You’re probably sick of hearing about the whole Netflix/Qwikster debacle by now. As am I. So perhaps we should give the last word on the subject (for a week or at the very least) to Netflix co-founder Marc Randolph.
What The Flix?
First, a very brief overview of the situation as it stands:
Netflix has long been transitioning from a DVDs-by-mail company into a streaming video company. In July Netflix separated the two sides of its business so that you chose one or the other for $7.99, which left those who wanted both paying $6 more than they did previously.
Then came the next step of actually spinning the DVD business off and calling it Qwikster. This led to an absolute outcry from Netflix fans, suddenly having to deal with two companies rather than one for their content needs. But despite the complaints many people, myself included, could at least see the logic in the decision, and suggested that perhaps it would be the best decision for the longterm good of the company.
Randolph Remembers A Time When…
It turns out that those on the inside feel the same way, or at least the closest thing to an insider we have yet heard from. Marc Randolph founded Netflix with current CEO Reed Hastings in 1998 and retired in 2004. But not before witnessing the company making the tough decision to stop selling DVDs in order to focus on renting them out instead.
The young Netflix did this despite making 95 percent of its revenue from selling DVDs. People didn’t like the decision, but it helped focus the company towards an ultimate goal for longterm success. There are clear parallels between the decision made back then and the decision made now.
Randolph calls the decision to spin the DVD business off into a new entity called Qwikster “one of the smartest, most disciplined and bravest moves” he has ever seen. And you don’t get a much more resolute endorsement than that.
Conclusions
It’s easy to say Randolph is Hastings’ friend and was therefore always going to take this line. But I don’t think that is the case. Randolph has seen this pioneering strategy work once and clearly feels it will work again. And I happen to agree with him.
