Netflix Fragments Its Brand in a Self-Made Disaster

Netflix must hate its by-mail DVD business. Why else would they spin it off, and give it a mid-’90s corporate name like Qwikster? Am I the only one to think this sounds like a late-moving Napster? I also hear that the Urban Slang dictionary defines a Quickster as one who can get girls in the sack quickly. There’s no way this was a lovingly crafted brand name.

Six months ago, I’d have said that Netflix was above the media convergence fray. After all, this service accounts for 20 percent of US internet traffic during “prime time.” That gives it the power of any broadcaster. Meanwhile, competitors like Hulu are falling apart, Apple TV is still managed like a corporate hobby, and GoogleTV is stymied by the networks.

Yet today, uncertainty abounds at Netflix. The future isn’t arriving fast enough for its business model. Sending DVDs through the mail is costly and it drives a lot of operational overhead, which could be spent on licensing desperately needed streaming content.

So now Netflix is splitting off its DVD and video game by mail business in to Qwikster. This fragments the Netflix brand and customer experience. It also loses what had been an ace in the hole for Netflix: the first-sale doctrine.  All anyone needs to do to rent a physical DVD to others is to legally purchase it first. This meant Hollywood couldn’t freeze Netflix out of renting DVDs; on-demand streaming requires licensing.

Suddenly, everyone from Redbox to Walmart is in a changed competitive space. And now that Netflix has unbundled its offerings, it seems far more assailable.

Dumping the DVD business may be necessary, but now Netflix needs a brilliant licensing deal to bring its subscribers over the pure-play digital chasm it has decided to cross. And this means that Hollywood holds the fate of Netflix in its hands.


Update 9/28/2011: When Jason Castillo got 9,000 new Twitter followers, and in box clogged with offers to buy his account, he realized that his dormant Twitter account, Qwikster, had some real value.

In fact, in the day since Netflix renamed its mail-by DVD using that name, his life has taken on sort of a reality tv show vibe. The young man who’s Twitter icon is a pot smoking Elmo, has taken to posting partially conscious nonesense that must be driving brand managers at Netflix crazy.

This is just more evidence that Qwikster was a knee-jerk brand change: its social media accounts were not secured before the brand launch. Had they performed a trademark search with a firm like ThomsonReuters or CoreSearch they’d have been alerted to this. Normally brands use services like Knowem to lock down names of hundreds of scattered social media services before launch.

That was enough to get him re-engaged, posting such bizarre stream of conscious tweets that it is nearly surreal poetry.

So, before Netflix takes on Hollywood, someone in legal will likely need to make a deal with this guy. Yes, selling Twitter accounts violates their terms of service. But as you can see, all Qwikster wants is a big wad of bills handed to his friend. Would that be selling an account, or just recognizing generosity? After all, nobody ever taught Elmo Latin, such as “quid pro quo”.

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