How is your floppy drive working?
Technological change is unavoidable, but there can be serious timing and strategy issues for those charged with making it happen. It is easy to see a "better" future, but getting there is anything but trivial. How do you convince your customers, customers who may be very happy at the moment, to move to something new that may not be perceived as being as good as what they currently have? How do you show them this is ultimately better?
In the past two days I've had several emails from friends complaining about Netflix. Only one complained about the separate DVD and download plans announced earlier in the year, but the announcement Sunday night and , perhaps more import, the explanation/apology, has triggered a reaction from people I didn't realize were Netflix customers. It has even triggered cartoons (tip of the hat to John for pointing out the Oatmeal)
Renting DVDs from physical stores annoyed many of us but Netflix came up with a great alternative and many of us signed on. It wasn't perfect - there was a lag between ordering and receiving, but there weren't any late fees or rushed trips to stores in snowstorms. It changed our perceptions of what was possible and represented a great value. Some of us even gave subscriptions as gifts to people who were technologically challenged.
But physical video content delivery is a doomed service. In theory many of us have good enough broadband service and a reasonable way to view streamed or downloaded content. In practice there are some issues, but technology and the infrastructure is moving in that direction. The ability to select any movie you want when you want to watch it and, assuming the rental is fairly priced and of high enough quality should be very attractive.
Currently there are a few problems. Steaming quality is not universally excellent or even good in North America. Many people have to resort to a network TV quality stream (or lower) complete with image breakups during an hour and a half movie. The depth of the streaming library is, in a word, shallow. Not everyone can watch the stream they have rented on their favorite screen and, some of us - particularly in Canada - have extreme bandwidth caps that limit how much we can stream in a month.
Many find real value in the current Netflix offering, but many others find the change a step down. Netflix needs to dramatically improve the depth of their library and Internet Service Providers need to offer more robust and unfettered bandwidth (although a discussion of the ISP end will get heated depending on your point of view and may involve additional carriage fees from the ISP in the future).
It isn't clear how this will play out, but it is a good example of an interesting society and technology challenge: "how and when do you migrate your existing customers to a new product?" Microsoft's answer is usually - "don't worry - we'll keep things backwards compatible for a very long time" Apple regularly kills technologies, but they seem to have a fantastic sense of timing knowing when they can get away with it. Many other companies have been killed by these transitions.
Netflix pretty much owned the physical DVD rental market with their incredible logistics and deep enough library, but they are not without competition in the streaming world. They see a clear need to move to a streaming only business, but haven't clearly articulated the value of this change to many of their customers and have not (yet) offered a service that offers at least DVD quality in the average home from a large library.
Some would say these missteps are damaging their brand, but it is probably too early to tell. They certainly could have done a better job listening and talking to their subscribers...
Will anyone care in a year? What quality level is necessary?1 How big and current does a streaming library have to be in order to be attractive? How will their competitors respond and what is in this for the ISPs and studios (some of which are competitors)? What are the new price points that will work?
Leading successful change demands a deep knowledge of the technologies and how they are used. This can injure or even fatally wound some companies while others move on to better things leaving the complaints from their customers a distant memory in the process. Some companies have built it into the internal process and even their brand.
You probably don't miss that old floppy drive...
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1 I have worked on the perception of audio and video quality for years and have a bit of clue on this as a separate question. The answer is not straight-forward. A short answer is people will tolerate lower resolution to a point and then the image becomes unwatchable. Video breakups are much more difficult to tolerate with audio and video components behaving differently. It is also a function of screen size as well as the subject matter and expectations of the video.
I've also been studying how twenty somethings consume audio and video for over a decade, but that only represents one segment - albeit one that is often a leading edge. Pieces that fit into a larger puzzle that has a few wildcards. Hopefully Netflix has a deep enough understanding is several disciplines to understand the likely scenarios.
Is this a company that has lost touch with what it means to its users? They had a service they charged money for and then added another that started out being free. If they thought steaming was important in the future why did they give it away and then effectively start charging for it? Maybe the value of the new service is different in their eyes than their users? How is their new service different and better from the services of their competitors? Suddenly swiching the rules and not having worked this out strikes me as very foolish. Do they understand the problem their customers have hired them to solve and are they solving THAT problem?
Posted by: jheri | 09/21/2011 at 08:42 PM