at 12:03 AM Report abuse +1 rate up rate down Reply
jackie

I still don't understand how a company with competitors can raise prices so dramatically but still offer the same lame moves. The competition has a better selection but costs more. So why would I pay the same price as the leading competitor and not have any benefit of updated new releases. I would go to the competitors, at least I would get to watch new movies. I canceled my subscription with NetFlix when I heard they were raising their prices. I will never go back until they go back to the way things were.

October 10 2011 at 11:55 PM Report abuse +2 rate up rate down Reply