Netflix

Netflix streaming on a laptop

As Netflix execs ring in the new year, they'll probably pray that things get better in 2012. A fresh consumer study reveals a big drop in the beleaguered video company's customer satisfaction scores, mostly due to poor handling of the separation of its streaming and DVD plans — and the price hike that went with it. 

ForeSee, an analytics firm specializing in the consumer experience, released its annual Holiday E-Retail Satisfaction index, which shows that even as Amazon has risen to top place, Netflix has slid the most. As the two go head to head in the video streaming competition, the company predicts the two will continue to go in opposite directions, with "a gulf that may be too wide for Netflix to overcome anytime soon."

Netflix took hits in almost every measurement ForeSee compiles as part of the index.

With its satisfaction decline, Netflix has gone from satisfaction superstar to merely average, matching the index’s aggregate score of 79 (up one point from 78 in the 2010 holiday shopping season). Netflix saw scores drop in every single element of the website that ForeSee measures, including site content, site functionality, merchandise and prices.

ForeSee

Netflix has been trying to regain its footing since the summer, according to CEO Reed Hastings, when the company "greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-cancelled rebranding of our DVD service," referring to the short, unhappy life of the Qwikster almost-spin-off.

Elsewhere in Hastings' third quarter letter to shareholders, he and CFO David Wells acknowledge that a "temporary cancellation surge" was the price to pay for the way they handled the 60 percent price increase that came with separating its streaming and DVD plans.

We think that $7.99 for unlimited streaming and $7.99 for unlimited DVD are both very aggressive low prices, relative to competition and to the value of the services, and they are the right place for Netflix to be in the long term. What we misjudged was how quickly to move there. We compounded the problem with our lack of explanation about the rising cost of the expansion of streaming content, and steady DVD costs, so that absent that explanation, many perceived us as greedy. Finally, we announced and then retracted a separate brand for DVD.

We first saw that wave of derision engulf the company over the summer, when more than 100,000 comments slammed the Netflix Facebook page and official blog following the separation announcement, which gave once-loyal costumers no choice in the matter, just a perfunctory heads-up that change was a-comin'. And after that, Netflix could do no right, with members complaining about snafus like the much smaller volume of streaming choices vs. DVDs (tens of thousands vs. millions), Qwikster and the threat of not being able to watch more than one stream at a time in the same household. 

Despite the threats of a mass exodus, Netflix members for the most part stayed put, though, as the company has acknowledged, it meant downgrading to streaming only. But that is, after all, the company's focus as it moves steadily into the tablet space and continues its infiltration onto TVs via video game consoles, Blu-ray players and dedicated devices like Roku's set-top boxes. 

TechCrunch recently ran a story about Citi analysts whose survey still put Netflix ahead of Hulu (and way ahead of Amazon) as the go-to site for streaming TV/movie watching, and another one that showed people spending twice as much time on Netflix than on Hulu.

Looks like whatever happens, there's almost no way 2012 won't be a better year for Netflix than this one.

More stories:

• Is Qwikster quicksand for Netflix?
• Netflix: Our bad, you can stream to more than one device
• Netflix service goes down, Internet anger rises
• Outrage over Netflix rate hike continues
• Thousands threaten to quit Netflix

Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.

Nielsen

While playing games remains the most popular use for game consoles, streaming video represents an increasing chunk of console time.

Game consoles are still primarily for playing games, but a new survey from Nielsen shows they're increasingly being used for a secondary purpose: showing movies and TV shows from Netflix and other streaming services on the living room TV.

Nielsen's survey of 3,000 Americans ages 13 and up found use of streaming video and video-on-demand services up on all three major consoles from 2010 to 2011. On the Nintendo Wii, in particular, streaming video now accounts for an estimated 33 percent of usage time, up from 20 percent in 2010. Streaming video made up 14 and 15 percent of usage time on the Microsoft Xbox 360 and Sony PlayStation 3, respectively, both up significantly from last year.

Does this mean people aren't using their consoles to play games anymore? Not exactly. Online and offline gameplay still combine to make up a majority of usage time on all three consoles, though proportional gaming time did decrease slightly for Nintendo Wii users this year.

For the most part, Nielsen's data shows the increase in streaming video time comes at the expense of other non-gaming uses for the consoles, such as listening to music, browsing the Internet, or using social networking apps. Users are also spending a little less time watching traditional Blu-ray and DVD movies on the Xbox 360 and PS3 (the Wii doesn't allow users to play disc-based movies, which perhaps explains its larger-than-normal streaming rates).

The increase in streaming is great news for Netflix, which sees half its users watching via a game console, according to a Nielsen report from this summer. The heavy streaming rates among console owners also help explain why, at peak times, Netflix is responsible for close to a third of all U.S. internet traffic.

More than that, though, this new data shows how game consoles are used more than ever as all-purpose, entertainment-focused computers for the living room. Over the last few weeks Microsoft has added new video content from sources including Comcast, Verizon FiOS and YouTube, and both the PS3 and Xbox 360 can already connect to your Facebook account.

Don't be surprised if the next generation of home consoles offers even more internet-connected apps to complement the core gaming functions that still make up the bulk of their usage.

Related stories:

• Half of Netflix users tune in with video game machines
• Nintendo 3DS will stream Netflix, let users record 3-D videos
• Average mobile gamer plays 7.8 hours a month: report

Kyle Orland has written hundreds of thousands of words about gaming since he started a Mario fan site at the age of 14. You can follow him on Twitter or at his personal website, KyleOrland.com.

Sandvine, Inc.

Netflix consumes 32.7 percent of the Internet's peak downstream traffic in North America, and "continues to be the most powerful driver of evening traffic, and for that matter, of daily traffic overall." 

Sandvine, Inc., which makes equipment used by cable and phone companies to manage their Internet systems, also says in a new report that despite "some negative subscriber reaction to price hikes, Netflix has continued to increase its presence by adding 1 million U.S. subscribers since the Spring 2011 report, and by many measures Netflix rules North America’s fixed access networks."

Earlier this week, Netflix said it ended September with 23.8 million U.S. subscribers, down about 800,000 from June.

Has Netflix peaked, and hence its Internet traffic, too?

In its "Global Internet Phenomena Report," Sandvine raises the question itself:

... has Netflix traffic reached a maximum as a share of total Internet traffic in the United States? With so many Netflix-capable devices, the addressable market for the service is already enormous and will only increase, so it’s hard to envision a scenario in which absolute levels of Netflix will decline. However, Netflix is facing increased local competition, and as a result new services might grow at a faster rate.

Globally, Netflix will grow — the service is available in almost 50 countries and the company is aggressively pursuing licensing deals with locally-focused content — but in the United States specifically, we might have seen the peak.

Last year, both Web surfing and peer-to-peer file sharing — mainly the illegal trading of copyrighted movies — were each larger than Netflix's traffic," noted the Associated Press. But by last spring, Netflix exceeded both of those activities.

So for now, Netflix remains the 800-pound gorilla of the Internet. Sandvine says Netflix also accounts for:

• 29 percent of "peak period aggregate traffic" — HTTP (Web surfing) is second with 16.6 percent.
• 23.3 percent of "daily aggregate traffic"  — BitTorrent (peer-to-peer file sharing) is second with 16.5 percent.

Related stories:

• Netflix shares tank as customers leave service
• Is Qwikster quicksand for Netflix?
• Thousands threaten to quit Netflix
• Netflix's Internet traffic overtakes Web surfing

Check out Technolog, Gadgetbox, Digital Life and In-Game on Facebook, and on Twitter, follow Suzanne Choney.

Reuters

Will CEO Reed Hastings be able to restore confidence in his company?

Netflix has sent its most recent venture — a plan to split its streaming and DVD-by-mail offerings into two separate businesses — to the cutting room floor.

CEO Reed Hastings said on the company's blog that the planned split was dead, but the bad reviews the move earned can't be erased so easily. Netflix first antagonized customers in July when it announced a 60 percent price increase to its hybrid DVD-and-streaming subscription. The planned split, which would entail renaming the DVD business Qwikster and require hybrid-plan users to keep two separate accounts, immediately got two thumbs down from customers when it was announced just a few weeks ago.

Netflix stock, which was in the $300 range in July, dropped by nearly $200.

In the annals of corporate blunders, it's not quite New Coke, but Netflix picked a bad time to stumble. Competition from rivals as diverse as Dish Networks and Amazon is growing, and every disenchanted customer is a potential defector.

The banking sector offers a particularly chilling cautionary tale for Netflix: It's a lot more of a headache to move a checking account than it is to cancel a movie subscription, yet consumers are willing to dismantle the foundation of their personal finances in response to unpopular fees. 

The company's about-face may be rewarded by investors — Netflix stock advanced about 3 percent when the announcement was made, but it has since fallen — but it also forces executives to prove themselves in a field they once dominated.

"It's no doubt reassuring that people can change their minds and get back on track," says Will Richmond, president and founder of market research firm Broadband Directions LLC. "At the same time … it takes a little bit of the shine off the Netflix invincibility," he says.

What about customers? Most of them will come back, says David Miller, managing director with investment firm Caris & Company. "I'd be wiling to bet churn went to 7 to 8 percent. They've got a lot of work to do to get those people to come back," he says.

But wooing back its subscriber base will take time. "It could be three to six months, and in the meantime there's a lot more competition," Miller says. "You can't fix that in one quarter."

Despite the griping from customers about the price changes over the summer, that alone wouldn't have led to mass cancellations, says Robert Passikoff, founder and CEO of branding and research company Brand Keys. Prior to the price change, Netflix had a 99 percent satisfaction rating in Brand Keys surveys that measured the company met customer expectations. Following the price increase, that dipped slightly to 96 percent, but it dropped down to 87 percent after the company rolled out Qwikster and its split lineup.

"When they split the company, they did it in such a way that nobody understood precisely how it was going to work, and that confusion led to a degradation in terms of the brand," Passikoff says.

Netflix had loyal customers who were willing to swallow the price increase because they had a well-liked service that offered value even at a markup, but shaking up the foundation of that service torpedoed the value customers perceived.

By way of comparison, Passikoff points to Starbucks' much-maligned push for efficiency in the mid 2000s: The coffee chain phased out time-consuming elements of its operations like complicated espresso machines and fresh-ground beans. Customers hated it, a fact acknowledged by company head Howard Schultz in a leaked 2007 memo.

Despite this admission, investors continued to hammer the stock for another couple of years, and Starbucks learned the hard way — as Netflix is likely to — that restoring customer confidence in your brand during an economic slump is an uphill endeavor.

In spite of the economic and competitive challenges facing Netflix, Caris & Company's Miller is bullish about its long-term ability to attract and retain subscribers.

"At the end of the day, though, the selection is still the best on Netflix," he says. Most streaming subscribers are there for the TV shows, and thanks to its partnerships with networks like Fox, this is an area where Netflix excels. "There's no one that matches this kind of selection," he says.

Bowing to an outcry from its customers, Netflix is dropping a plan to spin off its DVD service into a new company called Qwikster. NBC's Brian Williams reports.

Strategic Name Development

Netflix' new name for its DVD rental-by-mail service is being received with mixed results (including the Twitter account holder who uses that name, a teen). Brand-naming company Strategic Name Development did some "qwik" research Monday, the day Qwikster was announced, interviewing 500 consumers.

"Perhaps due to its created and unusual spelling, more than a third of consumers view the Qwikster name as contemporary," said Strategic Name Development. "But more importantly, to the Qwikster's name detriment, an equal number (36 percent) consider the Qwikster name 'easily confused with similar names.' "

While 57 percent said they consider the name ideal for a "service that is faster than any other alternative," not everyone felt that way, including 11 percent who said Qwikster's a good handle for "a service that helps you hook-up with the opposite sex."

Here's some "representative" quotes gathered by the Minneapolis-based company:

Netflix / Qwikster

Reminds me of Napster and we all know what happened to them."

Sounds like the game site winster.com

You misspelled Twitter.

Makes me think of the Nestle chocolate drink.

Quixtar comes to mind.

Others said the name sounds just plain "tacky," "really corny" and "more like a children's toy."

Many felt that Netflix should have kept the Netflix name for its DVD service, and given Qwikster to the streaming service. The Qwikster name, said one, "... has nothing to do with the movies."

"They should have Flix in the name, Mailflix, Dvdflix," said another.

"Qwikster is so generic it could be anything and has no chance of becoming a household name," was yet another opinion.

Good points all. Still, it might be good to remember another fairly recent product that was introduced with an almost-odious name. It was called the iPad, and seems to have done fine. 

Related stories:

• Why Netflix is splitting itself in two: A comic
• Twitter's Qwikster gets offers, trusts no one
• Uh oh! Netflix doesn't own the @Qwikster Twitter account
• Is Qwikster quicksand for Netflix?
• Netflix ... er ... Qwikster adding video game rentals

Check out Technolog, Gadgetbox, Digital Life and In-Game on Facebook, and on Twitter, follow Suzanne Choney.

The Oatmeal

We know that Netflix has split its DVD-by-mail and video streaming businesses into two, but — despite the company's explanations — we're still scratching our heads about the whole thing. Why on earth did Netflix go through with this plan — and create a new service called Qwikster while at it?

Comic artist The Oatmeal would like to offer an answer — in a typically hilarious illustrated format.

The Oatmeal

The Oatmeal

The Oatmeal

Related stories:

• Uh oh! Netflix doesn't own the @Qwikster Twitter account
• Is Qwikster quicksand for Netflix?
• Netflix ... er ... Qwikster adding video game rentals

This comic is republished with permission from Matthew Inman aka "The Oatmeal," a web designer turned comic artist. You can see more of his work on The Oatmeal. Inman is a one-man operation, so be sure to check out posters and prints from his shop or order a copy of his hilarious book, "5 Very Good Reasons to Punch a Dolphin in the Mouth."

Several hours after Netflix made its surprise announcement, renaming its DVD-by-mail service Qwikster, the account holder of that very Twitter handle said he was offered $1,000 for it. But he's being cagey about whether he'll take it.

"Got offer $1,000. But idk (I don't know) but you guys should follow my bro @SoccerIsLifegc7 n ill think about selling it to who ever supports my bro," tweeted Jason Castillo Monday.

As msnbc.com's Rosa Golijan noted earlier in the day, Castillo, who appears to be a high-school student, "has interests revolving around girls" and "vulgarities ...  based on his tweets." As she added: "It's perhaps worth noting that his Twitter user icon is an image of Sesame Street character Elmo holding" a smoke of some kind.

@SoccerIsLifegc7, referred to by Castillo, is his buddy and apparently, as of today, his business manager. Presumably a fellow student, Gabriel Caicedo tweeted this within the last hour:

Castillo may have some trouble "selling" the Twitter account name, though. As Twitter's "Name Squatting Policy" states:

Attempts to sell, buy, or solicit other forms of payment in exchange for usernames are also violations and may result in permanent account suspension.

It is not entirely clear that Castillo or his crony fully understand what's going on, from the potentially lucrative deal to the sudden, intense media interest. In subsequent tweets he reports "I'm about to go play soccer n I got stug by a [expletive] bee," then says, "Don't believe that [racial epithet] that sed the bought my [expletive] cuz it aint tru." 

Still, Caicedo says, "Me n @Qwikster know wat we're doin." 

Stay tuned. The Netflix Qwikster movie is on.

Related stories:

• Uh oh! Netflix doesn't own the @Qwikster Twitter account
• Is Qwikster quicksand for Netflix?
• Netflix ... er ... Qwikster adding video game rentals
• Netflix to split DVD and streaming services

Check out Technolog, Gadgetbox, Digital Life and In-Game on Facebook, and on Twitter, follow Suzanne Choney.

Netflix / Qwikster

Oops, Netflix has done it again.

If Netflix intended not to confuse people with its latest move to separate their DVD service and rename it Qwikster, then it's made another epic fail. Just as serious a blunder: further highlighting the inequity between its vast DVD selection and its less-than-impressive streaming choices, which may end up driving its 25 million-plus members elsewhere.

Netflix recently sent a letter to its shareholders bracing them to expect lower subscriber numbers on the DVD side, one million less than expectations projected over the summer. With this news, will Netflix finally lose whatever DVD loyalists it has retained?

There are already more than 10,000 comments on the blog announcing this latest move, and for the most part, it looks like Netflix has stumbled. Again.

Netflix

Reed Hastings, Netflix CEO

If you, like me, checked your email late last night before you went to bed, you would have gotten a sort-of mea culpa from Netflix's CEO, Reed Hastings, announcing the final break between the DVD and streaming plans into two different websites that began with this humbling passage:

Dear Athima,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

And then from there, it goes all wrong. Again.

If you haven't canceled your DVD plan with Netflix, the envelopes will still continue to arrive in your mailbox. "For me the Netflix red envelope has always been a source of joy," wrote Hastings. "The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you."

Qwikster? What?

Did they not know, as everyone on the Internet quickly found out, that the Twitter handle for Qwikster has already been claimed by a stoner gamer? (More on that from msnbc.com's Rosa Golijan.)

But besides the ridiculous name (nothing is quicker than streaming, right?) and Twitter fiasco, this move may finally be the death knell to Netflix's waning public opinion, which began to slide this summer and expressed itself loudly on its Facebook page.  

While Netflix's DVD and streaming plans were under the same roof, the company could hide behind the smoke and mirrors of its ginormous DVD selection. Like Amazon, pretty much anything you could think of (to watch), was there. Even movies that haven't come out in theaters are listed for you to save for the future, and if you can't find it on-demand, you can opt for the DVD.

Being an early adopter who's been with Netflix since 2000, I knew their core strength was DVD. Even Hastings acknowledged that: "Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies."

But Hollywood has chipped away at the power of Netflix DVD. While the Netflix library of DVDs numbers in the millions, it is consistently compromised by delays imposed by Hollywood studios (such as the 28-day muzzle from Warner Brothers back in 2010). It's nearly impossible to get a DVD during the first week of release, while video-on-demand services — from the cable company, Apple's iTunes, Microsoft's Xbox and many, many other third parties — offer new releases instantly the same day as the DVD launch, for the same price we used to pay at the video store.

Meanwhile, those left behind on the streaming-only Netflix site will get a rude awakening, if they haven't already: There are almost no recent top-shelf movies.

Back in July, when Netflix made its ill-received decision to separate its DVD and streaming plans — and hike up prices 60 percent if you still wanted both — Steve Swasey, vice president of corporate communications for Netflix, told us streaming titles numbered about 20,000 a year ago, and while he wouldn't reveal how much they've added, he did say it was "more than you can watch in a lifetime."

Now, I'm ok with a lifetime that included TV shows like "Mad Men," "Damages," every "Star Trek" iteration and the "X-Files." But Starz, a major supplier of Netflix's on-demand film content, including Sony and Disney movies, has pulled out of its distribution deal with the company. In terms of movies, I don't think I could handle a lifetime of movies like "Saw: The Final Chapter," or "Curdled" or the thousands of other straight-to-streaming time eaters.

(Read msnbc.com's Wilson Rothman on how to tell if your Netflix instant queue is in trouble.)

Still, if you're listening to Hastings, all is great in the Netflix on-demand world:

For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something — like AOL dialup or Borders bookstores — do not become great at new things people want (streaming for us).

So Netflix came to this conclusion:

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

Qwikster will be up and running soon. At least there won't any more pricing surprises, though your credit card will now have two entries for the dual services, if you receive both.

Yet the disruption is also a sign that there's no master plan over at Netflix HQ: If Netflix was always going to split off its DVD business, why did it make the price change first, then follow it sloppily two months later with this Qwikster offshoot? We'll be on the lookout for the company's third quarter report next month to see what kind of a blow moves like this have made on Netflix's once-loyal customer base.

More Netflix coverage from msnbc.com:

• Netflix to split DVD and streaming services
• Netflix exodus begins?
• Netflix: Our bad, you can stream to more than one device
• Is your Netflix queue in trouble?
• Report: 2 million+ subscribers will cancel Netflix
• Nielsen: Hulu users watch more TV than Netflix members
• Outrage over Netflix rate hike continues

Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.

Twitter

When the folks at Netflix decided to split up the DVD-by-mail and video streaming aspects of their business, they seem to have forgotten to do one tiny little thing: Check whether the Twitter account corresponding to their newly created service's name, Qwikster, was available.

Sure, this seems like a minor detail to fret about, but it can lead to quite a bit of confusion if overlooked. After all, don't you think that users of Netflix's spin-off service might wonder why messages from the @Qwikster Twitter account (warning: NSFW) have nothing to do with renting DVDs?

You see, that particular Twitter account currently appears to be owned by a fellow named Jason Castillo. And Mr. Castillo, a student, has interests revolving around girls, vulgarities and recreational drug use. (It's perhaps worth noting that his Twitter user icon is an image of Sesame Street character Elmo holding a marijuana joint.)

We're sure that Netflix will try to gain control of the @Qwikster account, but — if Business Insider's Alyson Shontell is correct — they may not have much luck:

While Netflix secured the Qwikster domain, there is no record of a trademark filing for "Qwikster." ... Unfortunately for Netflix, unless you own a trademark, you can't force a current tweeter to give up his or her handle. Twitter also doesn't let users buy handles from others.

Since Jason Castillo, the person who currently owns the Qwikster handle, is an active tweeter and hasn't impersonated the movie delivery company, Netflix may not be able to stop the high Elmo icon from tweeting raunchy status messages.

Of course, Netflix might just get lucky and be able to wait this one out because according to Castillo's first tweet, he created the @Qwikster Twitter account because he forgot the login credentials for his original one. With a little bit of luck, the absent-minded man will abandon this account for a few months and Netflix will be able to snatch it up thanks to Twitter's inactive account policy.

Related stories:

• Netflix: Our bad, you can stream to more than one device
• Child-friendly Netflix interface mysteriously appears
• Survey: Six out of ten movies streamed via Netflix

Want more tech news, silly puns, or amusing links? You'll get plenty of all three if you keep up with Rosa Golijan, the writer of this post, by following her on Twitter, subscribing to her Facebook posts, or circling her on Google+.

Netflix

Illustration from the Q3 11 Guidance Update

Netflix will probably lose a million more DVD plan holders by autumn's end than it had expected, the fallout continuing from its decision to not only split its DVD and streaming video plans but to also hike up its prices 60 percent.

In a "Q3 11 Guidance Update" sent out to its shareholders today, Netflix CEO Reed Hastings and CFO David Wells informed them that current expectation for the third quarter are for 2.2 million DVD-only plans, vs. a projected 3 million from July 25. The graph above shows they expect streaming members to stay constant, with 9.8 million expected for the fall, vs. 10 million streaming-only projected in July.

While the letter softens the blow by prefacing the news with "Our financial guidance for the quarter is unchanged, as is our international subscriber guidance," it still gives shareholders this: "We are, however, lowering our domestic subscriber estimates."

The execs still paint a rosy picture of the company's future: "Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice ... We know our decision to split our services has upset many of our subscribers, which we don't take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come."

The company faced an outpouring of vehement protest to its changes, mainly through its Facebook page. Many championed the DVD-for-a-dollar-a-day Redbox as an alternative, In an informal poll we included in this story, we asked if readers were going to cancel their Netflix subscription. An overwhelming majority, 55 percent, said they would. Now it looks like Netflix is starting to see those threats become reality. We'll know more when the third quarter report comes out next month.

More stories:

• Netflix: Our bad, you can stream to more than one device
• Is your Netflix queue in trouble?
• Report: 2 million+ subscribers will cancel Netflix
• Nielsen: Hulu users watch more TV than Netflix members
• Outrage over Netflix rate hike continues

Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.

Netflix

Netflix streaming through the Vizio TV

UPDATE: Netflix is NOT limiting its streaming! See details below.

Whew! Crisis averted. What looked to be another blow for Netflix customers today — people who pay for streaming plans could no longer watch more than one movie or show at a time on multiple devices — is not really happening. For those who already decided to scrap the DVD mailing plan when the company separated its signature red envelopes from its instant viewing plan this summer, effective Sept. 1, the enforcement of Netflix's single-stream policy could have been the final straw.

Turns out, Netflix had a glitch and sent out error messages, in error.

Thanks to Time for this:

"No Netflix member is limited to less than two concurrent streams," Netflix spokesman Steve Swasey sent in an email. "A few Netflix members have heard differently from us, which is an error that we are correcting."

But, should they ever decide to do this in the future, Mashable reports the enforcement's most likely casualties: "The change could have a major effect on how families use Netflix. No longer can one person watch a movie from the iPad while the rest of the family watches another film on the Xbox, for example."

Netflix caused quite a stir on its own social media platforms this summer with its announcement that members could no longer have a combination plan of DVDs and streaming. The separated plans also came with a 60 percent price hike. (Once a combined $9.99, the streaming service is now $7.99, while the cheapest DVD plan is also $7.99.) This could open the way for rivals such as Redbox to gain angry ex-Netflix subscribers, thousands of whom have said they would cancel their service.

While there was a decline in net subscriber additions from the first quarter of 2011 to the second, the mass exodus has yet to be reflected in Netflix's financial reports — yet. If anything, the third quarter report should show what impact the separation of plans has had.

Netflix also might feel the burn from the loss of movies from Starz. Talks between the two companies broke down last week.

Once those error messages started popping up limiting streams, members once again took to the Netflix Facebook page to air out their grievances on this latest (supposed) affront.

Ryan Condict wrote this on the page this morning, which seems to back up that assertion that families would suffer most by such enforcement:

I supported and understood the reason for the price hike. Still feel that the prices you have are very fair. However, limiting me to only 1 stream at a time is something that will make reconsider renewing my membership next month. I understand a small limit so that people are not sharing their accounts with friends and family which causes Netflix to lose money. But you need to be able to at least have 2 streams with the streaming only package. There are so many times when my 9 year old son wants to watch some disney show or cartoon that I don't have much interest in. So I go to my room and watch an episode of Mad Men or a movie. With this new policy I will not be able to do that. Please reconsider or alter this policy a bit. Once stream is not sufficient for most households with children.

Other members on the wall also chimed in with their own stories, but a few (a minority) said they could see where Netflix is coming from. Jason J. Peugot wrote:

Well it makes sense. I mean think about it. you 'could' give/sell your password to an unlimited number of people -- thereby streaming to unlimited numbers of devices. why should you pay for one subscription and stream to, let's say 1,000 devices? :\

Previously, Netflix's Terms of Use stated that streaming was permitted only on one device — if your plan included "unlimited streaming" and just one DVD. If you had a plan that allowed two DVDs at one time, you were permitted two simultaneous streams. Three DVDs got you three streams.

Now that the streaming plan is totally separate from the DVD rental plan, it had appeared Netflix was enforcing the single stream rule for everyone. The company has yet to update the terms of service to reflect the new plans and streaming policy.

Commenter Scott Dietrich clearly represents the majority of how Facebook posters seem to feel, so Netflix should take heed of this cautionary tale:

I think this is something that Netflix is pretty short-sighted on. I know it has always been in the TOS, but enforcing the policy now isn't all that smart if you ask me. I really don't think it would be too hard to weed out those people who share their information with multiple people. They wanted to separate the DVD and streaming parts of the business, but then they still have the streaming devices you can stream on at the same time tied to which DVD plan you have. That makes no sense to me. I think they are working on something to fix this, but that should have been done before they started enforcing this policy.

More stories:

• Is your Netflix queue in trouble?
• Report: 2 million+ subscribers will cancel Netflix
• Nielsen: Hulu users watch more TV than Netflix members
• Outrage over Netflix rate hike continues

Check out Technolog on Facebook, and on Twitter, follow Athima Chansanchai, who is also trying to keep her head above water in the Google+ stream.