A Brief History of Bad Product Decisions

I’m old enough that I remember the introduction of “New Coke,” when the soda pop manufacturer decided to make their formula taste closer to that of Pepsi, which I find is most useful as a scrubbing agent rather than a thirst-quenching beverage. It was April 23, 1985, and while it was a little late to be included in all of the Orwellian weird events of 1984, it certainly can still be grouped into the moments we all would love to forget about the 1980s—big hair and scrunchy socks notwithstanding.

There was actual public outcry. People poured the redesigned drink into the streets, and Coke executives were floored. Soon, there was “Coke classic” on the shelves of grocery stores again, and we all breathed a sigh of relief, even as we muttered to ourselves about stupid executives. Quietly, some time later, Coke pulled the new formula altogether.

blockbuster video storeSometimes products fail because they become obsolete, or fail to see what trends are on the horizon. Blockbuster went down in flames because they refused to acknowledge that then-upstart Netflix had a novel business model of no late fees. If folks wanted to pay a monthly subscription rate to sit on the same copy of Howard the Duck, or Zombie Strippers, that was their problem. By the time Blockbuster came around to DVD rentals, it was too late and they collapsed into bankruptcy, $1 billion in debt.

Now I receive an email in my inbox telling me that my Netflix subscription is going up, to cover the costs Netflix says have risen. Where once they offered me “unlimited” movie streaming as an addition to my DVD rental plan, now they’re splitting each into its own service and billing (more) them separately. I have been a Netflix customer since 2002, one of their first, actually. Yes, I’m close to being a Netflix early adopter. But now I’m considering walking away from them altogether.

Netflix may be making a very bad decision here, in thinking that its streaming service is more attractive than it is. It’s prone to the sudden buffering slowdown, and as they have a different licensing structure than say, iTunes or Hulu, users need to wait a little while for movies and television shows to be released to Netflix. I can haz access to the television lineup better, on average, through Hulu or the networks’ Web sites themselves, than I can with Netflix.

Netflix also has disappeared movies from its streaming service before, even if I’d just watched them—or part of them—the previous day or week. I’m looking at you, Spartacus: Blood and Sand. I can’t believe I just admitted publicly that I’m a fan of that.

Again, public outrage from Netflix’s 23 million subscribers. Like me, people are talking about quitting the company altogether. I’ll probably just forgo the DVDs and keep the streaming, looking to fill in the content gaps in other ways, and I say this as a very not big fan of iTunes’ 24-to-watch-the-movie setup.

Put it this way, Netflix’s pricing structure change is about as appealing as Microsoft’s WebTV. As sturdy a concept as the Pinto. Who knows? Maybe by next week they’ll say it was all a gag, or mistaken reporting, like the dissolution of the Oxford comma.

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7 Comments on “A Brief History of Bad Product Decisions”

  1. July 15, 2011 at 12:20 pm #

    Yes! Remember Pepsi – Clear?!

  2. evmaroon
    July 15, 2011 at 12:28 pm #

    Wasn’t it Pepsi Crystal? Yeah, I remember, and it was gross, gross stuff.

  3. Barbara
    July 15, 2011 at 5:45 pm #

    David Pogue has a good post about this. He basically says they handled it badly, but are still the best deal around unfortch. http://pogue.blogs.nytimes.com/2011/07/14/why-netflix-raised-its-prices/#more-4393

    • evmaroon
      July 18, 2011 at 9:16 am #

      Sadly, he’s right. I’m a little askance that there aren’t better options out there, given how close we are to a media company oligarchy. I suspect at some point things will consolidate. For now we’re going to drop the DVD rental, even though it pains me a little because streaming is the better profit maker for Netflix. Harrumph.

  4. hsofia
    July 18, 2011 at 9:45 am #

    I’ve been a Netflix subscriber since 1999/2000, and I think the days of a single service tv/movie source are gone. I haven’t had cable in years (and even when I did have it, never treated it as a necessity, but something to be ordered or not depending on how much I was really going to use it), so getting my TV from multiple methods or in a delayed fashion is pretty typical for me.

    Currently I have Netflix, Hulu+ (which is $8 for what – episodes of Master Chef, House Hunters, and maybe an SNL skit here and there, which we could watch on YouTube; I subscribed for access to the Criterion Collection, but I’ve only watched two of those in three+ months), and Amazon Prime video. I rarely use Amazon Prime video because most of their selection can be found on Netflix and/or Hulu. I don’t even use it to rent recent releases because I live several blocks from a Redbox if I’m hankering for something really current. I also borrow videos from the library from time to time, especially for my daughter.

    But I think this sort of customization of viewing products is the way of the future (not that I’m any good at predicting the future). People will pick and choose depending on their viewing habits. I have a friend who dropped Netflix and joined Blockbuster. I wouldn’t do it, but then I don’t need to see the most popular Hollywood offerings any time soon (if I do, I go to the theater) and Netflix has a much better and larger selection of the kinds of programs I do like to watch.

    The way Netflix announced the price increase was terrible, but I’m hardly paying more now than I was over a decade ago and their services have improved dramatically – bigger DVD library and a growing streaming library.

    My price will go up $5 to keep 2 DVD/streaming plan that I have now, but I have had the same two DVDs for six months so I’m seriously considering just going to streaming, in which case I’ll end up paying less than I do now. I would love to have a look at their data surrounding customer use – for example, what percentage of customers who borrow DVDs also use Instant, and vice versa? What is average length of time a customer keeps a DVD? What percentage of people are on which plans? I think it’s all very interesting.

  5. July 22, 2011 at 6:41 am #

    What I heard was that when they offered streaming, they added on DVD rentals at a low cost, thinking very few people would use them. But because their streaming options are still so limited, people did continue to use the DVD part of the plan, and they started losing money. So they had to up the price of the DVD part of the plan, and the best way to do that was to position them as separate services. I don’t have a citation for where I read that, so it could be completely wrong.

    • evmaroon
      July 22, 2011 at 7:44 am #

      I think that history is right, and it makes sense. But as a consumer, I hate it, don’t understand why I’d suddenly pay more money for the same service level, and am re-assessing my subscription. And as I hear it, if I drop the DVD service, it’s all the better for Netflix, because streaming is more profitable for them. So that’s my contribution to their company, then!

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