Netflix: Rebranding and Price Increase Debacle

Abstract

In 2011, Netflix was the world's largest online movie rental service. Its subscribers paid to have DVDs delivered to their homes through the US mail, or to access and watch unlimited TV shows and movies streamed over the Internet to their TVs, mobile devices, or computers. In September 2011, Netflix announced it would split its DVD delivery service from its online streaming service, rebranding its DVD delivery service, Qwikster, as a way to differentiate it from its online streaming service and creating a new website for the service. In response to customer outrage and confusion, the Netflix CEO rescinded rebranding the DVD delivery service and re-integrated it into Netflix. Nevertheless, only five weeks after the initial split, Netflix acknowledged that it had lost 800,000 US subscribers and expected to lose yet more, thanks both to the Qwikster debacle and the price hike the company had decided was necessary to cover increasing content costs. Despite this setback, Netflix continued to believe that by providing the cheapest and best subscription-paid, commercial-free streaming of movies and TV shows, it could still rapidly and profitably fulfill its envisioned goal to become the world's best entertainment distribution platform.