With service split, Netflix overlooks customer experience

Like a streaming Netflix movie, I'll make this quick.

Netflix CEO Reed Hastings announced this morning that the company was splitting its services into two: Netflix streaming movies and "Qwikster" DVDs by mail. Both services were formerly under the name "Netflix" and the announcement follows a new pricing scheme unveiled earlier this summer.

Many intelligent posts have already been written about the change:

• Tim Lee writes at Forbes that Netflix is using the "Innovator's Dilemma" as a straw man for change. Dan Frommer says as much at SplatF.
• Mike Isaac writes at Wired that the company's moves should make Wall Street investors happy.
• And David Gewirtz on our new "DIY IT" blog questions the move to streaming in the first place. (From a business leverage point of view.)
• Plus, ZDNet editor-in-chief Larry Dignan rounds up customer opinions on the switch.

I'm still waiting on CNET's Greg Sandoval to weigh in (update: there he goes), but in the meantime, I offer you a simple litmus test for the change.

My wife, a Netflix member, upon opening the announcement e-mail for the first time: "This is stupid."

Knee-jerk reactions can be dangerous, but from a branding perspective, they're often the most important.

In Hastings' announcement, he apologized for being "arrogant," lacking "humility" and "respect" for customers and failing to communicate with them as changes were implemented.

And yet this is precisely what we're seeing here: business first, customers second. The transition to streaming is hardly unexpected, but somehow Netflix manages to complicate an otherwise seamless customer experience in its move to separate potential from profitability.

Two services does no one but Netflix any good. From a branding perspective, creating a new one to send off into the sunset is confusing. Two statements on one's credit card is perplexing. And two websites to manage a single mental queue is unnerving.

Look, if you're a Netflix customer, you want to to one thing: watch a movie. You don't really care which channel it comes from. If you're at your beach house, you might want streaming; if you're at home, you might not mind DVDs. You're not thinking about the path it takes to get there -- you're thinking about watching a movie. Unless you can't watch that movie, you simply don't care.

Netflix's latest changes force you to care. But that's not how customers roll: we've seen in the music business (and the publishing one, too!) that you don't care how you get it, just that you do. Any complication of that is simply because a business doesn't know how to separate its books from the customer experience.

And that's what we see here. Qwikster (DVDs) and Netflix (streaming) makes a lot of sense in an Excel spreadsheet but it makes little sense on the couch. Cost structure, benefits, delivery, price -- we don't care. Give us the movie, and give it to us now. That's what we're paying for. That's what the word "Netflix" stands for in the mind of the consumer.

If it's not a slide into arrogance to think otherwise, I don't know what is.