Many of the truths that we cling to depend on our point of view. -Obi-Wan Kenobi

Recently I received a letter from Reed Hastings, CEO of Netflix, telling my why he raised prices on my service and why he was making changes that would make Netflix less convenient for me to use.


UPDATE: Of course Netflix back pedaled on this whole thing. They had to do this considering the huge backlash from thousands of people and bloggers. But as of this update I still think that Reed doesn’t understand his business that well, and I’d be happy to try out the first competitor that comes along that does what Netflix can do. Certainly the streaming has been full of buffer under-runs of late and all the DVDs on my queue are marked as “Long Wait”. This is not a good user experience. It is just the only thing reasonably close to what people want.


FURTHER UPDATE: While I complain that Reed doesn’t understand his customer or business model I have to admit the guy is thinking straight when it comes to networking and net neutrality. He understands who the bad guys are. See All Things D.


Reed Hastings wrote:

In a few weeks, we will rename our DVD by mail service to “Qwikster”…. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

Immediately I saw a perfect storm of protest on Twitter, with a few apologists and the whole debacle made me think of how Steve Jobs would have handled things if he were the founder and CEO of Netflix.

Reed Hastings has always had a dream of streaming movies. Hence the name of his company. And Netflix is close to achieving this goal by recently opening streaming to many more countries worldwide. You could say that like Steve Jobs he is a visionary. Yet the results are very different. Steve Jobs has left the CEO position at the top of his game after making Apple one of the largest and most important technology companies in the world. Reed Hastings, on the other hand, seems to have just shot himself in his foot and practically marginalized his company. Why would this happen if they are both visionaries?

I can give you a simple answer. Steve Jobs sees things the way his customers see them. The secret to his success is eating his own dog food as it were. Reed Hastings, on the other hand, is chasing his dream without really ever understanding why his customers use Netflix. One wonders if he uses the service himself. And if he does who maintains his movie queue? I can tell you that despite the name Netflix, for me and a lot of other people Netflix is a movie company, a source of movies. What I get from Netflix is a way to manage, rate and watch movies, and keep track of what I have seen and what is queued up for me to see.

Reed Hastings has clearly been thinking of his company and not his customers. He thinks that streaming is the future and is setting things up for that future. But he is doing it without any regard for the effect that it has on how his customers use his product. Clearly he has not even given that much thought to what his product is. For many people in the last year his product has been an iPad App that lets users watch movies on their iPad. But just try to use that App to maintain your movie queue! In fact the web programmers at Netflix probably have a better sense than anyone what the product really is because they see how people use Netflix. And the steps that are being taken now break that product into two and neither part is equal to the sum of the whole. Adding games to the DVD delivery business is not making up for the loss of integration between the movie queues as they exist now. Anyone who wanted games is a Gamefly customer. A better move for Netflix would be to try and become the source for movies that their customers want. Even add the ability to link to and buy songs from the soundtracks or do an even better job of predicting and suggesting movies. Integrate with IMDb. Many people complain about the streaming content being sub-par, but in many cases it is the searching and suggestions that are sub-par. One only has to see how you can search on the AppleTV version of Netflix by director and actor to understand there are better ways to find content.


MORE UPDATE: The AppleTV version of Netflix is obviously important enough that Netflix has agreed to use Apple’s subscription model in the latest AppleTV software (and hardware update to 1080p) and allow people to sign up and pay for Netflix using their AppleID. This is a smart move but the service still has buffering issues at peak times. Also another service out there called RedBox would be an obvious takeover target for Netflix if I were running things. It clearly rounds out the idea of Netflix as a movie company to add kiosks to its DVD offerings.


Clearly if Reed were the kind of visionary that Steve is, he would have envisioned what his customers wanted instead of just what he and his accountants and shareholders wanted. That is the big difference.

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