I can’t remember what my life was like before I had my driver’s license. The inefficiencies of “Michael’s mom can drive us there if we see the 8 o’clock, but my dad can’t come get us until 11…” astound me. Why didn’t I just get in the car and start driving? It’s not that hard. Gas on the left, brakes on the right, fun all around!
In the same vain, I have no recollection of my life before Netflix revolutionized it. No, my memory loss wasn’t caused by my excessive methamphetamine usage (though that does explain my teeth falling out). I must have blocked the memories of having to get up and change out the “Golden Girls” disc in the DVD player for the next one. All that physical movement — what were we thinking?
It should come as no surprise that we live in an increasingly digital world. Physical books are being replaced with e-readers. Money is no longer paper currency, it’s numbers on a computer screen. Our e-mail inboxes are by far more useful than our physical mailboxes. And though Netflix started as a DVD-by-mail service, its online streaming capabilities have clearly become the main draw for consumers. With hundreds of thousands of titles to peruse and watch instantly, DVDs or Blu-ray discs are simply unnecessary.
Netflix pioneered online streaming and remains the clear leader in the market. Its profits continue to rise as competitors dwindle. According to some estimates, 20 percent of peak-hours Internet traffic is Netflix users. Still, recent controversial business decisions leave room for speculation if Netflix can retain its crown.
Netflix stock reached an impressive $300 in July. Then, in a surprise announcement, monthly subscription prices were significantly raised. The move garnered noticeable media attention, along with Starz and Sony dropping content from Netflix’s streaming library. Perhaps as a result of the hype surrounding it, rather than the price change itself, Netflix’s stock price plummeted — currently valued at $127 — and approximately 1 million out of 25 million customers canceled their subscriptions. The mass exodus of customers and dramatic stock price drop prompted Netflix CEO Reed Hastings to apologize to consumers. An apology, but no price reduction.
Last week, in a substantially less publicized move, Netflix announced in a short post in their blog that the company would be split in two. Netflix will continue operating as an online streaming service, and the DVD-by-mail service will spin off into a new company: Qwikster. So, if you want to continue getting movies in the mail and streaming online, you now have to deal with two websites, two companies and two prices. Customers were upset, and stock prices continued to drop. Despite the obvious backlash against the two-company confusion, it’s obvious why Netflix made this decision.
DVDs, Blu-rays and any physical media are going by the wayside. They’re not gone yet, but looking at the music industry as an example, it’s easy to see a not-too-distant future when all of our media is web-based. Netflix knows this. It knows that the DVD side of its business isn’t viable in the long run. And with the rapidly changing technology market, “the long run” could be less than three years away. Hastings and Co. didn’t want the shrinking DVD market to kill their streaming empire by bringing the whole company down.
The stock price drop and customer loss were a large price to pay, but they probably saved the business. With an innocuous name like Qwikster, Hastings seemed to be preparing for the inevitable failure of the spin-off brand. When the DVD market dies for good in three, five, or even 10 years, Netflix can quietly kill Qwikster without dramatically upsetting Netflix investors.
Despite ups and downs, it appears Netflix has the brains to evolve with the market. And thank goodness, because a life without Netflix hardly seems worth living.
Andrew Weiner is a senior editorial page editor. He is an LSA sophomore.