Netflix Inc. chief executive officer Reed Hastings has a new strategy: Blame Canada.
That’s his suggestion for those who question Netflix’s decision earlier this week to split its original DVD rental business into a separate subsidiary. American subscribers, are you miffed about Netflix splitting your service in two, shoving your DVD-by-mail account onto a separate website and a second bill, and making the service more expensive and less convenient to use? If you think the service is going south, look north. Blame Canada.
“It’s all the Canadians’ fault,” Mr. Hastings said jovially in an interview Thursday, when asked what made him decide to hive off the DVD business under a new brand called Qwikster. It’s a decision that earned the company plenty of attention – and some scorn for the new strategy – early this week.
Thursday was the first anniversary, to the day, of Netflix’s launch in Canada, bringing its streaming service that delivers movies and TV shows over the Internet to computers and other connected devices, to its first international market.
“We launched in Canada to see how would streaming-only perform? Is broadband good enough that streaming only, without DVD, is a good enough product to catch on?” Mr. Hastings said.
Early success in Canada caused the company to experiment with streaming-only for U.S. subscribers shortly after the Canadian launch last year, he said, because company executives realized just how fast the market for video was changing.
“We launched streaming-only in the U.S., which we did because of Canada, and that took off really fast. Those two things made us say, DVD’s a great business but it’s a different business. And we should put it in a separate brand, in a subsidiary called Qwikster.”
The company announced in August that it had surpassed the one-million-subscriber mark in Canada in July.
Netflix earned the ire of U.S. customers in July when it un-bundled its streaming and DVD services, which used to be available for one discounted price, and made subscribers pay for two memberships at full price to continue receiving both services. Since then, Netflix’s stock has taken a beating, falling nearly 60 per cent since its peak in July, and the company has lost more than a million customers.
Mr. Hastings was in San Francisco on Thursday for Facebook’s f8 conference, where he went on stage with the social networking site’s founder Mark Zuckerberg to announce new co-operation between the two companies.
By connecting their Facebook and Netflix accounts, users will be able to see what their friends are watching, and also watch Netflix content inside through Facebook.
“We’ve been trying to figure out social TV for at least five years,” Mr. Hastings said. In fact, before Facebook, Netflix experimented with its own social network, which was a failure – a fact Mr. Hastings underlined by taking a shot at Apple Inc.’s social function for its media service.
“It suffered all the failures of – oh, I don’t know, do you use Ping in iTunes?” he said. “Like, no.”
The Facebook integration will be offered to Netflix users in Canada and in Latin America, where it launched in 43 countries earlier this month.
It won’t be available in the United States, where a 1988 law called The Video Privacy Protection Act bans companies from making public people’s video rental habits. Netflix has been lobbying Congress to change the law, and Mr. Hastings said he is optimistic it will agree to add a line allowing users to consent to their information being shared.
“We’re really focused on becoming a global streaming company,” he said. “…In five years, much of television viewing is going to be over the Internet, on demand, click and watch, Netflix and companies like Netflix.”