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39 posts tagged internets interestingness

Allowing for Focus

A follow up to my thoughts on the Netflix split from last week: Their former CEO and co-founder, Marc Randolph wrote an excellent post weighing in. The quote above comes from it, and you’ll want to read it in its entirety.

His take? Focus.

Randolph claims no insider-knowledge, so it’s just a theory, but I’d file it under educated guess considering his past ties to Netflix. His take? Focus. He thinks Reed Hastings wasn’t simply trying to spin things when he said that Netflix-proper wanted the freedom to focus solely on the streaming service and that it was a bold and gutsy move to do it when they did.

He makes a compelling argument and backs it using the example of Netflix’s original transition away from DVD retail (something I didn’t know about). I still wonder if there are some other ancillary reasons for the spin-off and I still expect Qwikster to be up for sale sooner than later, but the spin-off will certainly allow for the type of focus Randolph talks about.

By freeing our designers from having to create a sign-up flow that accommodated two types of business, we were able to cut out steps, clarify instructions and simplify the process. Conversion went up.

I’d not thought about it that way, but the entire exercise could be an incredible lesson in product design. Having two split sign-up paths has to increase sign-up attrition rate. Now think about companies that are trying to simultaneously pursue several models. The ability to sell one thing and sell it well is really attractive.

Double the Fun?

Netflix splits into two

If you’re a Netflix subscriber, or a member of the internet at large, you’ve probably heard the news already: Netflix is spinning off its DVD rental service into a separate company named Qwikster. You can read the letter from CEO Reed Hastings that was mailed to subscribers on the Netflix Blog

Unlike their recent price changes, this new move not only caught me by surprise, but doesn’t initially make sense.

As a consumer (and subscriber) this doubles my effort for what used to be a seamless, integrated service.

As a consumer (and subscriber) this doubles my effort for what used to be a seamless, integrated service. I now get billed separately, have to deal with two customer service departments, and two sets of policies that may, in time, conflict. Not only that, but when actually searching for movie I now have to search two websites, separately. I’ve always maintained two queues on Netflix, but it was very convenient to search for a movie, notice it was available for streaming and add it to that queue instead of the DVD queue.

I pride myself on having a bit of business savvy and it’s not often that a company I greatly respect leaves me scratching my head, so I’m trying to guess why Netflix would be willing to make such a bold move. I’ve got two theories:

#1 Sell while you’ve got something to sell

I think it’s no secret that Netflix doesn’t see a future in DVD rentals. They haven’t exactly made a secret of it. Just look at which part of their offerings is retaining the company name and brand. Hint: it’s not the DVD service. Hastings, in his letter today went so far as to say it this way:

“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) because they are afraid to hurt their initial business.”

The rational is that they need to split off DVD service so that they can focus on streaming service. I think there’s validity to this, but I wonder why the split needed to be so public? The services were already essentially split internally, so why split them formally? Why put your customers in some temporary pain? Other companies have made major transitions (Apple, for example) without formally splitting their business offerings into separate companies.

I wonder if the split is actually their exit strategy.

I wonder if the split is actually their exit strategy. Yes, companies that can’t shift focus don’t move into the future well, but Netflix has already demonstrated that it is focused on streaming and the future. Nobody questioned that, even before the price/plan restructuring, let alone this split. But what usually happens to companies that go through a large transition is that their old offerings become a drag on the company. They often can’t exit the business fast enough and go through a period where they lose money before shutting it down for good. What if Netflix, with this move into Qwikster is not only trying to avoid that scenario, but they’re trying to build a separate, currently-profitable company to make it attractive to potential acquirers? It would actually be a brilliant move, if they could pull it off. They sell off their DVD service, while it’s still successful, at for a financial windfall and use the revenue to fund continued development of their streaming offerings. Qwikster becomes a success story for them and, when the day comes in the next few years that the DVD service isn’t tenable, they don’t have it to anchor them down or distract them.

#2 Divide and conquer (Hollywood)

My other theory has to do with rights—the agreements Netflix makes with studios and production companies in order to rent DVDs and stream media. This is a grey are for me, I don’t know exactly how this works, so I’m making some top-level assumptions.

They make more money off of DVD rental agreements and they’re afraid of the scenario the music industry faces with streaming…

On the whole, Hollywood has been reluctant to embrace streaming rentals. They make more money off of DVD rental agreements and they’re afraid of the scenario the music industry faces with streaming: getting paid a paltry few cents for the streaming of an entire album. They’re happy with the status quo (always were and probably always will be) and have little incentive to change. I wonder if that hurts Netflix in negotiations?

It’s possible that now, in rights negotiations, Netflix can wipe the slate clean. Anytime a movie industry executive brings up DVD agreements as a reference point for streaming licensing Netflix can say: “that’s not relevant,” and actually, literally mean it.

It’s all business

I think my second theory, while it doesn’t hurt, still doesn’t seem to require such a drastic change. I also can’t see an angle where this is better for the consumer in the short-run (the short-run being as long as someone needs to rent a physical DVD because something isn’t available for streaming). So my money (literally, I have a very, very, small investment in Netflix stock) is in theory one.

Today, as a subscriber of Netflix, I’m unhappy. As a stockholder, I think I understand it and I’m guardedly-hopeful that it’ll work out the way they intend.

Visit the Link

Internet Access: A Basic Human Right

Amazing. I’m not disagreeing, but it’s really amazing, when you think about it, that the Internet has become so central to human culture in such a short period of time that the UN is essentially declaring it a necessary human right. Think about all the other culture-shifting technologies, like air travel, for example, that have been around much longer and don’t have this kind of status.

(via swissmiss)

Apple is professional, the web is amateur

David offers an interesting explanation for why Apple—to this point—hasn’t been that successful in the realm of web services and particularly the social web. I tend to agree with a lot of it. The very culture of the company seems to go against the grain in the haphazard world of web services.

(via @mranauro)

WeeNudge

Teach your clients about the mysteries of the web

Paddy Donnelly & Jack Osborne have curated a fascinating (and already growing) repository of articles centered around issues that clients of web design and development services often have: things like the mythical fold, use of whitespace, spec work, and the importance of content.

It’s a great resource. I wouldn’t send a client directly to it—that just seems a little cheap—but if you’ve got a client that has some of these questions and is willing to learn, these are good educational starting points.

(via swissmiss)

Visit the Link

Asymmetrical mass favors, a tragedy of our commons

I don’t think I’d ever thought of it this way, but this concept touches on a lot of what I don’t like about the internet in a social capacity. No, it’s not ok for you to spam me. No, it’s not ok for you to expect me to fund your vacation through “donations.” I’m poor too—vacation-poor, at least. No, it’s not ok for you to expect me to have read everything you post on all of the services you post to the next time we meet in person. If anything, the internet highlights a very human tenant: “I care about things and you don’t care enough about those things that I care about!” (myself, on the Twitter).

Good Software Takes Ten Years. Get Used To it.

Joel’s article, referenced by DHH in the article from the last post is a good expansion on the idea of taking your time to build a business with software as its core product.

The obsession with next

Please take a moment and read the entirety of this short piece. Some may think David is being black & white. I don’t think so; there are always exceptions to the rules. But I think what he’s saying is that we’re too often chasing the exceptions. And companies, projects, software, and customers can suffer for it.

Is the Internet God?

Dave Pell makes an argument that is at once beautiful and scary. The more we know, collectively, as an increasingly-world society, the more we’re responsible for the things we choose to be passive about. It’s both exciting and daunting.

The Very Last Thing I’ll Write About Twitter

Interesting concept. There are probably several other services that could benefit from a decentralization similar to email—imagine standardization and decentralization (and the data portability that comes with it) for services like video or photo sharing, for example—but Twitter may make the most sense right now.