I was proudly one of Netflix' first subscribers. October of 1999 to be exact. In the beginning, the plan consisted of four unlimited monthly DVD rentals. The turnaround time back in 1999 was around seven days. They were located on the west coast of the U.S. and I lived on the east cost. As they prospered they expanded throughout the U.S. They then were able to reduce their delivery turnaround times. They also began to change their rental plans because of the shorter delivery turnaround. They reduced the number of rentals out at one time. That was understandable because of the faster turnaround. Netflix decided to also grandfather-in their original subscribers, such as myself. They said we, original subscribers, would be subject to price increases like any other subscriber; however, the four out-at-a-time unlimited monthly DVD rentals would remain intact.

I was so happy with Netflix that I personally conveyed my satisfaction with friends, family members and acquaintances. As a result, I added many members to their customer base. I even bought a gift subscription for a friend. He still has that subscription. Most companies provide a benefit to customers who have friends and family also subscribe. Netflix has no such program. I'm fine with that. I always wanted them to do well so they could remain in business. As a huge movie fan, I loved having access to their massive stock of movies and TV shows.

Over the years, their growth allowed for multiple DVD rental/streaming plans. Streaming became standard with the DVD plans. For a nominal addition cost, Netflix later added Blu-ray rentals to the DVD plan (streaming included). I rarely used their streaming feature because of its poor video delivery quality. Due to their extreme video compression with low resolution, I found most of their stuff unwatchable. Even the HD streaming is highly compressed, although the available HD material is rather scarce. As a result, I stopped accessing the streaming feature.

Based on many articles about Netflix' future plans, their goal was to move more towards the streaming side of the business. DVD's/Blu-ray's are costly on many levels. They must contend with shipping costs, products lost or damaged in transit, multiple warehouses, employees and a massive disc inventory. I can see where streaming was the future and the profitable end of the business. The expansion of fiber optics for home delivery will likely one day make discs a thing of the past. Fiber optics will allow for uncompressed data throughput. Translated? Streaming Blu-ray quality. We're not there yet. For most of us, that is several years away. Still, for disc rentals, Netflix is, or was, the best bet in town.

My, how things have changed. Well, Netflix dropped a bomb on their customers. They split the DVD rentals away from their streaming basic subscriptions. You can get both for a substantial price increase or just subscribe to a solo DVD or streaming plan. All of this was done without any explanation to their customer base. Not a good move on their part. Why didn't they at least send out an e-letter to their customers with an explanation for the changes? Instead, all they did was incense their customers. As a result, most of my friends dumped Netflix. Instead, they decided to expand their options with their cable or satellite company. As for me, Netflix went back on the one thing I counted on. They eliminated their promise to loyal grandfathered customers. They threw out my plan and said I had to start from scratch. My plan went way up to $35.00 ($34.98 to be exact) a month for DVD + Blu-ray (four) + streaming. So much for customer loyalty. As a result, they now receive less money from me, $15.00 ($14.00 a month). I decided to drop down to two disc's a month for DVD + Blu-ray and with no streaming. By my math, they are now getting considerably less money from me.

It gets even worse. Starz Entertainment provided Netflix with over a 1,000 streaming movies. Well, Starz did not renew their contract with Netflix. Ouch! The overall losses are still to be determined. So far, Netflix' stock price dropped 19%. No telling where the bottom is.

The italicized below paragraph was quoted from CEPro.com:

"At a press conference on Thursday, Sept. 15, 2011, Netflix chief content officer Ted Sarandos admitted the company underestimated customer reaction. "Being able to precisely forecast and predict the behavior of that many people on a fairly radical change is something we'll get better at," he said.

Full article link:
http://www.cepro.com/article/netflix_loses_1_million_subscribers_shares_tumble_19/ "

The statement made by Ted Sarandos is all telling. They make a "fairly radical change" and then become shocked at the backlash. Corporations in general have lost touch with their customers and their employees. If you aimed a gun at your foot and you pulled the trigger, why would you be shocked when the bullet hits your foot?

On September 18, 2011, Reed Hastings, Co-Founder and CEO, Netflix sent out a memo to all Netflix subscribers. The memo was a belated explanation for all of the new changes. I suppose it's kind of like locking the barn door after the horse escaped. Anyway, Hastings also discussed an additional change. Apparently, the DVD side of the business will break away from the name Netflix.com. The new name is Quickster.com, although still the same company. The name sounds like a quick drying cement or a site where I should be downloading music really fast. How about NetflixDisks.com for disks and NetflixStream.com for streaming? Anyway, besides DVD's, we can use an upgrade option for Quickster.com to include Blu-ray and various games for a Wii, PS3 and Xbox 360. It's really not a bad idea.

For the HD streaming to take hold, there probably needs to be a three-component solution:

1. Hi Bandwidth
2. Higher but better Compression
3. Low error rate

Greater and better compression algorithms can offset some bandwidth limitations, but there are a bunch of variables. This is why there was a huge fight by content providers i.e. Netflix, Google, etc., because they want to buy bandwidth from the carriers to ensure a certain level of reliability to their customers. But, smaller companies fought back and the Net Neutrality provision was introduced into Congress to stop this. Point being is the streamers are hosed as providers to anyone who cares about decent quality HD streaming.

FIOS and Uverse have an advantage over high bandwidth cable. Their bandwidth is dedicated from the distribution electronics to the set-top-box. The backbone is the wild, wild west as far as capacity and priority are concerned. So, all that said, for most of the population, a more realistic timeframe is 5-10 years. The investment to change the bandwidth curve for the masses is staggering.

Look, I really like Netflix. They are still the best game in town for DVD and Blu-ray rentals. Why? Mostly, it is because of their massive library and reasonably quick turnaround time. I must say I was proud of being one of their very first members. I'm still a loyal member, although loyalty is clearly no longer a part of Netflix…I mean Quickster.

Below is a direct cut-and-paste of Reed Hastings' belated email explanation of the Netflix changes (dated September 18,2011)

Dear Robert,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn't have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It's hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to "Qwikster". We chose the name Qwikster because it refers to quick delivery. We will keep the name "Netflix" for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we're done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.