It's not often you get to watch a high-profile, high-flying company self-destruct quite so spectacularly as Netflix has over the past few months. First, the DVD-by-mail pioneer angers customers by charging separately for its increasingly popular movie-streaming service, nearly doubling the price of its formerly cheapest package, and causing as many as a million customers to cancel their subscriptions. Then late last week, Netflix announced it would be splitting the two services entirely, meaning those who wished to continue receiving DVDs by mail would have to open an entirely separate account at the newly created Qwikster.
If there's one rule of thumb of Internet commerce, it's that consumers want you to make their lives simpler. Netflix presumably knows this. That's what made their service so popular. And that's what makes their recent moves so baffling.
One explanation for Netflix's decision to essentially kill its DVD business, might be that CEO Reed Hastings, in perhaps the most brilliant case of corporate fraud ever, has shorted his own stock. But that just strikes me as too conspiratorial. So instead, I can only presume that Netflix has long known that its DVD business is a deadman walking, a reality that the Qwikster split merely confirms.
So who really killed Netflix? Well, I blame Congress. Or rather, Congress' willingness to to dismantle one of the most reliable and affordable postal services in the world.
Think about it. While the "net" in Netflix comes from its online presence, it's the unfairly maligned US Postal Service that made its business model even remotely possible. For example, here in the Seattle area where one-day in-region first class mail service is the norm, we can drop a DVD in the mail to Netflix's Tacoma distribution center on Thursday, and have our next selection arrive in time for a Saturday night viewing. Two days roundtrip. Amazing service. With that turnaround, you can view two DVDs a week for only $7.99 a month. Not a bad deal.
No wonder Netflix quickly became the USPS's largest customer. But with the USPS facing insolvency, all that is about to change.
Facing rising costs, lower volumes, and zero sympathy in Congress, Saturday delivery is soon a thing of the past. Even President Obama has signed off on this. Also slated for elimination are several thousand local post offices and over 250 mail processing centers. Currently, first class mail is delivered in 1 to 3 days, but under the soon to be approved cost-cutting proposals, that will slow to 2 to 3 days, with many areas of the country shifting toward the latter end of the delivery window.
That means that here in Seattle, where two-day deliver will soon be the norm, we'd have to drop a disk in the mail on Monday to be sure of getting our next selection in time for weekend viewing, and our two DVDs a week is suddenly halved to one. Elsewhere in the country, where three-day delivery will be the norm, even a Monday mailing would be too late to receive your next selection by the weekend, so if you have a weekly family movie night, be prepared to switch to every other week.
Suddenly, Netflix Qwikster doesn't look so quick, or all that much of a good deal. Especially with Redbox hawking dollar DVD rentals all over the damn place, and iTunes and Amazon and yes, Netflix streaming movies online.
In other words, DVD-by-mail is dead. Not because Netflix fucked up, but because the medium that made it possible—fast, reliable, affordable, six-day-a-week postal service—is no longer deemed a priority by our government-hating Congress. But then, as Republicans insist, nothing creates jobs or boosts economic growth more than disinvesting in critical public services and infrastructure.
