How Not to Launch a New Service

Earlier this week, Netflix launched their Internet streaming based video rental service in Canada. And boy is this one launch they really bungled for a variety of reasons. If you don't already know, Netflix is a wildly popular American “DVD-rental-by-mail” company that has gotten to be very popular, and they also have a service where subscribers can skip the mailing of DVDs and stream the video directly off the internet.

First of all, they launched with a significantly poorer video selection than everyone was expecting. More on that later.

Secondly, they hired paid extras to pose as enthusiastic Netflix fans in downtown Toronto. That didn't go over too well once word got out.

Thirdly, their CEO insulted his fellow Americans during an interview about the Canadian launch. When asked whether their American subscribers would be upset about the Canadian price being lower than the US price, he responded, “How much has it been your experience that Americans follow what happens in the world? It's something we'll monitor, but Americans are somewhat self-absorbed.”

While the second two points created quite an uproar, it's the first one that I think is going to really hurt them the most. I, too, was very disappointed by the poor selection. I did searches for lots of videos, and every one I searched for (many of which were very popular movies too) resulted in a note that movie x wasn't available, but I might be interested in movies y or z instead.

There have been many theories being made, including conspiracy theories involving interference from the CRTC or the cable companies. The more plausible ones are that Netflix is still working on getting distribution rights in Canada, or that due to our different ratings system compared to the US it's taking a little longer to get the ratings updated before putting a movie online. However, while I'm sure those two theories probably do account for lots of the unavailable videos, I've done a little extra research and have come up with a third plausible explanation.

There is a primary difference between the American and Canadian services. The American service was originally, as mentioned earlier, a DVD (and later Blu-ray as well) rental service that operated by mail rather than having physical stores. Later, they added the ability to stream video over the Internet to supported devices. They do have a very large selection of rentable videos, but only a portion of it is currently available for streaming, though. The big thing that sets their American and Canadian offerings apart (and also the reason for the lower price mentioned earlier) is that in Canada, they only operate the streaming service and not the rental of physical discs. That simple fact accounts for a significant portion of the “missing” videos.

Out of curiosity, I switched over to the US Netflix web site, and searched for the same movies and shows I searched for on the Canadian site. To my surprise, those videos aren't available for streaming on the US site either. Yes, the Americans do have access to all six Star Wars movies while we don't (of course, I own them all so that's irrelevant...), but they only get DVDs and can't stream them either. Same thing with almost everything else I searched for. Yes, I did find a few more videos that could be streamed for Americans but not Canadians, but as mentioned earlier that's likely just due to delays in getting proper permissions from the rights-holders before they can distribute them.

So, what really is the cause of their poor Canadian launch? Quite simply, I think they're just a victim of being too popular for their own good and have so much hype surrounding them that they couldn't keep up with. I, for one, have been constantly hearing for years about how phenomenal Netflix was and was looking forward to them expanding into Canada. It just turns out my expectations were raised to far higher than Netflix was capable of delivering. Kinda like a kid who's convinced his parents are buying him a car for his 16th birthday and is angry when he doesn't get one, even though they never did anything to suggest that was going to be the case.

I'll keep watching Netflix to see what happens as their Canadian service matures. Perhaps down the road their selection will grow enough to convince me to drop my Canflix subscription (similar name, but they're two completely different companies) and switch to them instead. It'll also be interesting to see what effect having Netflix operating up here will have for the local market. Canflix might end up having to do something to “sweeten the deal” to keep their current customers. For some people, it may be completely worth it to sacrifice the significantly greater selection to be able to pay 1/3 the price and have unlimited on-demand streaming. Extra competition can only be good for the consumer, after all.