“Netflix Inc. Chief Executive Reed Hastings said in a blog post the company is separating its movie-streaming business and its DVD-by-mail service, to be renamed Qwikster, a move he said was the undisclosed impetus for a recent price increase that outraged customers and sent the company’s stock price plummeting,” Ethan Smith reports for The Wall Street Journal. ‘I messed up,’ Mr. Hastings wrote in opening his lengthy, apologetic missive posted late Sunday night on Netflix’s website. ‘I owe everyone an explanation.'”
“A Netflix spokesman said that Qwikster will be a wholly owned subsidiary of Netflix. In the blog post Mr. Hastings wrote that Andrew Rendich, who was chief service and operations officer at Netflix, will become chief executive of Qwikster,” Smith reports. “He wrote that customers will receive separate credit card statements for the two services, with the new one billed under its new name.”
Advertisement: Limited Time, ends Sept. 20th: Students, Parents and Faculty save up to $200 on a new Mac.
“Two months ago, Netflix said it would change its pricing structure so that its by-mail and online offerings were essentially sold separately, each starting at $8 a month. Previously customers who got movies by mail and online paid less for the combination than the offerings cost separately,” Smith reports. “The change effectively raised many subscribers’ monthly charge by 60%, to $16 from $10. Last week, in light of negative reaction to the price increases, the company cut its subscriber forecast by 1 million, or 4%. In response, Netflix’s share price plummeted 19%… ‘Inside Netflix I say, ‘Actions speak louder than words,’ and we should just keep improving our service,’ he wrote. But he added, ‘I should have personally given a full justification to our members” for the price increases.'”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Jack Frederick” for the heads up.]
Related articles:
Price-raising Netflix is tone-deaf on public perception – July 26, 2011
Netflix increases prices, changes DVD and streaming plans – July 13, 2011
Fragmandroid: Netflix app spotlights Android AppLag, fragmentation crisis – May 14, 2011
Apple updates Apple TV with live MLB, NBA streaming, Netflix, Dolby Digital 5.1, and more – March 9, 2011
Hastings is apparently in the running for worst CEO currently running a company. What successful company, that has toppled an industry (brick and mortar DVD rentals) just decides to establish a new brand for their business. This move makes absolutely no sense. Looks a little like rear covering from the price increase.
Their solution just makes things worse. Now, if I want the choice of physical DVD or streaming, I have to have 2 separate subscriptions?
I think it is time for Netflix to find a new CEO.
Yeah I saw that also.
Instead of one log in and credit card charge… Now you have two!
The rumor I heard yesterday though was that they are doing this to make it easier to “sell” the DVD part of the company down the road if they wanted too.
I read his “I’m sorry” email this morning. Laughed at the two log in part, then deleted the email. That’s about all the time I’ll waste on qwikster. Gizmodo is having fun with the whole thing, the “qwikster” twitter account is taken by a drug using foul mouthed kid lol.
My family uses REDBOX… for free stuff we use Hulu… there’s more to life than sitting in front of a screen…
Not only that, but Quikster sounds way too much like Friendster. Heading for the same fate? Or maybe huckster. I think I just went from $8.00 a month to zero.
Here’s my take: Reed Hastings, hastily figures that the blunder really was in the lack of communications. He believes that if they had communicated the price hike better to the subscribers with apt humility, all would have been swell. Two words: N.O.
The real lack of “humility” was in thinking that Netflix was anything other than a 3rd party hack between the content providers and the consumers. Netflix, some may view, is nothing but a glorified mail order company (out-muscling USPO and outgunning Blockbuster) that’s trying to get their toes in content streaming. They don’t have anywhere near the server prowess of Amazon, Apple, Facebook, Google, MS etc. to host and stream major data demands under heavy loads in peak hours.
They hope to grow and get there eventually, but that’s more a pipe dream right now. Why? Because they are reliant on others for contents. They don’t produce anything (so far), and yet this is their primary bread earner. FB, Apple, Google have other businesses that support their server strategy and investments. But if the content providers of the studios and TV networks were to pull their plugs on Netfix tomorrow, they’ll have a mega server farm with bees skating on ice show to stream. And it’s already happening. Starz (which owns non-trivial percentage of movie rights) has already bowed out due to pricing disagreements. TV networks have their own pipe dreams with Hulu (who needs 3rd parties?) plus iTunes and Amazon.
Meanwhile, Netflix’s other blunder was in thinking they have a sustainable business model. Once again, the answer appears to be point towards a big N.O.
All their innovations/inventions so far (the pundits and Wall Street were cheering Mr. Hastings to the moon earlier as the next Steve Jobs) has been in how to deliver red-envelops to the customer faster than competition. Never mind that Blockbuster had (still has) more selections (especially with the vast older catalogs) and brick and mortar retail stores in every corner in most cities, Netflix understood that customer expectation is the movie the day after is actually the next day and they tried to fulfill that as best. But in the online streaming world there are two problems.
1. Many folks who get the DVD, also like to rip the movie for a private collection and later viewing. With online streaming, the video is DRM’d and once you watch it, it’s gone.
2. The delivery system is now more dependant on technology (ISP, consumer’s computer/appliances) and quality (no Blueray, true HD means longer download time, ISP download caps etc.)
In order to justify the extra hassles there should added benefits. Netflix/Mr. Hastins has’t “innovated” through that. Innovation is not just a technology concern. You need to innovate to anticipate customer concerns/experience. For instance, Amazon, out of the gate may offer the exact same deals Netflix is offering (nothing is stopping them) for lower prices (they have their own tried and true mega server farms) and internationally (a huge potential instant market grab). The players that can challenge Amazon are Apple (iTunes), Google (still working on an iTunes killer) and MS (Windows Live and marketplace).
But the real innovation, so far, has come from Apple. In iTunes, anything you have ever purchased (free or otherwise) is now automatically added to your iCloud account for life. All the movies, music, Apps, are now accessible for free on demand. You lose your computers or backup hard drive, it’s no longer a concern. All you purchased content is forever accessible to you again. That’s understanding anticipation and meeting the challenge with real innovation. The technology behind is complex, but that’s besides the point. It’s making it seamless and obvious that’s the Apple magic.
I like what you said and I agree with most of it. However, apps that no longer appear on the App Store are not in iCloud. Nor are any movies going to be on that service. Not that I have heard of. Current Music and Current Apps, I do believe, is what you get with iCloud.
If someone knows any different please say so!
Is that true?
If a app or movie is purchased and nolonger available on iTunes it’s done.
That would royally piss me off to no end.
However. If you made a backup of your purchases you can still restore them yes?
Just asking.
Consider this WF, I deleted an app off of my iPhone 2G. I was cleaning it up to give to mom. She handed it back a few months later. I tried to sync the phone which has iOS 3.x. The app Whoshere will not install as it is too new. It was one of the apps I removed from the phone. There is no way to get the app back on the phone. I am looking at past back ups to see if I still have the old app.
I also have other apps that were removed from the App Store because of some violation over their use of system protocols or some such thing. One of those apps’ name is WifiTrak. I can’t see Apple putting it up on iCloud.
Agreed.
I never have ordered a Netflix DVD.
So I ask…
This mailing a) is intended to be returned and b) is protected by DRM?
All consumer DVDs are DRMed and hence iTune rentals and purchases – even – blockbuster, walmart deals, kmart, hmv… This is the rights of the content producers. Simply to stop piracy.
Buying a iTunes movie I understand you cam share this on 3 devices and make a DVD backup of your purchased apps/movies/applications. But that burnt purchased movie will not play on a standard DVD player. It is protected and fit only to restore back in your iTunes.
To me this is fair.
As much as I would like to play it after on my DVD player I have accepted it’s just a headache and why collect a DVD anyways.
My point is… As much as I agree with you and others on how Netflix is screwing up… I think it is a good service. Better Apple watch and see then start something similar.
I careless for the quality… Come on it’s a movie it’s instant it’s good enough and I bet after someone hacks a copy and divix the darn movie the quality is as is Netflix for their pirated personal collection.
Why do we collect?
This is where as you say… The magic of iCloud will become far more beautiful then anyone yet has precieved…. Collect there in the cloud. Make it fast. Easy and save your own space of your harddrive for truly your own content created.
Apple seems to understand why we collect these things. And I believe will curve your collecting habits… I already have felt this.
Do I need to keep backing up my purchases?
Answer is two letters. N.O.
Apple purchases are dated recorded and solid I can purchase the item again and wow apple pops up a message saying I have already bought this before… Nice. Very very nice indeed. Download again if you wish. Delete from iTunes again If one wishes.
New habits are being set.
Excellent Apple understands consumers.
But as for options on instant streaming I believe Netflix for now unless Apple does theirs still has something to offer.
If Netflix is dead tomorrow fine. No sweat.
Sorry but last I checked NO was 1 word not 2 and honestly this isn’t to bad an idea I only use streaming cause I think paying extra for DVDs is retarded
“‘I should have personally given a full justification to our members” for the price increases.’””
Okay, so you “messed up”, and you say the mistake you made was that you didn’t give a “full justification”. So, nows your chance. Rather than apologize, can we hear the “full justification”? If there is none, then this is just more mess on top of the last mess.
Right…. So instead of Netflix (the company) hiking up prices 60% you now end up paying 8 dollars to Netflix (the service) and 8 dollars to Qwikster (the service), which are both owned by Netflix (the company)… So there’s no price hike, just a new service with it’s own price tag… I anybody really fooled by this?
well, if they are two different companies, I don’t see why one couldn’t subscribe to ONLY Qwikster if one wanted only streaming and thereby save $2/month (before it was $10/month for both). Just a thought…
I think you are missing the point of users dissatisfaction. I (my family) use Netflix and our selections are not limited to using only one side of the service, we use BOTH the mail order service and the streaming service. The streaming is on Our iphones, ipad, and game console. The available content is different, ie; not all dvd’s can be streamed and not all streams are available on dvd.
I signed up for the service SPECIFICALLY because of the ability to do BOTH, and the value proposition of the pricing.
If they need to hike the price, I can deal with it, but now having two different billings, and accounts does what for me exactly? So in six months, what keeps one company, or both from raising the individual rates again. (clearly where this is heading)
This seems like a colossal failure in regards to customer satisfaction/service. Not to mention the confusion around the separate names. It all reeks of arrogance and greed. Typical corporate stupidity. Charge what you need to to stay afloat and maintain profitability, thats reasonable. Shitting on the customers that made your company, and making it harder for them is NOT SERVICE. At the end of the day they ARE a service company.
Agreed. This separation of services seems to me to be even worse than the price increase. Go to the gas pump. If it’s 25¢ more today than yesterday I grumble a bit and fill my tank. But if you were only allowed to fill your tank with 90% gas and had to then go to a separate pump around the building for the 10% ethanol as a requirement, I would be looking for a station than bundled it and delivered it in one step. Or it’s like going to walmart and then having to check out at one register for groceries, then go to a separate one for everything else. I go to Walmart specifically so I can get everything and pay once.
The price increase was not a deterrent to me so much from keeping both services. But the separation of services seems asinine.
Brilliant. Exactly right.
I wasn’t that bothered by the price increase — I was just going to lowered by DVD rate to keep my pricing the same. But this move has me ready to cancel the entire service.
The only problem? With BB gone, what is the alternative? Does Netflix have any competition?
(Netflix user since before they started subscriptions.)
Red Box.
But the price increase stays the same. So who the hell cares if NFLX is split into 2 companies? The price didn’t drop. You still pay the same! Geez! Surely the critics will point out this? Also, Reed has been selling NFLX stock to the tune of 41 million lately. NFLX has lost 42 million in the last few months. Odd isn’t it? He’s an asswipe.
Of course the USPS isn’t helping Netflix much as they are extending the delivery times for 1st class mail and possibly suspending Saturday deliveries. I think Netflix knew what they were doing by pushing out the DVD service en lieu of streaming.
+1. Of course, that’s only one ingredient in the mix. For Netflix, the “threats” box in their SWOT analysis is overflowing regardless of whether we’re talking about the physical disc rental or the streaming side of the business.
Basically, their entire business model relies heavily on external factors – most beyond their control. With discs, it’s the postal service, but it’s even worse on the streaming side. of the business. They rely on the content owners for content to sell (and are at their mercy when it comes to price), then they rely on the ISP’s to deliver that content to the customers. They’re already being attacked from both directions.
Netflix will become the next cable or DirecTV… The pricing will necessarily climb, and it will simply be yet another $30-50/mo expense to watch content of questionable value.
The days of “Netflix is awesome!” are over.
Here’s the thing… if I want to watch a movie with big sounds and explosions, it needs to be in THX 6.1 or Dolby 5.1. Netflix does not stream in surround, so I would get the DVD for such movies. Now Netflix is going head to head with Apple TV, which streams in 5.1 surround. Now that Netflix is over $20/month, Apple TV makes more sense.
If Bang and Boom is your idea of art, skip video and buy fireworks. Personally, I prefer plot and substance.
Well, aren’t you the special snooty-type? How about you mind your own business on what people want to watch?
Netflix digital and Apple TV are currently two different services. Netflix is a subscription model and Apple TV is a rental/purchase model. Netflix digital is old stuff (at least a year but much of it is a lot older). The library is still very small (and if they lose Starz it’ll be smaller).
I have been pleased with streaming performance over WiFi and 3G. It does a good job (not great) adjusting for the available bandwidth.
On Apple I can rent movies recently released to DVD. I can rent older movies too. Not everything is rentable. There is much that requires purchase. The selection is larger then Netflix but to view the movies/shows there is a potentially higher cost. I have found many items on Netflix that do not exist on Apple TV particularly in the TV selection.
Bottom line: the two are not competitors at this time. They compliment each other.
Actually allot of Netflix is going to dd 5.1. If you have an apple tv I don’t know If any other Netflix devices will do 5.1 yet.
But I have seen several this go dd 5.1 in the last month. So hopefully more stuff is coming.
In Canada I have not seen the raise in price. I do not receive DVDs in the mail either.
Netflix is fast.
Instantly I see the movie stream good enough to enjoy on a 40 inch screen relaxing in my couch.
If I do not like the movie I can pick another.
The cost of streaming a iTunes rental and Netflix is the same as far as I know.
8 bucks for as many as you wish per month.
Now Compared that to 8 bucks spent for iTunes 99¢ deals — you get 8 movies you might not wish to see.
Shop wisely – good to have a choice.
However, when I don’t watch Netflix I am still charged monthly. And I admit I have choosen to watch nothing for month.
Typically iTunes has newer better quality. And I prefer to buy the movie if I really enjoyed it. Still I am finding why do I want to collect. And fill my hard drive with these things. If the movies where Unprotected and could burn and play normally back on a standard DVD player I would change my mind.
For now the two offer choice. If Apple buys out Netflix or begins a service like Netflix all the better.
that’s because you live in Canada, and don’t have the same third world internet service we have here in the states….
Appreciated but I’m not sure of what you mean third world – I spent 2 years in Asia 3rd world poverty strucken Philippines and I will tell you…
They got great skycable tv on demand watch what you wish pay for only the time you have that box turned on.
Next as a poor 3rd world country they got plenty of competition and good Internet services. PLDT, smartbro, Globe all with good coverage. And even 3G USB sticks.
Sorry I don’t understand your 3rd world comment. The Internet situation in Canada is no better then the USofA. Bell and Rogers still fighting over the power. Celular services from smaller competitors it’s messy here also.
Perhaps you mean 4th world? Lol.
Take it easy man… Everyone wants this Internet and all the companies see it and are damn greedy to control It.
My wife is so mad at Netflix she insisted we kill the service. She loved the DVDs as she is a big fan of British movies. By comparison the selection for streaming is culturally on the lite side.
She hasn’t looked back and as far as we are concerned Netflix is history after several years. Yes they screwed up.
Here’s an idea…
Poising their company for takeover by Microsoft. It’d be odd for Microsoft to buy a DVD company, but it wouldn’t be odd for them to buy a streaming company.
Reed Hastings is no idiot, he is not a upper level management hire from some sweet-water peddling company. He is the (co) founder of a company that turned a market upside down.
Streaming was an aside for Netflix it was virtually free, It has become more and more expensive (as they try to obtain rights to more & better films/TV)
He (Hastings) has foreseen that streaming is the future of the industry and that 1) the streaming side of his business needs more capitol to get more and better movies and 2) that it is not fair to burden those who are only interested in the dvd rental service with higher prices to support streaming (and remember the streaming was a “free” add on the price of DVD by mail has remained pretty constant)
So… quit ur bitchin. Those who want streaming are going to get a better product (streaming companies (like competitor hulu plus) are scrambling for rights to more & better movie catalogs and that costs $$$) and those who wanted DVD rentals by mail, well you are getting what you always has for the price you always paid.
And for those who wanted both for no more (or little more) than the dvd rentals used to be I have an old german saying (which I use on windows sufferers all the time) and it goes something like this:
If you want nice fresh clean oats expect to pay a fair price. If on the other hand you will accept them after they have been through the horse, the price will be considerably less.
Well say. Excellent info and very much appreciated… However, screwing up and admitting it is very big of this CEO.
And customers have a right to complain.
If the reasons for price increase is to buy new movies the justify it.
If the reason is for bandwidth the customer is paying already this here in Canada
It’s messy up here also.
Sounds like it is a bit messy up there. However, I live in the US and I envy you guys. It sounds like your government is actually doing something about the dumb pipes thinking they’re more then dumb pipes. If you’re a pipe, be a fucking pipe. The US government basically seems to have it’s collective thumb up it’s butt about the whole internet infrastructure thing.
The CEO has done the right thing here admitting he messed up.
Yes and fix it. The fix does not sit well with folks. Two bills two companies… For what reason. Why can it not stay as it was at the price it was? If a price increase is required for covering the increase on mailings then justify this side.
If Apple can run the iTunes store and the iOS and OSX sectors of business as a whole… What the hell Netflix… Sell off the mail service to better entice a company buyout? Interesting.
On a Mac you are required Silver-whatever a Microsoft application…. I can imagine Microsoft already has deeper interests or something to do wIth Netflix as a company buyout.
Dude,
You are so right. You messed up bigtime.
Word: I am so over Netflix.
Folks, I’m really sorry… this isn’t Reed Hastings’ fault. This is actually my fault, which I explain in this video here: http://www.youtube.com/watch?v=ziOpcodkupw
SPILTS? Perhaps “splits” would be the more appropriate word to use in the title?
Perhaps there’s some logic behind this move such as Netflix getting ready to sell their DVD business but from the consumer side it’s yet another bad move and even more reason to drop them.
I don’t follow your logic. The consumers who wanted DVD by mail are getting them at the old (lower) rate (even before they offered any streaming) And those who want streaming are going to get a much better catalog (from the additional revenue)
I don’t see how that doesn’t benefit both types of consumers
If you want TWO services (and a much better streaming catalog) you can (and should) pay for both.
Why (particularly on a Apple Form) do people think they will be happy with a crappy limited streaming service thrown for free (or almost nothing)? Isn’t that the PC way? The ideo that yes those crap $400 and $600 notebooks are crappy, but they are really “good enough”. That you don’t really need more than barely adequate.
Hogwash- I want a HUGE streaming library with all the newest releases and am willing to pay (a reasonable sum) for it, $8/month is more than fair.
If you also want DVD rentals (and want a lot of them) then $8 is cheap for that as well, if you don’t (rent a lot of DVD’s) then just use a RedBox. Seems simple.
And as for the “horror” of the separate billing… Come on give me a break… they are just a recurring charge on a CC card. Do you really care if they are one or two two line items?
I just don’t get all this mock outrage…