We Fear Change, Part 2: Netflix’s Interpretive Approach

I consider my well versed at making apologies. If there is anything that I have learned by apologizing, it doesn’t involve changing my name and creating a new identity for myself. Well maybe that’s not such bad idea after all.

Last week when I received an email from Reed Hastings, co-founder and CEO of Netflix, I treated it like one of the several hundred emails I get from Paul each day. I scanned it just closely enough to talk to him intelligently about it with him so when he calls five minutes after sending it, I can pretend like I really care. As a Netflix customer, I think that Reed’s email may have been misunderstood. It is my hope through this blog post that I can translate or read between the lines to help you understand the recent changes.

I try not to be one of those people (Paul Caputo) who fear change. The part that really bothered me about the change was the approach. Reed’s letter takes interpretive writing principles and uses them in an evil way. We all know that Jedi Mind Tricks are for the weak minded, so I wasn’t fooled by his red envelopes. Reed didn’t read the postscript in Freeman Tilden’s Interpreting Our Heritage where he unveiled his 7th principle of interpretation: “Remember, a Jedi’s strength flows from the Force. But beware. Anger, fear, aggression. The dark side are they. Once you start down the dark path, forever will it dominate your destiny.” Where he said Jedi, I’m pretty sure that was a typo that should have been interpreter. Who am I to question genius, though?

Here’s the letter and my comments are in parentheses (of course).

Dear Schafer, (Yes, my real name is Schafer. Insert your own jokes in the comments section.)

I messed up. I owe you an explanation. (Nice start, Roger Clemens should have taken this approach. Honesty goes a long way with readers, visitors, and baseball fans.)

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. (Building a relationship by saying “I have heard from you and I’m sorry.”)

For the past five years, my greatest fear (Anger, fear, aggression…okay we know what Yoda has to say about that, and I agree.) 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 that new things people want. 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. (Is he really just angry at the U.S. Postal Service or simply taking out aggression that DVDs are almost a thing of the past and they aren’t bringing in the cash they used to? The take home message here is: Daddy’s gonna get paid.)

So here is what we are doing and why. (Reed is setting the stage for meeting his objectives though this letter.)

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. (Trying to relate.)

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. (He wants to play for the Yankees and the Red Sox. Though I’m sure in the future the collapse of the 2011 Red Sox and Netflix will be used one in the same when describing failure.)

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. (See take home message above. Revelation coming now, please continue reading.)

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. (Okay, I’m lost. Wait, I see. Let’s take away any loyalty you have to “Netflix” DVDs because it is easier to kill something you don’t care about then you will come crawling to “Netflix” streaming video, your old red friend.)

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. (Was he serious about the name Qwikster? I’m pretty sure that handle on Twitter is taken by my brother-in-law.)

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. (He’s right, we love those red envelopes. I’ve even heard Paul say “My marriage depends on those red envelopes!” I’m pretty sure Paul’s wife has him enduring some sort of post-baseball television sensitivity training that involves the movies Steel Magnolias, Beaches, and Fried Green Tomatoes. Don’t mind trick us here, we know they won’t be Netflix DVDs because of the new complementary color palette.)

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. (Uh, we are not the stickees but the ones being stuck. If he is trying to provoke here, he was successful)

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. (This taken from the New York Times bestselling Book of Bad Coaching Cliches in the chapter titled When You Care Enough to Say the Very Least.)

Respectfully yours (Stick it in your ear),

-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. (Doesn’t he know that no one reads blogs anymore? What an idiot.)

Okay so this was more of a rant than a blog post, I’m sorry. I just needed to get this off of my chest. Lessons: realize your patrons are smarter than you, focus on what you are good at, be honest, and don’t use tested interpretive writing techniques for evil.