Netflix CEO Reed Hastings Issues Apology; Names DVD Division Qwikster; Will Offer Game Rentals

Netflix CEO Reed Hastings posted an apology on the Netflix blog about the way they communicated the price increase and why they're spinning off the DVD division as Qwikster ("A Netflix Company."). Hastings named Andy Rendich, who spent the past 12 years running the Netflix DVD service, as CEO of the new company. The new DVD-focused Qwikster will rent games, and will appear as Qwikster on your credit card statement if you have a DVD subscription.

Hastings apologized for the way the changes were communicated, saying that he "messed up." and "I owe everyone an apology."

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.

Hastings an Rendich posted a short video:

Thanks to Billy and everyone else for sending this in.

Comments

[Stevesliva]

Netflix is so used to having statistics-- AKA LiesDamnLies-- as their only reason for changes that they seemingly forgot that if they have an actual, ya know, *reason* for a change, that the could deign to communicate it. Hey Reed, we're wearing our bigboy britches today. I'm glad you bothered to explain that you doing a spinoff. With a terribly lame name.

But regardless, it makes more sense, and you guys appear to be less like Comcast and more like, well, Netflix, if you don't just quietly cram rate increases into the fine print.

[frank]

Naysayers said enough of us wouldn't quit, it was all talk. Enough of us did, and quitting does make a difference.

It puts a downside to raising prices. I think it is good because producers are not going to be able to demand such high fees out of Netflix because Netflix will have to be very careful about how much it pays. this is going to take many years to play out. I read where NBC is trying to charge cable providers more for their content.

[Jason Becker]

Sad that Netflix has to keep dealing with all this whining that's been going on. The complaining from people is pathetic. $9.99 for streaming AND a DVD was an insane deal. To expect that to go on forever and they somehow get the latest content is ridiculous. Netflix is still a good deal with no real competitors IMO. Redbox, Blockbuster, Amazon, iTunes all have plenty of caveats to them also.

[Daniel Trogdon]

Great news! I hope my phone provider splits into two companies so I'll have to go to different sites to look at my voice plan and data plan!

What the hell does "Qwikster" even mean?

[Daniel Trogdon]

I hope at least this means there will be a Qwikster app so I can manage my DVD queue on my iPad since the Netflix website queue is unusable.

[www.google.com/accounts/o8/id?id=AItOawmd3vfZNTlUtnd-NASWHZtriN3oa8GZFCk]

I know it's spelled differently but said the same, do they even know what a "quickster" means?!?! UM, Ya might want to consult the Urban Dictionary before renaming your company (unless you're handling ADULT films;-)

[Ahbi Santini]

Well this has divisional sell-off written all over it.
I wonder who (Blockbuster, Redbox, AMZN, etc.) will be Qwickster in a year or two?
.
It is a shame they are closing down the service (ah hem, I mean sell-off), I really liked the selection and convenience.

[Ahbi Santini]

I mean ...
.
will BUY Qwickster
.
Should have used the Preview option.

[James Heartney]

It doesn't affect me personally (we're streaming-only), but this strikes me as yet another boneheaded marketing move. They are splitting the DVD and streaming web infrastructure, so if you rate movies on one it will no longer be reflected in the other. If you depend on ratings for suggestions, you now have to put twice as much work into doing ratings in order to get the same benefit from it. Also, if you have both services, it will no longer tell you if an item in your DVD queue has become available for streaming. I predict much bellyaching, and this time, I think it'll be justified.

There are a couple of points to make about this. Both the price increase and this splitting of the sites were things that may have made sense to them in the back room, but which cheese off massive numbers of customers. I think Hastings & Co. are just unable to envision how their decisions look to customers, so they get blindsided by the negative reaction.

Related to this, Netflix as a company has grown tremendously in recent years, and now is a very different beast from what it used to be, if only for reasons of scale. As a result, the methodology for making decisions has to change too, and it hasn't.

I wonder if Hastings did any market research on how customers would see the new company, or if they researched how it would play if they split the DVD and streaming queues and disallowed ratings and other feedback. I'm guessing they didn't. From what I can see, they didn't even bother to buy up related URL's to the new one they are launching (they don't seem to own quickster.com or kwickster.com), which is nearly criminal negligence.

All of these things (researching customer reactions, thinking through what the proposed changes mean to customers and their user experience, buying up related URL's) are absolutely necessary if you are making these sorts of changes with a company Netflix's size. Reed Hastings needs to understand he has to do them now that he is running an entity this size. If he won't, then he'll keep making these sorts of tremendous blunders.

[James Heartney]

Edit to above:

and disallowed sharing ratings and other feedback.

[MiniMonkey]

James, I agree with you 100%. I'm a long time supporter of Netflix -- member since 2000. The price hikes and dropping of some key features in the past couple years have been annoying, but haven't changed the core (awesome) functionality of the service. Even splitting the company internally is fine by me, however...

Two websites?... that AREN'T INTEGRATED?!

WTF?! I seriously cannot even begin to imagine how terribly annoying it's going to be to have to rate movies in 2 places and not be able to know what DVDs in my queue are also available on streaming just by glancing at my queue.

Also, de-coupling the service like this gives me a lot less incentive to be loyal to Netflix streaming. There are a lot of strong competitors on the horizon in the streaming arena, and now that the convenience factor of having both streaming & DVD from one company is gone... I'm going to be looking at that competition as a much more viable option.

[ClydesMP]

So they're splitting them into two companies. Two things that really grab me. Not one word about rejuvenating their disc business, although this is suppose to imply that would magically take care of itself with this move. And second, Netquick will be renting games. This could really hurt Gamefly quite a bit, because Netquick has a better infrastructure. Didn't they swear they would always be a movie business and games didn' interest them? Well, maybe they didn't swear.

And guess where the money is going to come from to build up the gaming business? From someone like me who has no interest in renting games at all. Sorry, but I have a very bad feeling about this. And don't correct my Netquick. I can dream up crappy names as well as any marketing genius.

[FearNo1]

Wow..Reed and Co continue to make dumb moves lately. This surely will p1$$ off users who have DVD and streaming. Now they have to manage their queues from two sites? A year or so ago Reed made brilliant moves, but lately his biz decisions have been out of desperation.

[Sotrix]

I have nearly 900 movies rated on Netflix. Will I have to search for and re-rate every single one on Qwikster? Will my Netflix queue be transferred automatically? The fact that I'm even asking these questions - after reading all of the press releases and news stories - just shows how much of a PR disaster this is.

The only reason I accepted the price increase is for the convenience. Since they're taking that away I'm considering cancelling.

[AtomicBuffalo]

Two websites? Two queues with no connection to each other? Two sets of ratings? Two places to go to see what my viewing options are?

That is not in any way, shape, or form an improvement for media consumers. That's an arrogant business reducing customer value for increased shareholder value, DARING customers to go elsewhere.

Challenge accepted. The day the sites split, I'm cancelling both services.

[Freakqnc .((•)).]

I am appalled. You are so pathetic and the lack of professionalism it's unbelievable. Apologies? What an insult added to the injury! Highest expression of Greed and Fear that rules companies like Netblip! We first saw Greed with the nonsensical price increases, and now we see fear with this attempt to kiss the boo boo. You told us to go F ourselves and now you say "...and btw this is why you should go F yourselves". You guys are just beyond ridiculous! Apologies not accepted.

[Take it Easy]

When I got the email I thought it was spam when I came to the quikster part of the email. Then I thought what was he apologizing for? For the actions they are doing now or for the actions they took recently :)

As Ahbi mentioned above, this is for a sell-off. I was sort of expecting this when the original price hike came (even though I didn't want that to happen). Basically they are getting more profit with streaming and less with dvd business I think. This way they can slowly close down the dvd business or sell it off at some point. Again I don't like it though.

I agree with many here about 2 queues to maintain, if you have a movie added to streaming, you have to manually check and delete in the other queue, ratings, etc are not customer friendly at all.

Will there be an apology email for this one or I should take this apology for all actions in the past and in the future?

Takeiteasy.

[shthar]

I think Spider-Man fought the qwikster, didn't he?

[Sacredsin1]

Actually, thank you Reed. It was time for me to decide what to do since my billing date is approaching. This has cluster f**k written all over it. You are divorcing disks from Netflix. It is simply a marketing ploy to divert attention to the price increase.

Honestly, I didn't think the increase was all that bad until you basically admitted it by doing this bone-headed move.

I will keep the streaming because I like old TV shows. I will keep an eye out to see if Amazon streaming is similar, as I'm an Amazon Prime customer. If their streaming free stuff is the same, then it's goodbye Netflix, and glad to have never known ya Quickster.

Actually, it will be kind of freeing not to worry about how to get new releases (well after they come out, mind you),not to have to worry what second rate movies to order due to long waits on what I really want to see, and not to worry about the throttling that you do so well.

I will get whatever new movies I want to see in HD, with no waiting from Amazon. Yes, it will be a higher fee per movie, but I will get them in HD, and I won't have to settle for a movie I didn't really want to see because you won't send me what I want.

So thanks for making my decision to go from 24 bucks a month down to 8 bucks.

[Crow550]

Netflix might be shooting themselves in the foot.

However....

It's not surprising at all they wanted to be a streaming only service. So.... It's not like we didn't know this was coming. Just not this soon....

Especially since we would assume they would offer Discs until they could offer 1080P quality like Vudu does which is close to Blu-Ray and have a library close to the Disc business.

As far as Disc rentals go.... I am trying Blockbuster: Total Access and I am liking it. The turn around time is the same and they have more Blu-Rays and no 28 day wait on New releases. Dish Network seems to be fixing the old issues of BB: Total Access.

So well see if Netflix Improves streaming and the spin off disc rental service....

I might come back to Netflix in a Month or so for some TV shows and flicks they have. However there was a number of things that just pissed me off and they kept adding more crap that irked me till I decided to go. I just got fed up.

With Blockbuster streaming & Redbox streaming coming soon.... As well as Amazon improving & Hulu hopefully getting sold to someone who knows what to do with it....

Well see how Netflix does. I still like Netflix, they just need to re-connect with there user base.

What's really sad is this announcement will cause more people to leave Netflix that relied on the streaming & discs.

So Netflix better work on streaming & no more hikes.

[Sacredsin1]

I also meant to add that I too, thought that the email was some kind of spam or phishing thing at first. I did not recognize the sender. He should have sent it under the regular Netflix email address.

I had to come to Hacking Netflix to make sure this wasn't some kind of hoax or something.

Seriously, it's like you hit the floor with a thud, in the way you announced the price increase. Now it's like you have a jackhammer, trying to go even lower, making things worse, and admitting you want to divorce yourself of the disk side of your business.

[John Schmickley]

Well, well, well.....I have been a loyal customer for several yrs and while I did not like the price changes, I gave them the benefit of the doubt.

However this is just stupefying.

Not sure what I am going to do. I guess I am going to sit back as see the fallout.

[James]

1) They're making it worse. Far worse. I'm really glad I left, even after eight years and 6,000+ movies rated.

2) Anyone who thinks this was solely about a $6 price increase hasn't been paying attention. This is about the change of a company that catered to movie lovers in a way that Blockbuster didn't into...Blockbuster.

They dropped critic reviews, member reviews, friend recommendations, screwed the pooch with Criterion, neglected their DVD business, accepted maddening limitations on streaming, and *then* raised prices.

Good riddance.

[andy averill]

Hi guys, this is my first post. Please excuse me if this is an inappropriate comment for this thread, but I'm really baffled by what's going on with Netflix.

I just recently signed up for streaming video -- I used to be a subscriber in the DVD-only days.

Maybe I'm missing something here, but I just don't get why so many people seem to prefer the streaming option. I appreciate the convenience of being able to watch a movie instantly, but what good does that do if there aren't any movies worth watching?

I don't say this lightly. I'm a big fan of old movies, and I'm not necessarily that interested in recent releases. Yet no matter which category you're looking in, you're going to have to really work to find something really outstanding.

Just as an experiment, I searched for movies with Johnny Depp, listed as the biggest box-office star of 2010. Here's what I got: Alice in Wonderland, Dead Man, The Man Who Cried, Gonzo, Fear and Loathing in Las Vegas, Cry Baby, Benny and Joon, Don Juan de Marco, When You're Strange, Buy the Ticket, Take the Ride, Lost in La Mancha, Happily Ever After.

That's it. Except for Alice in Wonderland (which is a Starz movie & therefore will be going away next year), none of his big hits, none of his Tim Burton movies. Yes, some "interesting" movies for cultists, but practically nothing the general public wants to see.

OK, so how about old movies then? I searched for Humphrey Bogart. Results: Beat the Devil and Dead End. Now I happen to love Beat the Devil, but where are Maltese Falcon, Casablanca, Treasure of the Sierra Madre, The African Queen?

How about Oscar winners? Of the movies that have won Best Picture in the last 20 years, exactly 1 is available: Chicago.

So what's going on here? Am I missing the point somehow? Am I the only one who feels like these choices are underwhelming? Is this really the backlist that Netflix seems determined to bet the company on?

[corey3rd]

is nobody noticing Reed's biggest lie?

"Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD."

It's not even close to every movie. There's less titles on DVD than on VHS. He might be right when he's talking about films that were theatrically released from 1999 to now. But when it's about dipping into the vault, it's maybe 25 percent or less. I'm not sure what Reed's point of throwing this lie around since he knows better.

Far as splitting the company and giving the new service the name of the service we've known for over a decade, this is messed up. Expect the stock to jump thanks to Wall Street morons, but it will eventually fall when people who use the service get frustrated and decide to put their accounts on hold till Reed figures out that he's running a corporation and not a stall at a flea market.

Streaming will never work for him because the studios and cable companies don't want it to.

[Burningbird]

So, are you going to buy the domain hackingqwikster?

I have a hard time even writing qwikster. Appalling name.

How can a company that was so smart become so stupid?

[RJM35126]

This upsets me. Are we SURE the 2 sites wont be integrated for customers of BOTH ?

Thats hard to comprehend.

Im sticking with them despite the 20% increase (for me) but depending on how this plays out, I see potential for "issues".

I dont WANT to have to visit another website. And a separate charge on my credit card is just stupid. The fewer credit card transactions, the lower the cost per customer. Surely they can find a way to transfer the money internally.

I think I would have kept the name....and added "by mail" if they had to distinguish.

The apology was nice and games sould be a nice opportunity for them.

The stocks down a few more points in premarket trading. (I dont own shares, I am 100% customer)

Trying to give them the benefit of the doubt but I just cant get over the non-integration part.

Are they going to have non-integrated customer service too ?

[Linuslive]

Too many people who were burned (like me) will see this as Netflix trying to debrand itself from its price fumble. Reed didn't even really apologize.

He's pulling a "high fructose corn syrup" and trying to rebrand his company so we don't associate greed with netflix. Note that the DVD part of the company is getting renamed, not the streaming. The DVD part is what made Netflix a company. It's also the part that costs more.

With Redbox getting a larger market share and having a lower cost point, I think it's only a matter of time before Netflix becomes another hulu and their marketability will nosedive.

[Marlene Stein]

This confirms the suspicion I've had since the pricing change that Netflix plans on selling "Qwikster" quite soon, probably within a year, and will focus solely on streaming. They believe that mailing DVDs is a busines that only appeals to older viewers and are concerned about the Postal Service's ability to perform, so from a business point of view, it makes sense to focus solely on streaming. Well, it was nice when it lasted, but if you like DVDs by mail, be prepared for some pain down the road, as the new company will raise prices and you have to wait longer and longer for delivery, as the Postal Service declines.

[BP]

So, I haven't made a comment here for months. I figure this, if anything, is worth it. I'll be short and sweet for once:

I was completely, utterly wrong in my defense of Netflix's practices, as was everyone else. Though many arguments were petty, the anti-change crowd were right. It will be extremely clear who is astroturfing after this change; just look for those wearing the pro-Netflix/pro-Qwikster hats.

Hindsight is 20/20. It should be clear to everyone now that every single one of those decisions was calculated with this end in mind.

Qwikster won't be a wholly owned Netflix subsidiary within 2-3 years, perhaps less. The new Netflix is positioning itself to be the new low rent mass media distribution house for 21st century America. There's no room for a smart, efficient, consumer-centric service. The new way forward is low rent, low brow, catering to what the average American wants while the loyal customer base they built the company up on goes away looking for someone that cares about them.

I don't blame them all that much. It's just business, and this is the inevitable end run of every company: to sell out for that extra percentile.

I hope that Reed and company are happy being that ever so slightly much more rich, because apparently merely being rich and running one of the most successful and revered companies in American history isn't enough.

-BP

[Marlene Stein]

And BTW, I bought a new Roku2 about 6 weeks ago to get the subtitles option, and guess what? There's been a continuing, and worsening, problem with subtitles on Roku, which Roku blames on Netflix. No ETA for resolution, and more and more films are losing the ability to stream subtitles, despite having the option available. What a disaster.

[Tom]

Not sure this is the brightest idea a company ever had. Are they just trying to ruin it?

Now, we will have to maintain two separate lists of titles on two separate websites.

The integration of the two on the current website made them easier to maintain.

Additionally, the Post Office may be closing our regional processing center (30 miles away) and moving processing to the state capitol (250 miles away). That would probably add an extra day to DVD turnaround time; thus reducing the number of monthly DVD deliveries by 3-4. If the PO also stops Saturday delivery, that would reduce the number even more -- and make Red Box a better value.

The list of new DVD titles has been real great in recent months. Most of the titles in my DVD list are NOT 'must see' titles. I lived without mailed DVDs for decades. I can easily live without them again.

[Rigelkitty]

I'm a DVD + Streaming customer. How will I be able to tell when a movie is released on NetFlix, but not Qwikster (e.g. Zombie Girl, etc), without having to compare the well-buried New Releases sections of two separate websites against each other? Is there going to be a growing disconnect between what becomes available on DVD and what becomes available on streaming?

For that matter, how is HackingNetflix.com going to deal with covering two separate websites, if at all?

[Arnold]

There may be some business strategy that's not obvious to me, but generally, isn't it considered smart to maintain your corporate identity with customers? I went with the DVD-only plan when the summer changes were announced, and I was fine with that, although it seemed dumb that I lost information about whether the discs in my queue were available for streaming. That just seemed an easy way to promote the streaming service -- if I could see what titles were available I might reconsider my decision to drop it at some point in the future.
And even though I know it's just a business, I did feel some loyalty to Netflix, and encouraged friends to give it a try. Now I find out I've been transferred to something called Qwikster? I don't know where Netflix thinks this will take the company, but more than anything else this seems a move that treats customers in a callous way. I'm not going to drop my service, which continues to be good and serves my needs, but this does reinforce my feeling that Netflix (or whatever I should call it) may not be around in a few years. That's sad. My wife and I have been able to get a wide variety of moives (with minimal service problems) & it will be a shame when that is no longer around.

[Robert Emmerich]

Topic seems well saturated but just had to add my WTF!?!?! Actually turned on my computer just to come here to read this b/c I couldn't believe it when I read it in my CNBC Brief email this morning. Qwikster? Fugedaboutit. How about "slowster, as DVD by mail is going to be slower than streaming, or Redbox, not quicker, [email protected] I didn't think it was possible to come up with a worse name than VuDu, apparently I was wrong.

I'm not exactly sure how to explain it but this "split" reminds me of the AOl-TW deal, which was done so Steve Case could salvage his stock earnings before the inevitable AOL collapse. There is no possible way to spin this split as a plus for current NF subscribers, and very little incentive for future NF customers.

I've spent years on this site proclaiming NF the equivalent of Coke, Xerox, Kleenex and McDonalds, but now they're AOL. Or SOL if you prefer.

[Anthony Hayes]

This totally seems like an April Fool's but it's September. So confused.

[Brian Berube]

He slid into arrogance? He is so arrogant he can't even see that his most recent effort is a full, face first, belly flop. I received, in my email in box today, the most cynical, arrogant, condescending, patronizing letter I have ever received! It reeks of desperation and it strikes me as an insincere effort to stop their free fall. Count me out!

[gir]

Splitting will undoubtedly prompt many to go either DVD only or streaming only.

I wonder what people will do when they realize they don't get hardly any new releases on streaming. I expect there's going to be a lot of thrash, and a lot of loss. "NetFlix" will probably survive, but it'll no longer be the must-have that it has been.

I wonder what will happen when the DVD business is sold off. I think we can expect another significant price hike, though technically it won't be a "NetFlix" price hike ("we're done with that"). More loss, but not a loss that "NetFlix" need care about.

[I think we need to refer to "NetFlix" in quotes from now on. The company formerly known as NetFlix will soon be gone.]

[Jeff]

Wow, it's just a bloodbath over at the Netflix blog. Although I'm not a fan of the proposed changes, for me this is less of a blow than the price increase, the poor changes made to the website, and the removal of community features. But never have I see such a unanimously negative reaction to anything on the internet as to this proposal on the blog. There seem to be about 10 people in favor and 6000 opposed. Bad sign, that.

[Arnold Rogers]

Personally I see it as pure greed and arrogance. In an economy with 15% unemployment CEO's still live in a world of 100 million dollar bonuses, unlike us, and could care less how their decisons affect us. This is no different. He should be ashamed.