If you’re a Netflix subscriber, you may have woken today to find an email in your inbox from the CEO of the company. If not, a lengthier version of the message was posted on the website’s blog, reaching out to people with an explanation of their business plans, including the decision to split the company.
Co-Founder and CEO of Netflix Reed Hastings doesn’t apologize for jacking up the prices on Netflix, however he does appear to be apologetic about not communicating their plans with readers as they carried out the shift in pricing.
“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,” he said. “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.”He references AOL’s dial-up service and Borders, when discussing companies that are great at something but “do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business.” In the case of Netflix, the big change appears to be breaking the streaming service away from the DVD-by-mail service entirely.
Netflix Streaming will remain “Netflix,” while their DVD-by-mail service will be renamed “Qwikster,” and will operate on an entirely separate site. “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,” Hastings said.
It seems as though their decision to split the pricing (increasing the price significantly for those who were subscribers of the DVD and streaming services) was in preparation for this business shift. Perhaps they thought it made more sense to ease subscribers into paying for the two separate services before they actually split the business. At the end of the day, subscribers are still paying the same amount for both services, whether they’re offered on the same site or two separate sites. It was just a matter of letting people know what was happening. Whether that would’ve eliminated some or all of the backlash the company receives, who knows?
They might have gotten a better reaction from users, had they held off on raising the price until the two businesses were split and the shiny-new Qwikster website was up and running. Instead, they started with asking for more money first, with no real explanation or incentive.
Also mentioned in Hastings’ message was the plan to begin renting video games through Qwikster, which may be a big incentive for some people to use (or return to) the DVD-by-mail option, given the cost of video games.
Does Hastings’ mea culpa change your opinion of Netflix right now? Do you plan to subscribe to Qwikster when the site is up and running?