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Netflix Blows It Again and Again: Commentary

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Years back, Palm, makers of a phenomenally successful handheld organizer, was the definition of a tech company that had it all and blew it through management missteps.

Netflix seems eager to follow the same path.

After a price hike that left its customers fuming, Netflix added two more self-inflicted wounds this weekend: first by changing users' movie queues and then by renaming and separating its DVD-by-mail operation.

Netflix, do you really not understand the appeal of your own company?

The only thing Netflix should be worrying about now is how to sign premium Hollywood movies to its growing streaming service. And yet, it's battling several problems of its own creation. The mess started in July, when Netflix announced a change in its pricing. No longer would the streaming service be a $2 extra, easily justified to most customers. Now, DVDs and streaming were separate businesses, and each costs $7.99 per month.

Despite the outpouring of Twitter rage, Netflix didn't believe it would lose many customers over the decision. This month, however, it acknowledged that customers were leaving at a higher rate than expected.

Making a bad situation worse, the company announced changes to users' movie queues on Saturday (Read Dan Rayburn's column on the subject). Previously, selected movies no longer available for streaming were listed at the bottom of the queue, so users could still see their choices. Netflix said it made the move for convenience, but to many it looked like Netflix was trying to hide the fact that many titles would no longer be available.

The move was a misstep because it removed a convenience that many customers relied on, and because Netflix announced the change after the fact.

Yesterday, however, came the biggest blunder of all.

In a groveling blog post (which began "I messed up. I owe everyone an explanation."), Netflix CEO Reed Hastings said that in order to show how the DVD and streaming businesses are now separate, the DVD business will now be called Qwikster (and will also include video games). That means customers of both services will need to maintain separate queues on separate websites and will get separate charges on their credit cards.

Unbelievable. Netflix, you got big because of the simplicity you offered. How do you not see that? People liked that they could pay one low price and stream whatever they liked. Sure, the streaming library wasn't great, but people overlooked that thanks to the ease of use. Why have you destroyed that?

Keep watching, because Netflix will likely make two or three other blunders while trying to correct these two, as it becomes the Palm for a new generation.

If the people behind Amazon Prime and Hulu Plus aren't right now creating incentive deals to lure unhappy Netflix subscribers, they're making a blunder of their own.

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