The encyclopedia · Marketing & Brand · Strategic decision · 2011
Netflix split its DVD service into Qwikster and lost 800,000 subscribers in a quarter
In 2011, Netflix announced it would split DVD rentals into a new brand called Qwikster, triggering a backlash that cost 800,000 subscribers.
Netflix · 2011-09
What happened
In July 2011, Netflix raised prices by roughly 60% for customers who wanted both DVD-by-mail and streaming, effectively unbundling the two services. In September, CEO Reed Hastings announced that the DVD business would be spun off into a separate company called Qwikster, requiring customers to use two websites and two accounts.
Customers reacted with fury. Many saw the move as a price hike dressed up as a strategic split, and the Qwikster name became a symbol of corporate arrogance. Netflix lost 800,000 U.S. subscribers in the third quarter of 2011, and its stock fell roughly 77% between July and December.
Within weeks, Hastings reversed the Qwikster decision, admitting in a blog post that he had 'slid into arrogance.' The DVD business stayed inside Netflix, but the price increase remained. The episode became one of the most cited examples of a company misreading its own customers.
Netflix eventually recovered and grew into a streaming giant, but the Qwikster reversal is still taught as a warning about combining a price increase with a confusing rebrand and poor communication.
Why it happened
- Netflix tried to separate two services that customers saw as one product, without explaining the benefit to them.
- A large price increase and a new brand name arrived together, making both look worse.
- The Qwikster announcement was made by blog post, with little customer research or advance communication.
- Management assumed subscribers would accept the strategic logic and underestimated emotional attachment to the existing service.
- Qwikster was announced and killed inside 23 days — the reversal was faster than the rollout, which is what a decision reversed by its own customers looks like
The lesson
A price change and a rebrand should rarely land at the same time. If you are asking customers to pay more, do not also ask them to learn a new name and a new workflow.
Aftermath
Netflix killed Qwikster within weeks and kept DVDs under the Netflix name. The company later recovered and dominated streaming, but the 2011 episode remains a standard case study in pricing, rebranding and customer communication.
Sources
- Netflix Case Study — From Qwikster Disaster to Global Streaming Dominance — Meritshot
- Netflix's Qwikster Catastrophe: The 23-Day Blunder — Stratrix
- Netflix and Qwikster — Yale SOM Cases
- NPR, 10 October 2011 — Netflix Scuttles Its 'Qwikster' DVD Rental Plan (reversal after backlash; price hike kept; ~1 million subscribers lost)
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