Why I Think Reed Hastings Knows What He Is Doing – Netflix and Qwikster

The internet is a-buzz with negative comments regarding the recent letter and price changes from Netflix (NFLX), of which I’ve commented on before.

Reed Hastings, CEO and Co-Founder of Netflix recently wrote a letter, which was emailed to all customers as well as posted on the Netflix blog. In the letter, Mr. Hastings apologized (admirable and humble, a sign of a true leader) for the lack of communication regarding the price change as well as detailed a massive change (massive unless you paid attention to the details the first time around) to the Netflix corporate structure. This change comes in the form of the DVD portion of the Netflix company becoming it’s own organization (again, not a surprise if you paid attention during the price change) named Qwikster, with it’s own website and seperate name on your monthly credit card statement. The new service changes only in name but the function remains the same, shipping movies to your home. As a bonus, they also announced that video games for the Xbox 360, PS3 and Wii would be available through the service soon.

So, two things from me. First, I think Reed did a great job handling this whole thing. While initially there seemed to be information missing (like what exactly did they mean by separating the streaming and DVD portions of the company) the follow-up sought to remedy that and announce further what they intended for the company. Secondly, I believe they see the two services as needing to grow at different paces, with streaming taking the lead. The move makes complete sense IF you understand the future of the business to be streaming, which I believe is the future and Reed and associates seem to agree with me. STARZ will be regretting the departure when Netflix moves to fight for streaming and picks up better distributors.

So, what’s the bottom line, Netflix has communicated their commitment to the future of movies at home, and that future IS streaming. If the company restructeruing, a few more bucks a month (come on people, it’s waaaay cheaper than cable!) achieve this, then I’m all for it.

For the record, my DVD plan ended September 1st. I now only subscribe to the streaming side of Netflix. If you’re a movie studio and you want a piece of the pie, it’s time to get on board.

The future is streaming. Netflix, make it happen.

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