GeekCast Radio
Netflix and Qwikster Strategy Analysis

About this Episode
You're listening to the GeekCast Radio Network,
a podcast. Hello and welcome to GeekCaster Radio.
This is a special episode. We already talked
about Netflix and video stores and all the other
happy stuff in episode 28, but since we talked
about that, Netflix has finally, the people that
actually work there, finally stepped up, took
ownership of the shitstorm that they've put us
users through in the last... A couple of months.
So I am TFG1Mike. One of your hosts joining me
is Steve Megatron. Hello. Hello. And he's been
on GeekCast radio before. You're mainly going
to hear him from ToyCast and all the other Transformers
podcasts. Peek on court, Michael. Hello. Hey,
how's it going? It's going. And we're basically
doing this because Michael had been talking on
Twitter about all the Netflix changes and stuff
like that, and the fact that they're actually
responding to the users and the fans and all
this and all that, so that's why we're here,
so take it away. Who, me? Yeah, you. Sure, okay,
I'll take care of that for you. Basically, you
know, The Führer started a few months back when
Netflix decided to raise their rates by 30%,
and not really explain it to anybody. And they
kind of couched it in such a way where they said
well, you know, we're not really charging you
more What we're doing is we're splitting up our
services between DVDs and streaming and Previously
these two, you know services were coupled together
and it's like you could get your DVDs But you
could also get unlimited streaming At the same
time for the same price right and and now they're
saying well if you want DVDs and streaming we
you can you can get both services, but you're
gonna pay significantly more Now my first thought
Was you know drop streaming because I my family
doesn't so much use streaming There's probably
two videos online or I should say two videos
on Netflix's online content there that are available
We actually watch I mean there's the boys will
watch For some reason Aidan loves this volcano
documentary from National Geographic and he'll
watch this over and over and over again Gavin
loves the 1967 Batman movie Which he will watch
66 is a 66. I'm sorry. Yeah, so 60 say he'll
watch that over and over and over again You should
get them watching Phineas and Ferb the entire
series is on there Probably should because they
love that show, too But but I mean that this
is the two shows that they watch now, you know
Christy and I are happy just to you know Get
the DVDs in the DVD selection is bigger And includes
more stuff that I want to watch which is you
know obscure Japanese horror movies and anime
Yeah, you know and and there's um, there's just
a lot more see I think Out of my queue, I have
a Netflix queue of about 400. 350, 400 somewhere
in there, it fluctuates, but 400 titles to send
to my home as a DVD. Of those, I think maybe
100 are available for streaming. So roughly one
out of four. Now, if I drop the DVD service,
that's a bunch of stuff I'm not going to be able
to see. If I drop streaming that's two movies
that my kids won't be able to see and maybe if
I'm lucky I can get those from Amazon comm for
ten bucks each So I'm kind of like, huh? Yeah,
seriously thinking about dropping streaming But
you know, of course we don't you know, we're
prepaid. It's just I'll let the bill slide Well,
the problem that a lot of people had is that
Netflix never Explain themselves They just did
it. They said ha ha you're gonna pay it suckers
and that was it They didn't say, you know, this
is the reason why we're doing this and I understand
From you know a business point of view that they
have to make deals with you know stars and TNT
and HBO and whoever is the the trademark owners
or the copyright owners of The TV shows and the
movies that they want to have streaming on demand,
you know They have to pay for the rights to do
this and I know just recently like they they
lost the rights just to Put out any of the stars
content through streaming, right? I think they
just announced that they got like Discovery Channel
or something like that. It's dream works. It's
coming in 2013 Yeah, so they mean they're getting
better. But what you have to remember is this
costs money Every time that they sign a deal
with discovery or dream works or somebody they're
they're spending a lot of money to do this and
the fact is This is a limited -time contract.
You may have a five -year contract with Discovery
Channel or a two -year contract with DreamWorks.
In those two years, if there's a, let's say,
you know, a million DreamWorks movies streamed,
well, DreamWorks may say, hey, this looks pretty
good. We might be able to get more money on the
next contract renewal. So then they might amend
the contract. Say, hey, I want twice as much,
or I want... To write into the contract where
we get a five percent up kick every every, you
know, two renewal cycles or something like that.
They can write that in and then legally enforce
it. It costs a lot of money. Netflix is going
to have to raise their rates. Yeah, but they
don't explain that they never came out and said,
oh, by the way, this is costing a ton of money
and we're going to have to pass it on to you
that nobody ever came out and said that. I mean,
I understand it. That's how it works. But it
would have been nice to. you know, say something.
You're not gonna ream us and not give us a reach
around. You know, at least try to massage our
egos a little bit so that we don't feel bad about
the 30 % more cash we're forking over every month.
Right, yeah. Okay, so that's where we start.
That's where it all starts. Actually, it was
a 60 % increase. Well, I think they started off
with a small increase. then Well, it wasn't small
but they started off with an increase to the
service and then I think three years three to
six months later then they kicked it up another
30 % and then announced that they were splitting
the services right now you now you have to pay
X amount for streaming and X amount for DVDs
and if you don't want streaming you can cancel
if you don't want DVDs you can cancel but 30
% extra either way, right if you will If you
want, and I think this applies to new customers,
not the existing, I'm not exactly sure, but I
read online that if you want both services, the
unlimited streaming and one DVD out at a time,
the total cost to the consumer for both services
is $15 .98 a month, $7 .99 for each service.
Up from $9 .99 back in the day. Right. Yeah,
so it so basically, you know for people who have
been with Netflix for a long time like me You
know who like the service who trusts the service.
All right, fine We're gonna pay the a little
extra money despite the fact that we feel swindled
and nobody explained why? You know fast forward
doesn't need to explain his deals. Yeah, of course
not Fast forward another Unless you're stuck
in the company fast forward another three to
six months and the CEO of Netflix Reed Hastings,
there's his name. I was looking on the website
here and I'm like, wait a minute. I don't see
it. So Reed Hastings comes out and says, all
right, fine. You know, I realize that I, we should
have been more upfront with you guys. We should
have been telling you what was going on all along.
And we apologize. We're going to make it better.
And my first thought is cool. They're going to
drop prices 30 % across the board. But that's
not what happened. What happened is they say,
here's what we're gonna do to make things better.
First thing we're gonna do is we're going to
completely decouple the DVD side, the DVD mail
to your home side, and the streaming video side.
We're gonna completely cut them apart and make
them their own businesses. And and the name Netflix
is gonna go to the streaming side Whereas the
DVD side is gonna get a new name called quick
stir Because it's hip as of about you know five
years ago the very early days of net 2 .0 well
in because what also happened was Read didn't
just post this on the Netflix blog. I got an
email The exact same thing that the blog says,
I got that in an email. And basically what it
says is the reason why they're changing that
to Quickster, why that name, why they chose that
name was because they want you to get your DVDs
quick in the mail. They want you to get them
quick in the mail. So that's why the name of
Quickster. You're killing me. I know. Killing
me, Reed. Killing me. And again... you know don't
insult my intelligence is so by the time you
get to the end of this email or The end of the
blog post or whatever however you came upon it
Within an hour of it being posted I had seen
it on Twitter Retweeted like 50 times and it
was on Facebook and everyone was like, oh my
god, what's going on here? And my first thought
Was clearly this guy's trying to derail his company,
you know, which which makes no sense to me because
He has been working hard for ten years to make
Netflix What it is and it's Netflix is like synonymous
with getting movies in in the mail It's it's
like when you say I'm gonna Google something
It's it's a verb that you use to describe it.
You say I'm gonna Netflix this movie At least
I say that I'm sure there are other people to
say this as well, right? I don't know Alright
back me up here people What it comes down to
is when you start using the name of your company
to describe as a verb, to describe what you're
doing with the movies, if you're going to say,
I'm Netflixing a movie, you don't just change
the name of your company. That is like the corporate
kiss of death. You just don't rebrand anything.
I worked at Playboy for several years. And they're
all about the brand. They have a brand that's
been around for 50, 60 years. They don't mess
with it. If you try to mess with it, they have
a fleet of lawyers that come down in your head
with cease and desist letters and saying, we
will sue you back into the Stone Age. You don't
mess with the brand name. Same with Netflix.
It's important to hold onto this name. We're
going to keep it. We're going to ride this into
the next century. you don't mess with the brand
name. And here's what he's doing. He's saying,
all right, I'm going to take my core business
model. This is what's been making us money for
the last 10 years. I'm taking this business model,
and I'm going to piss all over it by giving it
some stupid ass name. Quickster, what the hell?
And basically renaming it, rebranding it into
something that nobody's going to remember tomorrow.
I'm not going to Quickster a movie. That makes
no sense to me. It's just it's it's it's harmful
to my ears to say this. I mean they couldn't
have said This it's just sounds so dumb. It's
like Friendster. Whatever happened a Friendster
What was Friendster, I mean it's that like Sharing
friends over streaming or I don't yeah, I was
never a part of Friendster So I have no clue
what Friendster is. I've heard of it, but So,
naming your business after something that's died
doesn't make a whole lot of sense. Unless, you
know, it's like a dead relative and you're trying
to pay homage or something. Regardless, what
it comes down to is, to me, it looks like he's
trying to kill his business and offend me, you
know, personally. So, it was hard. By the time
I got to the end of this, It's like, all right,
so what you're saying now is Netflix is gonna
be the name of the streaming. So you have a streaming
company. They're two separate companies now.
We're talking two separate billing records. I'm
not paying one company for both streaming and
DVDs, right? I'm paying two separate companies
now. So I gotta set that up. You know two times
the worries that someone's gonna get hacked and
my credit card numbers are gonna be you know
spilled out across the internet It's just it
just didn't sit well with me but I mean I You
know, I understand the business aspect of it
I I have an MBA I I see where this was going
now and Want to say that this is the part of
the conversation where I can end my rant about
what an awful idea this is and kind of Change
tack and go in a different direction and kind
of explain why maybe it wasn't such a bad idea
But before I do that, I want to give somebody
else a chance to complain Steve Yeah As far as
the the whole split off that they've done I am
that actually prompted us to drop the DVD part
Really yeah, we well streaming now. Yeah, we
just use the streaming now Because one you can't
get the latest movies anyway For the first month
or so it takes a while to get some of the latest
ones that are coming out Yeah, really quick before
you continue what I found out. I actually found
this up from our good friend Spada Apparently
it takes like for Netflix to get a brand new
likes like say red box gets Black Swan in In
order for Netflix to get it 28 days has to pass
from the initial DVD release Transformers Dark
of the Moon just came out as of 33 minutes ago
Netflix won't have that or red box will not have
that or anything like that until 28 days after
the initial DVD release of You know people actually
buying the DVD so It takes Netflix a while to
get new movies like brand new movies, right?
Well, this just opens up a nice opportunity for
red box. I mean I just started using red box
Almost as soon as they made the announcement.
I went out and got a red box account. Yeah Continue
Steve, sorry. Well, I mean we we use red box
too, but I mean black buster also I mean as much
as I don't like them they've dropped their their
prices of their one out at a time which used
to be $25 before dish network bottom out and
Like right now for late for this month and next
month. They've got it for 749 and then it It's
only for like the first month and it goes up
to 14 But you can go into the store and then
swap it out as much as you want throughout the
day Whereas netflix you may you may get two to
three discs a week if you're lucky For that quickster,
but I mean and or For uh blockbuster. Yeah, you
just Go in so I mean that's in that sense. It's
nicer But to me, it's not worth spending the
extra nine dollars When I can spend a little
over that and I can get as many as I want for
the month Yeah, right at another pass at another
place and Granted blockbuster doesn't have the
streaming yet Which blockbuster also gets more
content? to their stores than any of these other
Services, so I mean it's it's gonna be kind of
a close battle once blockbuster enters that streaming
Like Netflix, but I can't remember the last time
I went into a blockbuster brick -and -mortar
store Well, what Steve is saying is that the
difference between Netflix and the blockbuster
like not Netflix the difference between red box
and blockbusters blue boxes is that Red box you
have to you have to wait still on some of them.
Well, you have to wait still on some of them,
but You have to, like say you go on Redbox's
website, you go on there, you get your movies,
you go to the kiosk, you pick them up, you have
to then take them back to the kiosk, return them,
and then go back home or stand there and order
more. Whereas the Blue Box is for Blockbuster,
what Steve is saying is that if he and his wife
go to the Blue Box and they get two movies at
a dollar five, a dollar six a piece, Instead
of going back to that Blue Box kiosk, they can
actually go to a Blockbuster store that may be
open and they can exchange them there. Well,
that's not even using the Blue Box. Blue Box
you can't exchange at the store. Oh, you can't?
No, that's completely different. No, I'm saying
you can rent through their pass at their brick
and mortar store. Sign up for this this media
pass which you can either rent games movies blu
-ray any of that stuff and Get it for that set
price, and then you just take the disk and then
keep swapping them out every time Okay, I mean
granted their prices because we just went into
them are very comparable to family video now
So they're they're not that five six dollars
for a one disk. You know rental Yeah, so they
have come down. So I mean you're gonna see a
lot of people jump and ship back to blockbuster
because of Them raising the prices and not saying
hey, you know, this is why we're doing it blah
blah blah and I could have seen if you know they
They would have you know Not only let people
know but not raised it at that high Mm -hmm,
because I mean they basically doubled what people
were paying before Yep, and to me it's not worth
that because like I stated before I'm not gonna
do You know have to worry about if I'm gonna
get two to three discs a week Most of the time
I got like one maybe two Depended on how fast
they got it back out Yeah, so I mean it's I can
kind of see why they did what they did. But on
the other hand I That's why I just went ahead
and canceled the disk service and just kept the
streaming. For me, I've told the story before.
All of my mail goes through a business address
from where I'm living at this point in time because
this apartment building, neither the apartment
managers or the postal service will fix the mailboxes.
No mail is actually delivered to my apartment
complex because the mailboxes are broken. uh...
so i haven't i i never had a use for the dvd
service from netflix the streaming i can wait
for new releases that's why i use red box when
i want to because it's a uh... x -men first class
for and what else just came out uh... what well
i guess we could say dark of the moon you know
i could go to red box and get those right now
or whenever Whereas Netflix, I would have to
wait for them to be able to get the contracts
and this and the other thing. I use Netflix streaming
more for TV shows than I do for movies. I think
right now, the only movies I've watched on there,
the entire three or four or five months that
I've had the service, Full Metal Jacket, Die
Hard 1 and 2, and I think I started Demolition
Man. I don't remember if I did or not, but I
mainly use it for TV shows. But this price increase
in the fact, as Michael said, you're getting
two different billing charges. That's just ridiculous.
Yeah, to me, that's kind of asinine because I'm
not signing up for two different services. Yeah.
You know, leaving on one bill. I mean, there's
literally no real reason to have to split it
to a different company just to have the price
increase. One again, I guess it's they want to
create another brand You know kind of like My
space is a part of rubert murdoch industries
I know it's I know that's not a factual statement
at this point in time because obviously my space
has been sold and dead but You know where they
say quick stir a Netflix company. It's kind of
like saying Pixar is a part of the Walt Disney
Company now. They want to create a new brand
for the DVD service, and I can kind of see that,
but at the same time, the name is kind of stupid.
It almost sounds like one of those pyramid scheme
companies. Yeah, ain't that the truth? Honestly,
I think there's a reason why the name is stupid.
And I'll get into that later. Honestly, I think
what they're trying to do is dissuade people
anyway from the discs and just say, hey, just
do the streaming. Yep. I mean, the streaming
does have its advantages. If you have an internet
-connected television or an internet -connected
Blu -ray player, you can watch the streaming
on your TV. You don't just have to sit at your
computer and watch it. They have the mobile apps,
you can watch it on your phone if that's the
way you choose to. If you have a current gen
gaming system, PS3, Xbox, Wii, you can watch
it through that. So I mean, the streaming isn't
just for the internet connected PC or Mac. Right,
no, you can connect to your consoles. Yeah. You
can connect everything. Yeah, through the Wii,
or the PS3, or if you've got a DVD player that'll
handle that. My TV actually has Wi -Fi built
in, so I can stream directly from my TV. Awesome.
Yeah, so it's, I mean, streaming, it's not quite
there yet, but it's getting there. And again,
for me, like I said, it's great that they have
the deals in place for a lot of these old, like,
I can watch almost every episode of Cheers, every
episode of The Bill Cosby Show, Numbers, Angel,
Stargate SG -1, Stargate Atlantis, Stargate Universe,
all the Stargate things are on there for streaming.
There's plenty of advantages for it, but if you're
one of those people that just wants new movies,
you're SOL on the streaming. So what else do
we want to talk about these new news updates
here for Netflix? Well, I was gonna basically
go into why this isn't a bad idea Okay, and why
yeah, basically again I was horrified when I
first heard about this I said this is a horrible
idea and they're shooting themselves in the foot
and it's gonna ruin their business, which doesn't
make any sense, you know, they've You know basically
built this business up for the last ten years
and why would they suddenly destroy it? Right
well There's a reason they're purposefully trying
to destroy it Okay, that's what it comes out
to but there's a business reason for them to
do this basically, you know Reed Hastings has
taken a look at the long -term outlook of DVD
to home sales mm -hmm and said and you know the
writing on the wall here is that as the as internet
bandwidth increases And, you know, it's increasing
everywhere. Soon we're going to have 4G speeds
on everything that's just lightning fast. Not
just on phones, but everywhere. Right. As Netflix,
the streaming company, makes more deals with
content providers, you're going to get a lot
more content, you're going to get a lot more...
The ratio of movies that I can DVD versus movies
that I can stream are going to go from you know,
four to one to one to one. We're going to be
able, you know, I'm not going to have 400 items
on my queue of which only 100 of them I can stream.
It's going to be I can I can stream everything.
All of their content available on DVD will be
streamable. Right. And probably within five to
10 years. So he's basically got five years to
wean the public off of. Quickster let's say so
the He wants to get out of the mailing DVDs to
people business. He spends I should say he but
Netflix is Spending an awful lot of money in
postage. They're spending an awful lot of money
in Warehousing all these DVDs the pull system
Making the envelopes cost money? Exactly. These
red envelopes that everybody recognizes and loves
to see in the mail cost a buttload of money.
And there's an awful lot of overhead that goes
into overhead costs. These are sunk costs as
you have to pay all the time. It's it's I don't
want to say prohibitively expensive because they've
been doing it for 10 years and they've been doing
it very very well They've got this down to a
science to the point where they're spending the
least amount of money that they could but it's
still a lot of money and When you look at streaming,
you know granted there's a new set of costs You
have to pay for the servers. You have to pay
for the bandwidth, etc, etc, but you're not paying
posted You're not paying printing costs. You're
not paying DVD storage and warehousing and pull
systems and All the rest of the overhead that
goes into this I mean that can just be scrapped
and He'd like nothing more than to save all those
costs and be able to put that money Toward content
deals on the streaming side, right? So, you know,
the only way he's gonna be able to do this is
if he kills off that direct -to -mail business
You know and what's the best way to do that?
Well, let's branch it off from our from our the
rest of our business You know and give it a dumb
name That nobody's gonna remember and most likely
no one's gonna want to use and people like Steve
are gonna cancel their DVD altogether Well and
see this is the thing too it also By them splitting
it off right now and moving people that have
that service It ensures that when that company
goes bankrupt. It doesn't hurt Netflix Exactly,
you can quietly shutter a company called quickster
But you're not gonna be able to quietly shutter
Netflix. It's been around for ten years Right
that that's and that's hedging your bets basically,
so He is he's looking at the long term. He's
saying five years down the road ten years down
the road Net or Netflix the streaming company
is going to be what Netflix the direct mail company
used to be except without a buttload of overhead
and Everything's done just through the internet
which, you know, for most people, they're going
to get anyway. Almost all the other customers
who would be getting DVDs in the mail are going
to have the internet. And most likely, one of
the, you know, they're going to have some type
of streaming device, either be it a computer
or a console game or a TV or a DVD player. Most
DVD players have some type of streaming available
now, except, you know, like the $10 ones you
buy at Walmart nowadays. Within five years even
the $10 ones you buy at Walmart will be able
to stream down Netflix That's my prediction.
Yeah easily. So he's looking five years down
the road ten years down the road. He sees Where
his business is gonna go he sees that if he sticks
with DVD by mail that business is gonna die in
five years and Blockbuster is gonna be taking
that streaming business or red box will be taking
that streaming business Well red box won't but
blockbuster might You know Amazon might be taking
that streaming business iTunes might be taking
that streaming business He doesn't want to lose
that in five years He sees you know the writing
on the wall and he's moving his core business
his new core business Moving that core business
forward by killing the old business on purpose
Does that make sense? Oh, it makes perfect sense
It didn't make sense, you know to me. I'm like,
what is he doing? You're shooting himself in
the foot. This is horrible. Oh my god That's
exactly what he's doing and he's crazy like a
fox But I mean you got to do it. You got to do
it. You got to put a bullet in the head of that
direct -to -mail You know before you know He's
just not gonna let this drag out forever ten
years from now. He's not gonna be sending DVDs
by mail to the last you know five thousand stragglers
Maybe there will be five thousand stragglers
and for those people they'll be quickster Until
he puts a bullet in the head a quickster But
you know well until quick sir becomes cost -prohibitive
It'll stick around but for right now He's putting
all of his eggs into that Netflix basket and
the streaming media basket Because again five
years from now ten years from now. That's where
the money's gonna be oh Yeah, and he'll be first
to market with with the infrastructure in place
already Exactly So yeah, I understand it completely
now now that it speaks. You know now that I've
read Online people who basically explain and
there's I sent you guys a link on what I read
first and there's a couple other articles that
I read explained a little more but Somebody else
that either retweeted or tweeted that that linked
to that comic book strip Yeah, I think I don't
think it was me I think it might have been somebody
else, but I read the comic book strip about the
make Netflix. Yeah or mcnetwitch and that yeah
really that's kind of like again when i said
when i said in the beginning it was the price
change and they charged it charges you more and
then it's like okay well so you're charging me
30 more for my mcnetwitch all i want is a sandwich
with extra mayo you know and they say well you
know we'll explain it in a week and then you
come back in a week and they say well guess what
we split up into two separate companies so now
you can get your You know your hamburger bun
here, but you have to go across the street to
get the actual You know chicken to go in in with
your extra mayo I mean in that it was funny It
didn't it didn't address the root of the problem
to me and the root of the problem was You know,
why why why would they do this yes the underlying
cause It was funny though I think the guy ended
up going across the street for his chicken patty
So yeah for me I'm just all about the streaming
so it doesn't really affect me for those of you
who are about both services, you know Sorry about
your luck Any final thoughts Steve? Um Other
than it makes perfect sense what we're talking
about. I mean it I don't really see any problem
with it Yeah I see a problem with it. No, I shouldn't
say that. As a consumer, I'm kind of pissed still,
because I want to get my streaming and my DVDs
from the same place at the same time on the same
bill 30 % less than what they're charging me.
As a consumer, again, you know, as a business
analyst, I completely understand why they did
what they did, even if they didn't explain it
very well. or in a timely manner. Right. But
again, as a consumer, it's like, well, damn it,
you know. And as far as I'm concerned, I don't
think streaming is at the place now. It's not
five years from now. It's where it's at now.
And where it's at now is not satisfying me. I
would most likely cancel my streaming if my wife
would let me. OK. OK. I have a mission for you.
Sure. Between now and the next Transformation
Animation Podcast recording. I want you to actually
look at a lot of the stuff that is on the streaming
side and tell us next week if your opinion of
streaming has changed because there really is
a lot on there. Right. Well, I'm again, I'm just
going by what's in my queue. I've got 400 items
in my queue because you only have two damn things
in your queue. Look at some of the genres, look
at some of the categories on there, and I've
gone through and I've looked through a lot of
the categories on there, a lot of the stuff on
there, and as I've gone through and said, oh
hey, there's Demolition Man, oh hey, there's
Die Hard or Terminators on there, or you know,
it's like, oh wow, a lot of these cool things
that I used to love watching and I might want
to watch again. So... Right. You have one week,
sir, to explore stuff outside of your queue.
Oh, my queue's pretty massive. I don't know.
That's what she said. Wow. All right, so we hope
you enjoyed this episode of GeekCaster Radio.
Wish you'll join us next time when we'll be starting
the music spotlight with our parents' music.
We'll be talking about music from the 60s and
70s. For now, I am TFG1Mike with... Michael Wilson
and Steve Megatron Phillips Thank you for listening
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