Netflix's original business finally has a name that doesn't contradict its nature.
Reed Hastings '83, among Bowdoin's most illustrious living alumni, founded Netflix in 1997 to rent DVDs to people by mail. But aside from account management, there was nothing "net" about the "flix." That didn't come until January 2007, when the company launched online streaming. Now, the DVDs-by-mail service is being broken off into a separate (but Netflix-owned and operated) company called Qwikster.
"Companies rarely die moving too fast," Hastings wrote in a blog post announcing the change, "and they frequently die from moving too slowly."
The life of a corporation is theoretically unbounded, but the de-thronings are coming closer and closer together. It's the nature of a fast-moving ecosystem ruled by the long and lengthening lever of technology.
When your product is code served from a central store, you can pivot on a dime. Facebook can roll out a complete redesign to 800 million people in the time it might have taken Henry Ford to sell one customer a new model. But whatever the incumbent's technological firepower, internal institutional friction can encumber every growing company.
Netflix is now aggressively cutting free its baggage in order to focus on what its prescient name proves was always going to be its fate.
The short-term negative impact on user experience is clear. Users will have to manage two separate accounts on two separate websites. But we can only begin to guess how the tethering of its two very different businesses has been holding Netflix back internally.
Why is there even an "instant queue"? There's nothing queue-like about it. It's a holdover from the DVD era, an artifact of antiquity. But historically, everything the Watch Instantly team has done has had to respect everything the DVD team had done.
In theory, it always sounds great to roll everything together into a single, master-planned, all-singing all-dancing, fully-integrated service. In practice, it incurs serious costs that the customer may never be aware of. The graveyard of what could have been is silent.
Hastings has long been conscious of the things that age a company to the point of total senescence. His widely-read "Netflix Culture: Freedom & Responsibility" slide deck preaches a decentralized, "highly aligned, loosely coupled" organization, free of the complex interdependencies that make a system slow and brittle. (Similarly, Amazon CEO Jeff Bezos' famous "two-pizza rule" bounds optimal team size by the amount of food that should be sufficient to feed them.)
The Qwikster spin-off is the epitome of this philosophy. Netflix has never been afraid to aggressively disrupt and cannibalize its own business in order to stay cutting-edge; now, it's externalizing the internal disruption.
Besides being an impressive business in its own right, the DVD service was critical in helping Netflix gain traction in online streaming—it subsidized it, cross-promoted it, and provided reams of data about the sort of movies people want to watch. But its time is nearly done. Netflix has bigger problems.
"We had DVD by mail mostly to ourselves for five years before Blockbuster attacked," Hastings said in a 2009 interview with Wired Magazine. "And then they gave us hell for five years. So, as great as things are going now, I'm like, remember, hell will return."
Netflix will die eventually. If Hastings has anything to say about it, it will be by fire.