The stock of Netflix has dropped nearly in half and thousands of subscribers have jumped ship since the company that essentially put video stores out of business announced that it would have a price increase two months ago.
On Sunday night, CEO Reed Hastings posted a mea culpa blog post and video (above) that stated "I messed up," adding, "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."
Prices are returning to to what they were. Instead, the company’s DVD-by-mail service is going to be spun off and called Qwikster, which Hastings said wouldn't change the 12-year-old DVD service other than to create a distinct brand and website, Qwikster.com.
The Qwikster news comes as Facebook, where Hastings is a board member, is getting ready to announce a new media platform, according to the New York Times, which "will allow people to easily share their favorite music, television shows and movies, effectively making the basic profile page a primary entertainment hub."
As for Qwikster, "It's going to be the same great service that you all know," said the Netflix executive, Andy Rendich, who will be in charge of it. (One area they might have done a little more due diligence: the @qwikster account on Twitter is not only taken but a potential embarrassment to Netflix.)
The biggest change, beyond the name, is that the DVD business and the streaming-video business that Netflix has dominated will be separated into two totally different businesses with two charges to customers who choose to do both. What's more, user-generated ratings and reviews about a film will be exclusive to each site, while games are being added to the movie and TV mix:
“Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.”
“Companies rarely die from moving too fast, and they frequently die from moving too slowly,” Hastings stated, adding:
“When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong. In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, ‘Actions speak louder than words,’ and we should just keep improving our service. But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”
CNNMoney calls the name change "quite silly" and says it's a sign that Netflix will eventually get out of the cumbersome DVD business altogether.
In the short term, the multimillion-dollar question for Hastings & Co.: will a new brand, adding DVDs and very public apology bring back subscribers irked at the way the rate hike was handled in the first place — and convert them into more revenue-generating streaming subs? And can it compete with Facebook's looming entertainment platform?