NetFlix: Big Change, Big Gain?
Seeing mammoths like Blockbuster die must a sobering thought for any leader. Especially CEO and Co-Founder of Netflix, Reed Hastings, who announced yesterday he is going to split it's two primary offerings, online streaming and DVD by mail, renaming the DVD business to "Qwikster". After changing their pricing structure only two months ago and losing roughly one million subscribers (and an estimated $100 million in annual revenue). I think everyone is wondering if this the right strategy and how much innovation is too much?
Here are my thoughts on the situation from a branding perspective:
THE NEW NAME
Mr. Hastings announced in a blog and email "We chose the name Qwikster because it refers to quick delivery." The irony of this name is that the DVD by mail service is the slowest delivery route in the market. If I'm going to watch a movie I can buy one from Comcast (Instant), stream one from Amazon (Instant), rent one from iTunes (30 mins to download), watch on Hulu (instant), or drive to Red Box (10 mins). Waiting overnight for a DVD by mail is not the qwikest option. My assumption is the name is an insecure attempt to overcompensate for a less desirable (and in-authentic) position of the brand.
I will give them some benefit of the doubt, finding a .com URL availability and following up in the shadows of the great "Netflix" is pretty difficult, but anything else would have been better. If Quiktrip (the best gas stations in the world) and Friendster (antique social media pre-myspace days) had a baby it would be called Qwikster. The foundational problem with this name is the lack of believability in the positioning around "Speed of Delivery".
The unique spelling of "Qwikster" has a similar misspell strategy of "Netflix" (replacing the "cks" syllable with the "x") to make the name more ownable. The added "w" however is not a great phenotic replacement for the "u" and visually it looks like a typo (with the "w" being next to the "q" on the standard American keyboard). Likewise, the double misspell of leaving out the "c" in "quick" is just overkill.
When we test name candidates we use a "Score sheet" to validate their overall effectiveness as a name, so I thought it'd be far to do the same here. We use our 7 Naming Principles as a litmus test for the score sheet to best remove subjectivity. It isn't perfect but it can serve as a good metric for overall effectiveness. See my score sheet below, 1 being the lowest and 5 being the highest for each principle, with the potential of 30 for the overall score.
THE NEW LOGO
It is hard to make too much of an assessment at this point, but the overall word mark is very uninspired and predictable. The clunky rounded letter forms complete with inner glow and heavy drop shadow all combined for a cheap aesthetic. I will be interested to see the full system and not just the "Coming Soon" page.
THE NEW BRAND STRATEGY
A brand is simply a reputation and for the most part is going to be known for only one thing. With that in mind, I believe their strategy of separating the two offerings is quite brilliant. Netflix to me currently is "DVDs by mail", which is the dying side of the business. The future obviously lies in the online instant streaming business so attempting to change the perception of Netflix from DVDs to online streaming is a smart strategy. Creating a new brand, Qwickster, is quite smart as well (besides the actual name). By creating a new brand synonymous with the dying side of the business they can watch it go down in flames, while squeezing every dollar from it, while the new NetFlix sits safely at a distance. The critical success factor for the new Netflix is securing premium content (Blockbuster movies) for online streaming subscribers so it can support the entire business. If they do that then it will be a slam dunk, not just for the brand, but for the bottom-line.
But who knows, I could be wrong. Is this a smart move?
10 Comments
"Good post. Agree the direction seems like good strategy, but the execution is a disaster. I'd also give them a less than 5 on "How ownable is it?" Given that they didn't have the Twitter account locked down, I'd say it's got to be at least a 4 or less.
http://techcrunch.com/2011/09/19/the-guy-behind-the-qwikster-twitter-account-realizes-what-he-has-wants-a-mountain-of-cash/"
- Chris Allison
"I completely agree about the split being a smart move for the evolution of their business. And am also struck by the irony of the name! A pure marketing play for sure... but unfortunately a transparent one. But overall the business model gives me more faith in the future success of their streaming services. And I care more now about the brand now than I ever did before (perhaps PR works on me).
I wrote up an opinion as well that compliments your thoughts:
http://launchpadadvertising.wordpress.com/2011/09/19/apology-marketing-netflix-says-sorry-announces-segmentation-of-streaming-technology-vs-dvd-mailing/"
- Melanie Weinberger
"reading @Qwikster is like watching a train wreck...its horrible but I cant look away"
- dave
"So glad to read your take on this Blake. Your comment about the cheap design aesthetic of the Qwidster logo is on par of my assessment of that horrendous video this put out. Cheap.
I would disagree with you on the branding move though. While I believe there may be some smart financial and/or licensing reasons for spinning off Qwikster, from a branding perspective I think this hurts them. The reason is that I don't think of their brand so much as "DVDs by Mail." I think of the Netflix brand as the "fastest and easiest access to the best compilation of movies ever." The method of delivery is unimportant to me. All I care is that if I want to see a movie, I am confident Netflix will have it: whether it's streamed or delivered via mail. And, their brand meant total convenience and ease of use to get to those movies. They are destroying all of that with this move.
It's inevitable that physical DVDs at some point are going to die. But that point cannot be as close as people think. There is no way Redbox would have grown as fast as it has if physical DVDs were that close to being a dinosaur. Clearly, the demand is strong enough to make Redbox a force to be reckoned with. Which means a LOT of people still want/need DVDs and will for a while.
Furthermore, Netflix's current streaming selections aren't that great. So now the Netflix brand will mean a lousy selection of movies from a company that gave me less yet charged me more.
And as Chris pointed out above, their execution of this whole thing has been a disaster. The fact that their stock value has lost 50% over the past two months is a testament to that. Then this poor apology and terrible video adds insult to injury.
I think Netflix has given its biggest competitors a huge opportunity. I would not even be surprised if Blockbuster makes a comeback.
I'll keep Netflix/Qwikster for now, but I am now actively looking for a better solution, whereas before I wouldn't have dreamed of canceling Netflix."
- Ron Dawson
"I think they'd have been better off with a more subtle separation. Rename the mail service "Netflix Mail" and give it less priority on the site."
- Chris Allison
"Qwikster is the Lee Harvey Oswald of the Netflix brand. A patsy being lead to the slaughter house."
- Bryan Johnson
"Good thoughts from all. Chris, that's an interesting idea to still separate the services but only by a brand extension, like "Netflix Mail".
Also, to your point Ron about selection, I think you're dead on. If Netflix streaming doesn't get a better selection they are doomed. Right now it is full of low budget disappointments. They will never build a brand that way."
- Blake Howard
"Unless they are doing it on purpose to kill off DVD by mail...it seems like a mistake to force people to have 2 separate logins to access their accounts.
I understand the need to separate the divisions from a financial and strategic perspective, but not the part where they make it more difficult to use their services. (With the caveat above.)"
- Austin Lee
"This Mashable article really puts it well: http://mashable.com/2011/09/20/letter-to-netflix/"
- Ron Dawson
"DVD and BluRay are not going away imminently (see RedBox point above). So why split up their business and weaken it, when as you state, there are ALREADY many many many options for a streaming delivery. Netflix's power lie in their amazing catalogue of physical discs, and the option to watch a whole lot of streaming video (albeit lackluster when it comes to new releases). You combine those two services into one business and it makes it the "fastest and easiest access to the best compilation of movies ever" (as Ron says).
As a side note, I'm blown away by the amazingly poor acting/quality/editing of this "apology" video. It's really pathetic."
- Nate