Beginning of the end for Netflix…or the end of the beginning?

From a position of seeming-dominance in the home entertainment market not so long ago, Netflix has taken a beating in recent months through a series of missteps and some surprisingly sharp competition. Who would have guessed that this would be such an area of contention in the age of spiking VOD demand and emerging digital rights lockers? Netflix seems to be lost in the weeds, wandering in the space between what their audience actually wants and what Netflix thinks they ‘should’ want. I’m sure that the execs at Netflix hope that Lillyhammer and America’s undying love of all things mafia will herald the dawning of a new day, but I can’t help but wonder whether we’re witnessing the beginning of the end of this innovative company…the end of their revolutionary beginning? Following closely on the phenomenal customer-relations snafu that was the Quikster split, the sharp cookies at Redbox seems to have stolen all the momentum — making partnership deals with Verizon and acquiring competitors (Blockbuster Express) for the purpose of eliminating them. Consolidating…maneuvering.

Though I haven’t used Redbox myself, being an admittedly long-time Netflix user (2000), I can completely understand the attraction of the omnipresent red kiosk in suburban shopping malls and locales. It’s like a Blockbuster store, but without the overhead and desultory staff. As the real estate adage says, “Location, location, location.” Being able to rent a disc, cheap, as a capper to a grocery run or local errand is a tough proposition to beat. Must be a real boon to overworked parents! (Be where your customers are.) Netflix has set out to differentiate itself in the increasingly competitive marketplace by becoming a producer rather a distributor. While it’s very cool to be hobnobbing with the stars, resurrecting cult favorites like Arrested Development and producing new ones with Sopranos alumni, perhaps this is not the right way to go about rebuilding trust with the paying customers. Will American audiences find Lillyhammer to be so compelling that they’ll overlook the service-level chaos and mixed message coming from Netflix? It’s too early for me to say — and Netflix says they won’t. In going down this path, Netflix has gained a little distance over their archrival, but created a potentially bigger problem by threatening the very companies on which its very business model depends. Time Warner has already figured this out and responded, extended the waiting period for both Netflix and Redbox to access their titles for rental. (Redbox intends to ignore the window.) Perhaps this timing has something to do with the debut of Ultraviolet, which WB strongly supports. Time-Warner subsidiary HBO followed suit not long after. The niche cable producer refused to sell Netflix rental discs at wholesale prices henceforth. One of the reasons I signed up with Netflix back in 2000 was that it was the MOST convenient way to rent movies. No lines, late fees, or laughably narrow selection, all of which I was frustrated by at the local video store. As pleased as I am with Netflix’s recent push into streaming, I too was disappointed by the recent price increase and confused by the back n’ forth about Quikster. The icing on the cake seemed to be that Netflix hadn’t even investigated whether the Quikster Twitter handle was available before making their announcement. It came off like corporate strong-arming. I’ll stick with big red for the time being, but Reid and company have to get it together if they want to keep me and mine as loyal customers. A few modest suggestions: Continue to broaden the streaming choices. Mend fences with the studios. Provide service and selection. Remember who your customer is. And don’t tell me how I want my media. I’ll let you know.