TORONTO - Video-streaming website Netflix Inc. (Nasdaq:NFLX) closed down a Toronto street Wednesday and attracted dozens of onlookers for a splashy launch to promote its highly anticipated foray into Canada.
Problem is, many in the crowd were actors who were paid to be there. And some of those "extras" gave interviews to journalists, who didn't realize they weren't real consumers interested in the product.
The performers recruited for the news conference — where Netflix announced the Canadian service would cost $7.99 a month with a one-month free trial — were asked to spill into the street and encouraged to "play types, for example, mothers, film buffs, tech geeks, couch potatoes etc."
"Extras are to behave as members of the public, out and about enjoying their day-to-day life, who happen upon a street event for Netflix and stop by to check it out," said an information sheet handed out to the actors.
"Extras are to look really excited, particularly if asked by media to do any interviews about the prospect of Netflix in Canada."
After word of the ruse spread on Twitter, Netflix apologized and said the extras should not have been talking to reporters. A Netflix spokesman said the handout for extras was required to obtain a film permit for the launch. The instruction sheet refers to Wednesday's event as a "corporate documentary."
"I was unaware that script was handed out to extras and that was not supposed to happen," said Steve Swasey, vice president of corporate communications for Netflix.
"Extras were not supposed to talk to reporters or convey that they were anything other than promotional people.
"Some people got carried away and it's embarrassing to Netflix."
The backlash to the ill-advised marketing strategy wasn't the kind of press Netflix was hoping for at its launch, and some of the feedback from potential customers wasn't great either.
While the company's stock price hit a new high Wednesday, there were complaints about the Netflix content, which is short on new releases.
"Ever since I saw Netflix in the U.S., I've been eager for the day that it would be available here," said Salvatore D'Agostino, a Montreal-based computer programmer.
"I whipped out my credit card and jumped on the site, eager to sign up and start a queue for when I got home. The way I see it, $8 a month for unlimited rentals is extremely worth it — seeing as how about eight rentals on iTunes would come to that — but when the selection is very limited, it kind of defeats the purpose.
"I don't think I'll sign up for Netflix until their selection is equivalent to that offered in the U.S."
There is plenty of quality content available on Netflix, including the first three seasons of "Mad Men," along with full seasons of shows like "Trailer Park Boys," "Monk," "Rescue Me" and "Heroes." But noticeably absent are the likes of "Dexter," "The Sopranos," "Friends" and "Seinfeld." On the film side, the site is loaded with plenty of popular titles from the last few years but new movies are scant.
Netflix co-founder and CEO Reed Hastings believes there's plenty of content to justify a subscription.
"It's not about the newest, hottest film coming out, there's so many places you can go to get that film, what we focus on is the really broad range you might not be able to easily get and there's so many good films in that broad catalogue," Hastings said in an interview.
"We have more content than anyone can watch — but we don't have everything. What we hope to do is be able to get lots of subscribers and as we get more subscribers we'll be able to afford more content and then we keep getting better and better."
While U.S. customers — which now number more than 15 million — also have the option of renting newer DVDs by mail, Hastings said that option wasn't seriously considered for the Canadian market.
"For a while we were focused on DVD ... and as DVD started to peak we realized streaming was really growing, we realized OK, when we enter (Canada) we should do this and be 100 per cent streaming."
Zip.ca, which also runs a mail-based DVD rental business, said it isn't spooked by Netflix's move into Canada.
"We've been expecting them to come to Canadian for some time and our perspective on it is that they've shown up with what is essentially Netflix lite," said CEO Scott Richards. "They've got older content and not a lot of it."
Zip.ca is planning to launch an online streaming option before the end of the year, although it will offer a la carte rentals and purchases of movies, not unlimited access. The company is also close to rolling out rental kiosks in Metro grocery stores that will offer DVD rentals for 99 cents a day.
"The kiosks hold more than 1,000 discs so essentially it's a Blockbuster store in a kiosk," Richards said.
Blockbuster Canada also hinted that it plans a "multi-channel" strategy to offer access to movies outside retail stores.
"It only makes sense as a market leader here in Canada to be able to, in the future, expand our offering to multi-channel and we look forward to executing our strategies," said vice president Barry Guest.
"I'm not making any announcements here but that would be a natural transition for Blockbuster."
A potential problem for Netflix and its streaming strategy lies in how Canadians receive Internet access, and the caps on downloading imposed by providers. In a test by The Canadian Press, a 23-minute "Trailer Park Boys" episode ate up almost 270 megabytes of data, while watching the Lars von Trier film "Antichrist" in high definition downloaded almost 2.9 gigabytes of data for the 108-minute film.
If users exceed download limits, they could face a fee at the end of the month.
Hastings said it's a new issue for Netflix customers, since in the U.S., consumers typically get uncapped Internet accounts.
"It could be a concern over time, we'll have to see," he said. "If someone's on a cap it's a different experience."