Netflix has abandoned its plans to separate its DVD by mail service from its streaming business. Qwikster is dead. The stunning twists and turns in Netflix's strategy have left most of us dizzy. The collapse of the stock price in recent months proves that investors don't like uncertainty. While it's ok to change strategy, investors do not want to see constant twists, turns, and reversals.
Beyond the uncertainty, I was never quite clear regarding the notion that Netflix and Qwikster would not share information regarding a customer's queue, movie preferences, recommendations, and rental history. That lack of sharing made me wonder whether Netflix was failing to capitalize on one of its greatest strengths, namely its powerful predictive algorithms that it uses to recommend movies. Would lack of sharing across sites mean that it would not capitalize on the wealth of data that it had accumulated? It wasn't clear based on what I had read. To me, the predictive algorithms lie at the heart of Netflix's success, and no change in strategy should undermine that strength. After all, the algorithms enabled Netflix to take advantage of the "Long Tail Effect" - the idea that a large percentage of Netflix rentals always came from movies that were not new releases. That strategy proved very profitable over the years.