Killing Netflix “Profiles” - A Stupid Business Decision
Netflix is ending its longstanding policy of allowing customers to hold multiple profiles under a single account. The announcement was sent to users today:
We wanted to let you know we will be eliminating Profiles, the feature that allowed you to set up separate DVD Queues under one account, effective September 1, 2008.
Each additional Profile Queue will be unavailable after September 1, 2008. Before then, we recommend you consolidate any of your Profile Queues to your main account Queue or print them out.
The profiles feature was an excellent way for multiple people living in a single household (husband/wife, roommates, etc) to maintain separate queues and profiles of the movies they have liked, disliked, etc., while keeping a joint account of discs sent to the same address for billing purposes and convenience.
The rationale for the move is not substantially explained in the Netflix communication.
While it may be disappointing to see Profiles go away, this change will help us continue to improve the Netflix website for all our customers.
The most likely explanation is that Netflix has determined that joint accounts are causing them to lose revenue due to their pricing structure. In effect, multiple users in a single household gain scale efficiencies because it is cheaper to have a single account sending 4 discs at a time ($23.99) than it would be sending 2 different accounts 2 discs at a time ($13.99 x 2, or $27.98, a $4.00 difference). If multiplied across millions of accounts on a monthly basis, that could mean a lot of additional revenue for Netflix.
… IF it doesn’t turn a large number of their customers away.
The real shocker can be found on the FAQ linked from the email sent out today:
You will not be able to transfer your Profiles data to a separate new account
Consider moving all DVD titles in your Profiles Queues to your main account Queue
How does that make any sense? Does Netflix seriously expect the wives and roommates and brothers and sisters who have been sharing accounts to merge their accounts into a single account and lose all of the individuality and “social profile” data that they used to enjoy from the site? This mass of data, and the power of the Netflix recommendation engine was one of the major differentiators that kept its users on the site.
To quickly come to my point, this is a plain stupid business decision. Here’s why:
- Users will now have to pay two bills where they used to pay one
- Users will lose all of the data they have built up over time while using Netflix, eliminating the barrier that once kept them from switching to a competitor, such as Blockbuster
- Users who decide to stay with Netflix will be forced to spend hours re-entering their movie ratings and rental queues
- Users who have been too lazy to close or downgrade their accounts won’t renew their accounts, killing the “momentem” that once kept them paying every month
- Users who do decide to turn their single account into two different accounts will feel like Netflix is nickle-and-diming them, forcing them to pay more for a less convenient, equivalent service that they used to pay less for
- New customers that might have been attracted to the idea of a single Netflix account per household (it’s easy to convince a new roomie to pay $3.00 a month to move from a 2 to 3 disc account, when they might not have been willing to pay $9.00 a month to get an account of their own)
Who wins from this decision?
- Traditional competitors who can take advantage of the mass of new potential customers shopping for a DVD rental service (e.g. Blockbuster)
- New competitors (e.g. iTunes movie downloads) who will open their arms to an influx of users who no longer have any reason to stay with Netflix and its old DVD-by-mail technology
Am I missing something here, or did Netflix just make a huge blunder?
The Gluten-Free Niche
Two years ago, my friend told me she couldn’t eat bread or drink beer, but that corn-tortilla-wrapped tacos were just fine. I did my best not to look at her like she was crazy.
Then last year I met a coworker with a similar ailment, and then just this summer, a new flatmate. That trend is telling, and apparently in-sync with the growing trend in diagnosis of “Gluten Intolerance” throughout the United States. As with any ailment, increasing prevalence or diagnosis of previously inexplicable symptoms leads to new business opportunities for those willing to customize their service and products to cater to the afflicted.
In July, The New York Times wrote about Risotteria, a descriptively-named restaurant in Greenwich Village with a menu that caters to the needs of the gluten intolerant (”For the Gluten-Averse, a Menu That Works“). The success of that restaurant would seem to be a harbinger of opportunity for restaurants and food-product manufacturers looking for a new niche audience to target. Indeed, many producers have already started to move to the scene.
It has become a popular dietary villain. Gluten-free foods are popping up on grocery-store shelves and restaurant menus, including those of national chains like P. F. Chang’s and Outback Steakhouse.
The diagnosis of Celiac’s Disease (the scientific name), an autoimmune disorder wherein sufferers have an adverse reaction to Gluten, a protein found in wheat, rye, and barley (read: bread and other baked goods, beer, and a whole host of things that use wheat flour as a thickening agent) is on the rise in the United States. The New York Times wrote in May about this trend, comparing it to the similar rise in lactose-intolerance in previous times (”Jury Is Still Out on Gluten, the Latest Dietary Villain“)
The prevalence in North America was previously estimated at about 1 in 3,000, but several studies published in the last three years indicate that it is closer to 1 in 100 — and 1 in 22 for those with risk factors like having an immediate relative with celiac disease.
Two or three restaurants and a few packaged foods, however, would seem to barely touch the surface of the trend that could lie ahead. Wrong Diagnosis puts the disease’s prevalence rate at 1 in 250 Americans, and according to the University of Chicago’s Celiac Disease Center, prevalence among otherwise healthy adults may be as high as 1 in 133.
Businesses can cater to the gluten intolerant through a variety of means. For the majority of the restaurants in the world, the option will be as simple as ensuring one or two items are suitable for those with Celiac’s Disease, and labeling them appropriately in the same way vegetarian options often are. In places where populations where disproportionately many “alternative” or “healthy” diners reside, such as San Francisco and Chicago, or where a particularly aggressive diagnoser has a clinic, there is likely a large enough customer base to support a restaurant dedicated to gluten-free items. The place to start would be to contact local support groups and physician specialists to get a better feel for the size of the opportunity.
And best of all, especially for the friends of the gluten-intolerant, it turns out that the food can be quite tasty. I ate at Risotteria while in New York last year, and found my shimp, pepper, and spinach risotto to be excellent. The gluten-free beer made from sorghum, on the other hand, was another matter entirely.
- Welcome to The Strategy Fox
Welcome to the professional weblog of Mitchell W. Fox, a management strategy consultant at Bain & Company in Sydney, Australia.Mitch was previously a Consultant at the Monitor Group, is a graduate of Georgetown University (MSB '05), and was the founder of Hilltop Consultants.