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  • What Is Going On With Netflix?

    [caption id="attachment_3252" align="alignleft" width="357" caption="Why You Should Still Do Business With Netflix"]business[/caption]

     

    If you are a Netflix customer, then you might have heard them in the news now and then and received an apology letter. Netflix has been doing very successful since their launch, and sadly putting some of our favorite movie stores out of business, but with their no late fees and mail delivery service, Netflix has been a great outlet for us movie lovers. Rick Newman of US News discusses more about the problems Netflix is facing now, and why you should still do business with them.

    Is it New Coke? Or the iPod?

    Video-rental service Netflix has provoked a consumer firestorm--and probably a few business-school case studies--with its recent plan to split its operations in two. Its traditional business of delivering DVDs by mail will henceforth be known as Qwikster, while "Netflix" will be reserved for the service that streams video over the Internet. Customers used to getting both services bundled together will now have to choose one or both--and deal with separate bills and websites.

    Netflix CEO Reed Hastings has butchered a sacred cow by changing something most customers like just the way it is--his DVD-by-mail service. Once they've chosen a new Netflix plan (or bolted for another service), most customers will settle into their new routine and stop complaining. Still, consumers are notoriously fickle about things that corporate executives often overlook, which is why Netflix's subscriber base has fallen for the first time in its 14-year history. The sudden smackdown of an Internet darling suggests that Qwikster could become the New Coke of the 21st century: a change that customers didn't ask for, which ends up a total flop.

    But my bet is that the new Netflix strategy turns out more like the iPod, which reinvigorated Apple and began a long shift away from a declining business toward a more promising and futuristic one. Hastings is famously fixated on obsolescence and the speed with which companies can sink in the digital era. "You hear about companies getting long in the tooth," Hastings said at an industry conference earlier this year. "All of these innovations are going on every day, all around you. One day, someone could overtake you."

    In a blog post explaining the latest change, Hastings mentioned AOL's dial-up service and the now-defunct Border's bookstore chain as examples of how companies cling far too long to past strategies that quickly become outdated. Netflix itself helped push the Blockbuster video-rental chain into bankruptcy, helped along by Blockbuster's own embrace of an antiquated brick-and-mortar strategy that dragged the company down like an anchor, while more nimble competitors soared.

    Read more US News

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