Capitalism is on full display in the case of the current Netflix debacle.
The movie rental giant recently frustrated customers by raising prices without much explanation. Customers were previously able to get unlimited streaming and one-by-mail-DVD at a time for $10 a month before the company split the services and charged $8 for each, making them both cost $16 a month.
Now, Blockbuster, the bankrupt movie giant, is looking to offer a streaming service similar to Netflix that could possibly compete with them. Netflix’s mishap opened the door to competition. Dish Network, which acquired Blockbuster earlier this year, plans on taking advantage of the situation.
Netflix co-founder and CEO Reed Hastings explained this decision in a long overdue apology letter on the Netflix’s blog.
“For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming,” he wrote.
Hastings was correct that many companies stay rooted in the past. He cited AOL Dial-Up and Barnes and Noble Bookstores. Both were great, but they did not keep up with the times.
But apparently Hastings doesn’t realize a good thing when he sees it. The Netflix business model was wildly successful. For $10 a month, customers could watch endless amounts of movies via streaming or DVD.
Aside from raising prices, the company is also splitting the streaming and the DVD-by-mail service. This separation was given a cursory look and done with little care.
“Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our DVD by mail service. Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail,” Hastings wrote.
The DVD will now be under the name “Qwikster,” and it will offer video games. That was another reason the company justified the split. An addition of a whole new service justifies a split? Perhaps, if it is done right.
Unfortunately, it will be a logistical nightmare. The websites will not be the same and the billing will come separately. If you have a problem with services for both, you have to take care each separately.
The one thing Netflix has going for it is the massive video library it possesses. It will take Blockbuster a while to compete with it, but if Netflix stumbles again, they could very well lose the lead.
Netflix grew with our help, but we will not mourn the loss of a company that consistently treats its customers poorly or arrogantly. We choose the best entertainment options, which include both cost and simplicity.
It’s a sign of capitalism in real time.
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