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October 10, 2011 09:33 pm GMT
A month agoI applauded Reed Hasting's bold decision to split his business into two components. Today he's announcing that they're backing out of this decision.Netflix as a service has always prided itself on movie recommendations that are tailored specifically to you, plus user ratings on the quality of films. So let me use their ratings system to judge their actions to date and explain how I think things will break in the future and why.The big price increase: 5 out of 5 stars. The remainder of this article will deal with this decision but it comes down to the different economics of DVD rentals due to "the first sale doctrine," which gives Netflix a complete library of films and the fact that the first-sale doctrine doesn't apply to digital downloads. This makes their business types very different. Some customer segments value the DVD business and these may be more price sensitive. Some customer segments value the convenience of instantly available films. They might be willing to pay higher prices (and perhaps not an "all you can eat" price but a "pay as you go" price per film). They are potentiallydifferentbusiness models. Netflix needs to segment their customers and charge each what is appropriate.
Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/_e2hk2Rdss8/
Netflix Redux: Is It Ever OK to Fire Your Customers?
A month agoI applauded Reed Hasting's bold decision to split his business into two components. Today he's announcing that they're backing out of this decision.Netflix as a service has always prided itself on movie recommendations that are tailored specifically to you, plus user ratings on the quality of films. So let me use their ratings system to judge their actions to date and explain how I think things will break in the future and why.The big price increase: 5 out of 5 stars. The remainder of this article will deal with this decision but it comes down to the different economics of DVD rentals due to "the first sale doctrine," which gives Netflix a complete library of films and the fact that the first-sale doctrine doesn't apply to digital downloads. This makes their business types very different. Some customer segments value the DVD business and these may be more price sensitive. Some customer segments value the convenience of instantly available films. They might be willing to pay higher prices (and perhaps not an "all you can eat" price but a "pay as you go" price per film). They are potentiallydifferentbusiness models. Netflix needs to segment their customers and charge each what is appropriate.Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/_e2hk2Rdss8/
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