Netflix Changing DVD Service Name To “Qwikster”?

Update: Netflix does a rewind! Abandons the Qwikster plan…

Got an email from, Netflix. They’re changing their DVD service name to “Qwikster”? Really? But the same lousy pricing?

Here’s the email:

Dear xxxx,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

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. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

Metered Internet Usage – Ridiculous Solution to a Legitmate Concern

The Problem: When you open your faucet, water travels through the water pipes in your house, to your sink. The amount of water that leaves your faucet, per second, can be referred to in terms of liters per second, or gallons per second. If you turn on all the faucets in your house, the pressure, or the gallons per second for each faucet will be reduced. If everyone in your neighborhood turned on their faucets at the same time, it would be reduced even further.

Similarly, when you open up a web browser and go to a website, like Yahoo or Google, the data for that web page comes from the servers at Yahoo or Google, through their communication pipe to the internet, and traverses through the communication pipes that belong to your Internet Service Provider, down to your PC. The amount of data that can traverse the communication pipe, per second, is known as bandwidth. Usually it is referred to in terms of Megabits per second (Mbps), or Gigabits per second (Gbps). Now, let’s assume, everyone in your house had a computer, sharing your one internet connection (your communication pipe). Things would be slow for everyone, if all of you were using your computers at the same time, downloading a movie or song at the same time.

Companies like Time Warner Cable market their internet services based on download speed (bandwidth). You can get download speeds of 10 Mbps, up to 15Mbps, faster than DSL or dialup they say. Woo Hoo! In my neighborhood, most of the time, I can reach download speeds of at least 10Mbps, because theoretically, not everyone is using their computer at the same time. Which means the local communication pipe is not maxed out to capacity, and bandwidth is available. However if everyone in my neighborhood, were streaming movies, at the same time, I might notice some response time issues. And if more and more people use high bandwidth applications, like constantly downloading movies and music through peer-to-peer sites, like bit torrent, my service will degrade.

Both AT&T and Comcast say the reason they’re experimenting with caps is to preserve network quality. In an e-mailed statement, AT&T said half its bandwidth is used by 5 percent of its customers, which “has an impact on all of our customers.”

Cable companies like Time Warner Cable, AT&T, and Comcast are looking to place “bandwidth caps” on Internet usage, charging customers extra if they go over these monthly download caps. The problem I have with this is that bandwidth is not like water, gas, or oil. It’s not a commodity that can be bought or sold. There’s a physical limit of how much water, gas, or oil is available. Once it’s used, it’s gone. Municipalities often charge homeowners for water usage, which is understandable.  We shouldn’t keep faucets running all the time, wasting water. However, data, once it’s used, is not gone. The data you download is available for download by everyone on the planet. However, the amount of bandwidth available at any given time might vary, depending on customer usage. This is due to the size of the communication pipes. As such, throttling might be more of an answer, (like in the UK), so that everyone get’s their fair share of bandwidth at any given time. How much data I download should not be a concern for the ISP. How much I download per second, with respect to the bandwidth available at that time, should be of concern.

Bandwidth caps, on the other hand, make more sense for a company like Time Warner, which would lose revenue to movie and TV streaming websites like Netflix, Amazon, or Hulu. Even network stations like NBC are streaming free TV content, in HD, over the internet. So why pay for cable, when I can watch movies and TV for free in HD over the internet?

I think we all know the real reason behind “bandwidth caps”.