By now, it’s not new news that Netflix is reversing the Qwikster split.

After enormous backlash from loyal users about their plan to split their DVD service from their instant streaming service, they’ve gone back to the way things were (albeit at higher prices). Much of this could have been avoided if they had just listened to their customers from the outset. Unfortunately, it took a painful lesson to teach Netflix that it’s tough to go against what your customers want – regardless of what you think is best.

Netflix finally listened to its customers

After the price change uproar, many people thought that Netflix would sit quietly, not make waves and wait out the storm. They probably should have. Instead, CEO Reed Hastings and Netflix famously decided to double-down and upset their customer-base some more by splitting the DVD service off from the streaming service and creating a second company called Qwikster.

They certainly didn’t accurately predict how this would be received by their customers. They seemingly saw that streaming is the future of movie delivery (which, it likely is) and decided to jump ahead of the curve and position themselves for success when the transition ultimately takes place. The problem was, they were moving into a future that their customers weren’t yet prepared for.

This heavy-handed change ultimately showed what happens when a company ignores the wishes of their users/customers and “goes it alone.”

Why didn’t this work? Streaming is the future!

There are two reasons why this strategy didn’t work for Netflix, even though streaming will likely be the way we consume media in the future. They are:

1. They made the experience worse for their customers.
A company will never win by making things more difficult for their customers. The beauty of how Netflix currently works is the ability to see if something is available as streaming and, if not, choose to have the DVD delivered so you can still watch the movie. By splitting the DVD delivery business to Qwikster and making people manage two different accounts, you are effectively making them choose between you and a competitive service. Even though you own that second service, you are still frustrating loyal customers by having to manage the two accounts. So, you upset them on both the Netflix side and the Qwikster side.

2. The customers – and Netflix – aren’t yet ready for streaming only.
Netflix grossly underestimated the number of people who still rely on DVDs for movie consumption. They obviously didn’t expect there to be such outcry about the change and wrongly assumed that people were moving to the future of streaming along with them. Unfortunately, their customer base wasn’t yet ready.

The other problem, as I’ve outlined before, is that Netflix wasn’t ready either.

One of the key benefits of Netflix since day one has been their selection. It’s largely what led to their victory over Blockbuster – the ability to find movies that you couldn’t elsewhere. By splitting the two services, you remove much of that advantage because you make it more difficult for people to use the broad selection you’ve become known for. In reality, customers would likely end up choosing between either having more selection, but waiting for DVDs and less selection but immediate availability.

Until Netflix can beef up their streaming library to overshadow other streaming services like those from Amazon and Apple, they need to make it easy for customers to get the movie they want in the format they desire. Otherwise they open themselves up to even more competition. The additional option to receive a DVD of a movie that isn’t available to stream is one of the key points of differentiation they have over the competition.

“But didn’t it work for Apple?”

Steve Jobs is famously quoted in BusinessWeek from May 25, 1998 with regard to what customers want.

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

So, why didn’t that same concept work for Netflix? Why didn’t they just push ahead saying they knew what the future looked like and this was what the customer would want.

Part of it goes back to the fact that they weren’t ready, but a big part of it is also what is great about Apple.

Yes, Steve Jobs did essentially say that they often know better than their customers when they design a product because the customer doesn’t really know what they want. But, what he didn’t say is that they know the customer will want something more cumbersome. He didn’t say that they were going to create a laptop that weighs twice as much and runs Windows 3.1 because customers didn’t know that’s what they wanted.

Any time a company assumes to know more than their customers, they’d better be moving in a direction that makes the experience better for the customer or they will find out the hard way (like Netflix did) that they were wrong.

So, Netflix is reversing the decision. All better, right?

In the long run, it’s likely that movie delivery will largely move to streaming. People will embrace the concept of streaming because it is a better experience – as broadband becomes even more available and the selection grows. So, it’s just a matter of time. Netflix should be happy. They got the feedback they needed to delight their customers…at least right now.

If the posts by Hastings are any indication, he/they don’t seem happy about it.

In his first post apologizing for the price increase and announcing the split, Hastings seemed to be genuinely apologetic for the communication failure and excited for the announcement of Qwikster. If you read his post announcing that they are reversing the decision, he seems far more curt, grudgingly admits they made a mistake and you almost get a sense that he’s bitter…like he’s saying, “Fine, we’ll do what you want.”

This has shown Netflix that they have a large customer base that is passionate about what they do. Shouldn’t you be happy about that and nurture it? Shouldn’t you be thankful that people care enough about what you do to voice their opinion?

That passion is deserving of thanks, not seeming annoyance.

Sure, Netflix has gotten beaten up recently, but this can be great insight for them that their customers aren’t necessarily on the same page they are. It also gives them a great case study for how to approach the change to their business model in the future and what their customers expect from them. Most companies would pay handsomely for that kind of research.

Netflix has an opportunity to turn this to a positive by listening more closely to their customers going forward and using that insight to improve the experience of being a Netflix user. They just have to choose to use the feedback they get.