Monday, September 19, 2011

Moron of the Week: Reed Hastings ∞

So Netflix is spinning off its DVDs-by-mail service as Qwikster because, as Hastings makes somewhat clear in his 13-paragraph email to subscribers, they’re “very different”. Let’s ignore there’s no live Web site for this service, its name and logo are aesthetically repulsive, and the Qwikster Twitter account is held by a pot-smoking Elmo avatar.

You can read why Dan Frommer, who’s ostensibly in the minority, argues for the logic of a split. His points aren’t particularly persuasive. Most of them revolve around the idea they’re just kind-of, sort-of different. And they are. But so are delivery and table service at pizzerias. (And #4, the U.S. Postal Service is in “big trouble”? Talk about crying wolf. It also has $60b in overpaid employee pension funds.)

The real problem with the separation is Netflix Watch Instantly, which can’t stand on its own two feet. The quality of the content is abysmal. OK, they have Mad Men and Weeds, and perennial favorites like The X-Files, but generally speaking, there’s a huge gap in the content available by mail and streaming.

Granted, Hastings acknowledges this, but the selection hasn’t improved. You can review the streaming titles recently added to Netflix at Instant Watcher. Netflix has added 63 titles in the past two weeks, only 38 of which were rated 3 stars or higher by its subscribers and the most popular of which is Saw: The Final Chapter. Draw your own conclusion.

Think 63 titles isn’t half-bad? How many movies can any one person watch in a 2-week span? Keep in the mind, over the next two weeks, over 200 titles are set to expire from its streaming service. (Some may be renewed.)

Add to that, Starz, the source of much of Netflix’s better streaming content, including that from Sony and Walt Disney, will be not be renewing its distribution deal with Netflix, which ends in February 2012.

Are subscribers like me being overdramatic? Maybe, but many investors see the writing on the wall. Today’s closing share price is less than half of what it was at its peak in mid-July, all of two months ago.

What really makes Hastings a moron though is the backhandedness of what was once a customer-centric company. Netflix kept mum about Qwikster when it announced the 60% price increase. It’s no surprise why. He apparently thinks Netflix subscribers are so dumb they won’t realize they’ll be paying more for less.