3 Reasons Why Netflix Is Nixing Qwikster
Fare 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.