The Netflix Post That Reed Should Have Written

Dear Subscribers,

I know you hate it when we do this. But here goes...

For 5 years we have integrated the DVD and streaming businesses -- and for those of you who used it you've gotten used to the really cludgy way we fit them together. Yes, there are many aspects that fit together well (one movie - multiple ways to view it) but there were other ways it was goofy (two queues, two or three play-type buttons). We experimented for years with making this easier and clearer. But over those years a few important things have happened. The people who use the site for DVD-only or Streaming-only has surged - growing way faster than the people who use us for both. 75% of all new customers only want streaming. That number is growing fast. The number who want both is dropping. Additionally, we've expanded to Canada and Latin America -- and no one anywhere else in the world is going to get DVDs - we can't ship them. So, for our entire future, our growth opportunity, is entirely in streaming. And finally, the economics of DVDs and streaming are totally different. Deals are complicated.

What to do?

While I have been consumed with this problem, I've also been critically aware of a basic business principle: it's very hard to shift a company from something they're great at (for us, shipping DVDs) and something new (for us, Streaming). These "disruptions" as they are called, tend to kill established companies. Almost always, the industry leader simply moves too slowly to adopt the new path, and once they do, they play catch-up until they fail. My biggest fear for these years is that we'd move too slowly into streaming. The problem for established companies is managing the existing users. In order to protect the business and the current user experience, a company moves very slowly. Not to do so would seem heartless and suicidal: screw up the user's experience in some way? are you crazy?

I'm not crazy, and i really do love our users. But Netflix isn't helping anyone by failing to lead the way into streaming. We're not helping our users if we stand by them to the point that we kill the company. For better or worse, today, i'm taking a stand and shifting our focus into Streaming. Everyone wants a simple website, everyone wants tons of great content. I believe we can better deliver on the things most of our current users want (and ALL of our new users), by separating these businesses.

It's going to be a little painful and you have to trust me that I feel the same pain. Inside Netflix virtually all of us use both services - discs and streaming - and we know that we're introducing something that has drawbacks. Needing to go to two different sites to manage our entertainment content... two accounts... all that. I could point to the fact that each site will be easier to use, or that the DVD site will finally be able to offer GAMES, but it really doesn't matter - the truth is there is going to be some disappointment and pain.

Qwikster will have its full attention on diminishing those difficulties as much as possible. We'll work with customers and iterate the website and service to make it increasingly better. We've done this in the past and you know we're pretty good at it. It takes some time, but we do get there.

There is no escaping the fact that NOT to do this would kill Netflix over the next decade; and as much as some folks are going to be bummed, I also don't believe you'd want me to make a decision that would do that. I'm sure many of you will quit the service in anger. We have raised prices over the past few months (to be fair - many people see a price DECREASE, and for those who use both services, it's really just a fairer price for what you get - but i suppose that isn't the point).

I'm sorry if this change feels heartless, or that i'm throwing some subscribers under the bus. These are not easy decisions, but truly made with ALL our customers in mind. In the past i've not been as communicative about these kinds of changes as i should have been. I seriously believe in corporate transparency, but i've not been willing to expose my concerns about the path we were on or the steps necessary to evolve through the difficulties. Our competitors are huge, and the opportunity is too. I don't believe the service will be worse for this, but i do believe that some customers are going to feel abandoned and unconsidered. I feel terrible about it. But i know it's the right thing to do and all I can say is that i promise we will work to win back your trust and your excitement in using the service, at a really attractive price, with the best content available.

Thank you for caring. I'll try to answer as many questions as possible.

Albert-Szent-Gyorgi, Google, and the Meaning of Life

"In my hunt for the meaning of life, I started research in histology. Unsatisfied by the information cellular morphology could give me about life, I turned to physiology. Finding physiology too complex I took up pharmacology. Still finding the situation too complicated I turned to bacteriology.  But bacteria were even too complex, so I descended to the molecular level, studying chemistry and physical chemistry. After 20 years of work I was led to conclude that to understand life we have to descend to the electronic level, and the world of wave mechanics. But electrons are just electrons, and have no life at all. Evidently, on the way I lost life; it had run out between my fingers."

I first heard this quotation in college, and it stuck with me. The guy who said it, Albert Szent-Gyorgi, discovered vitamin C and won a few Nobel prizes, but you don't hear too much about him these days. That's why I was particularly happy to see him honored in the Google doodle today. It's his 118th Birthday. Thought it would be a good moment to drag out my old notebook...