View Full Version : Netflix C.E.O. Apologizes for Handling of Price Increase

Sep 19th, 2011, 07:22 PM
Netflix C.E.O. Apologizes for Handling of Price Increase

ELIZABETH A. HARRIS, On Monday September 19, 2011, 2:16 am EDT
In a letter (http://us.lrd.yahoo.com/SIG=12pkiuv7h/EXP=1317665279/**http%3A//blog.netflix.com/2011/09/explanation-and-some-reflections.html) posted on the Netflix Web site late Sunday night, the company's chief executive, Reed Hastings, apologized for the way he handled recent changes in pricing and subscription services, which were announced this past summer and have since caused Netflix customers to walk away in droves.

"I messed up," Mr. Hastings said. "I owe everyone an explanation."
Mr. Hastings also announced that the DVD-by-mail service, where the company began, will be renamed Qwikster. Those distinctive red envelopes will become part of a separate brand with its own management team.

The name Netflix will remain for movie streaming, according to the statement, which was posted around 9 p.m. Pacific time. Qwikster and Netflix will now appear as separate lines on customers' credit card bills.
The price of the company's services will not change.
"We're done with that!" Mr. Hastings said.

It was, after all, just that kind of change that prompted outrage among Netflix customers this summer, when the cost of a subscription that included unlimited online movie streaming plus one DVD-by-mail at a time went from $10 per month to $16 per month. That 60 percent increase (http://us.lrd.yahoo.com/SIG=13r93ige2/EXP=1317665279/**http%3A//www.nytimes.com/2011/07/13/technology/netflix-raises-price-of-dvd-and-online-movies-package.html) has cost the company about 1 million of its 25 million customers, a greater exodus than they expected (http://us.lrd.yahoo.com/SIG=149kdjr1u/EXP=1317665279/**http%3A//www.nytimes.com/2011/09/16/business/media/customers-aggrieved-over-revamped-pricing-are-deserting-netflix.html), company representatives have said.

But Mr. Hastings did not apologize for increasing subscription fees, or for asking customers to think about the two services separately. Instead, he blamed his own "arrogance based upon past success" for a failure to communicate in the face of a fast-changing business model.

"We realized we should have communicated better in July when we announced the price change," said Steve Swasey, company spokesman. "That's a mea culpa on that."


I didn't think it was possible for Netflix to make their choices worse but then I saw this article. :facepalm: It's really interesting how money and power can corrupt one's character.... He's one arrogant SOB.

I use to love Netflix.... I do understand that the movie industry is sabotaging them but they are doing a good job themselves as well.

I'm going to have to dump them.... :sobbing:

Sep 19th, 2011, 07:32 PM
Netflix separates its DVD, streaming businesses

Netflix formally separates DVD-by-mail service dubbed Qwikster from streaming video service

Barbara Ortutay, AP Technology Writer, On Monday September 19, 2011, 12:58 pm EDT

NEW YORK (AP) -- Netflix Inc. is separating its DVD-by-mail business from the online movie streaming service it sees as the future of entertainment consumption.

In announcing the changes, CEO Reed Hastings also apologized to subscribers for the way the company communicated its decision to split the two services, which raised prices for those who want both.

The mail order plan will be renamed "Qwikster." In a few weeks, Netflix subscribers who want to get DVDs by mail will go to a separate website to access Qwikster. The streaming business will continue to be called Netflix.
Members who subscribe to both services will have two entries on their credit card statements. Instead of Netflix, the distinctive red envelopes that end up in customers' mailboxes will now say Qwikster.

It's a risky gamble. The amount of streaming content the company offers is still far less than the number of DVDs in its catalog. And competition, from Hulu, Amazon, Coinstar's Redbox kiosks and other services, is growing. Netflix could even alienate customers further by asking them to now deal with two separate websites and accounts instead of just one.

Netflix CEO Reed Hastings apologized for the way the company communicated the price changes, but not for the price hike itself.
"I messed up," Hastings wrote in a blog post Sunday night that was also emailed to subscribers.

The changes come as the company faces increasing scrutiny from customers and shareholders over the decision announced in July to separate its mail order and Internet streaming services into two separate plans. The change raised the prices for users who want both services, by as much as 60 percent for some.

"Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail," Hastings wrote.
Last week, Netflix lowered its U.S. subscriber forecast for the third quarter and the former stock market darling's shares took a beating as a result.

Hastings said he "slid into arrogance based upon past success" when he did not adequately explain the reasons behind the plan separation and effective price hike. He said the reason is that instant 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."
Explaining the reasons behind the plan change "wouldn't have changed the price increase, but it would have been the right thing to do," Hastings wrote.

Netflix announced its move just as the once-mighty Borders Inc. shuttered the last of its bookstores around the country. Hastings' blog post seemed to take heed. He said that for the past five years, his "greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming."

"Most companies that are great at something -- like AOL dialup or Borders bookstores -- do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices," he wrote.

Hastings said the DVD service will be the same as ever, "just a new name." But customers will see a video games upgrade option for game rentals on the Qwikster website. Andy Rendich, who has been working on Netflix's DVD service for 12 years, and leading it for the past four years, will be the CEO of Qwikster.

Hastings also said Netflix will add "substantial" streaming content in the next few months, and reassured that there are no more pricing changes.
Shares of Los Gatos, Calif.-based Netflix rose $4.13, or 2.7 percent, to $159.32 in morning trading. The stock is about 45 percent since July 12, when the company announced the plan pricing changes.