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It can't be a fun week to be a marketer at Netflix. A year ago Netflix seemed unassailable.
Now its fate may be in the hands of the very Hollywood studios it bested and a 'pot-smoking guy' who owns its new brand on Twitter.
Just a year ago, an Econsultancy post concluded that movie studios missed their streaming video opportunity, and that Netflix, with a surging stock price had all but eaten their lunch.
That was a fair assessment, then. After all, Netflix still accounts for a staggering 20% of US internet traffic during prime television viewing hours. That gives it a future as bright as any entertainment network.
Meanwhile, competitors like Hulu are falling apart, Apple TV is still managed like a corporate hobby, and GoogleTV is stymied by the networks.
But Netflix is no longer above the fray. You see, the future hasn't been arriving fast enough for the Netflix business model. Sending DVDs through the mail is costly and it drives lots of operational overheads, which otherwise could be spent on licensing desperately needed streaming content.
Though Netflix has a huge subscriber base, new "web only" competitors will be able to grow faster than them. That's the source of the huge multichannel mistake of the Netflix ill-fated price increase. Then came a subscriber insurrection, reduced growth estimates for Wall Street, and a tumble in the firm's stock price of 27% in just the last week.
So that's the background for what seems like a frantic move this week, Netflix is splitting off its DVD and video game by mail business in to Qwikster.
The US first sale doctrine
Yes, this fragments the Netflix brand and customer experience, and that's bad. However, potentially worse, it loses what has been an ace in the hole for Netflix: the first-sale doctrine.
All anyone needs to do to rent a physical DVD to others is to legally purchase it first. This meant Hollywood couldn't freeze Netflix out of renting DVDs; on-demand streaming requires licensing.
How the mighty have fallen
With an unbundled offering, Netflix seems far more assailable. But before Netflix can take on Hollywood studios, Walmart, Redbox and others who want to take a piece of their business, they need to take on a guy with a dormant Twitter account.
Until yesterday the Qwikster Twitter account was identified by an icon of a pot smoking Elmo from the children's television show Seasame Street.
When Jason Castillo got 9,000 new Twitter followers in a single day, and found his in-box clogged with offers to buy his account, he realized that his dormant Twitter account, Qwikster, really had some real value.
In fact, in the day since Netflix renamed its mail-by DVD using that name, his life has taken on sort of a reality tv show vibe.
And he's letting it show with a stream of partially conscious nonesense, mixed with musings about selling the account, that must be driving brand managers at Netflix crazy.
Others are even starting to parody his "half baked" style on other accounts.
This is further proof that Qwikster was a knee-jerk brand change: its social media accounts were not secured before the brand launch.
Had they performed a trademark search with a firm like ThomsonReuters or CoreSearch they'd have been alerted to this.
Normally brands use services like Knowem to lock down names of hundreds of scattered social media services before launch.
Netflix, meet your studio masters
Dumping the DVD business may be necessary for Netflix, but that has to be just the start of something bigger. Without a brilliant licensing deal to bring its subscribers over the digital chasm it has decided to cross, this will have been for nothing.
So, suddenly, the fate of the previously unassailable Netflix is in the very hands of the Hollywood studios it bested. But before it can take them on, someone at Netflix needs to deal with a guy with a pot-smoking Elmo on his icon. This can't be a fun week to be a Netflix marketer.