Qwikster: the three weeks Netflix split itself in two

The price change came first

In July 2011, Netflix ended its $9.99 plan that included streaming and one DVD at a time. Streaming alone would be $7.99, and DVDs alone $7.99. Anyone who wanted both now paid $15.98, about 60 percent more. It took effect for existing members on September 1.

Netflix knew it would sting. Its own letter to shareholders that month said it expected DVD subscribers who also streamed not to like the change.

Then came Qwikster

In mid-September, CEO Reed Hastings posted an apology that opened, “I messed up. I owe everyone an explanation.” The explanation was a bigger change. The DVD business would become its own brand, Qwikster, on its own website with its own account. Your queue and your ratings wouldn’t carry over between the two.

His reasoning was that streaming and DVDs were becoming very different businesses, and each would be better run on its own. He may well have been right about the businesses. The plan still asked customers to keep two logins for one habit. And the @Qwikster account on Twitter already belonged to somebody else.

What it cost

Between July and late October, Netflix stock fell about 75 percent, from $298.73 to $77.37. In the three months through September, it lost about 810,000 US subscribers, going from 24.59 million to 23.79 million.

On October 10, 23 days after the announcement, Netflix dropped Qwikster before it ever launched. There would be one website and one account again. The split prices stayed.

What people get wrong about it

The usual version says Qwikster sank Netflix. Netflix’s own letter to shareholders disagreed. It called Qwikster’s effect relatively minor next to the price change, which long-time members felt shocked by. Qwikster was the more embarrassing blow. The price was the bigger one.

What a product manager takes from it

• Being right about the business isn’t enough

  Streaming really was the future. DVDs by mail really did wind down, shipping their last discs on September 29, 2023. The strategy held up. What failed was asking customers to pay for it all at once.

• Test the change on the people it lands on

  Two websites look tidy on a whiteboard. A customer sees two logins and a queue that doesn’t follow them. That’s the kind of thing a small test with real members turns up in a week.

• When you’re wrong, undo it fast

  Netflix reversed Qwikster in 23 days. That didn’t win back what the price change cost, but it stopped a second, avoidable wound from getting worse.