Netflix’s recent spinoff, Qwikster, which separated their mailed DVD’s from their online streaming services, has proven to be unsuccessful. The split of services and hike in prices has driven away about 800,000 American subscribers.
This strategy that Netflix tried to implement was unsuccessful because the price of their services was elastic, meaning that demand was sensitive to price. If they had done market research beforehand, they could have foreseen their customer’s reception to Qwikster. Their brand positioning of this new product failed to match what the market had offered with Netflix; Qwikster’s relation to Netflix is similar to the free-ride trap approach because it introduced a similar product to what was already present.
Netflix has faced over a 25% drop in shares compared to their previous quarter. Investors and stakeholders are losing interest in Netflix because of their inconsistent display of market security over the past few months. The company can face major problems due to the loss of equity and liability funding (like bank loans).
Though Netflix has returned their previous combined services and rates, they are continuing to lose customers; their actions had received such negative publicity, which prompted the loss of trust and loyalty to the company.
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