Netflix CEO Reed Hastings: “I Messed Up”

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Netflix CEO Reed Hastings: “I Messed Up” →

Wow, I’m at once stunned and impressed. Tonight around 9:00PM, Netflix CEO Reed Hastings posted an apology on the Netflix blog in which he addressed the company’s recent changes in service and price offerings.

In the apology, Hastings explains his lack of customer communication as his biggest mea culpa. He says that the Netflix community deserves to know his reasoning behind the company’s separation between the DVD and streaming service, as well as the reason behind the price hike. 

…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.

“…we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.

…We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games.

…Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our DVD by mail service. Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail. It is possible we are moving too fast – it is hard to say. But going forward, Qwikster will continue to run the best DVD by mail service ever, throughout the United States. Netflix will offer the best streaming service for TV shows and movies, hopefully on a global basis. The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further.

I did a google search and as of now, did not see Hastings’ apology issued anywhere else, not even in a press release. The big media outlets are all in the know, however.

What do you think of the Reed Hastings’ apology?

I’m a longtime Netflix customer and currently subscribe to both the DVD and streaming services. The price hike didn’t please me, but it’s not that significant given I don’t subscribe to cable TV. I am a little concerned about the schism in the traditional Netflix service. It may seem like a simpler way for the Netflix/Hastings team to manage the two main services, but I’m not yet convinced the split will benefit consumers. It’s small, for instance, but the two credit card charges — one for Qwikster and the other for Netflix — is annoying. Totally different bills and accounts. Maybe consumer improvements will focus around the user interface, particularly the UX with the streaming service across various platforms and distribution channels. I hope so because Netflix could use a UI make-over.

Hastings’ humble tone in the post is disarming, and using the blog as the source of the apology is good for fostering community intimacy. I like the approach…makes me feel a small amount of warm fuzzies.

I’m not in the camp of being pissed off at Neflix. The television, cable and media-on-demand markets are undergoing huge changes. Profit-margins are shrinking. Technology and consumer demand are driving up costs at this stage. It will be interesting to see how the landscape shapes up. In the meantime, I’ll keep enjoying my DVDs and streaming shows on Netflix/Qwikster.

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