A Netflix By Any Other Name: CEO Apologizes, Splits DVDs From Streaming Video

Reed Hastings co-founder and CEO of Netflix (NFLX) began the blog he posted Sunday with an admission. "I messed up," he wrote. "I owe everyone an explanation." Along with that explanation, he unveiled significant changes to the way Netflix operates, and announced a new set of services from the company, but the message may do little to calm customers or investors.

Reed explained that he hadn't meant to show a lack of "respect" to customers when he split the premium content firm's DVD and streaming offerings and set new higher prices. He said he believed it was right to separate the two businesses because one -- streaming -- is a growth business, while the DVD segment is no. He blamed himself for generating the extremely negative customer reaction. "In hindsight, I slid into arrogance based upon past success."

The DVD and streaming businesses will be split into two, at least as far as customers are concerned, with The DVD operations to be renamed Qwikster. "We chose the name Qwikster because it refers to quick delivery," Reed wrote. "We will keep the name "Netflix" for streaming.' Qwikster will add video game rentals to its DVD-by-mail service, and other "improvements" will come later, he said.

The action probably won't satisfy customers who dropped Netflix because of recent price increases, but at least the split will not bring another one. "There are no pricing changes (we're done with that!)," Hastings wrote. He closed his blog with the acknowledgment that it would take time for customers to recover from their reaction to price increases and the way they were announced. "Both the Qwikster and Netflix teams will work hard to regain your trust."

This CEO mea culpa is likely to do even less to satisfy Wall Street. On Sept. 15, Netflix revised guidance for its third quarter. The forecast for the company's subscriber base at the end of the period went from 25 million to 24 million. Netflix said its financial guidance for the quarter remained unchanged

In response, Wall Street punished Netflix shares, dropping them from $210 to $155 in two days. A blog post and a name change won't change that.



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77 Comments

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kef45

I still love it. Its still cheap entertainment

September 20 2011 at 12:32 PM Report abuse rate up rate down Reply
bill

i get dvd's by mail 3 out at a time.i am happy with way.don't care about streaming.

September 20 2011 at 11:41 AM Report abuse rate up rate down Reply
kjmbcsm

I cancelled today. Consumers fight back now against corporate greed. I can live without the DVDs AND streaming garbage. Their arrogance has convinced me. I hope it will convince you too.

September 20 2011 at 11:01 AM Report abuse rate up rate down Reply
geraldr5

After many years as a satisfied customer, I pulled the plug. The price hike was outrageous in today's market. Netflix reached a point where its service was not worth the money. Pity. TERRIBLE execitve decision!!!

September 20 2011 at 10:56 AM Report abuse rate up rate down Reply
reichshulk

How can a CEO or should i say Chief Idiot in charge destroy a company in such a short time???? Intenional i guess....great job....way to go........Oh yeah, you sold your stocks in the $230 range already, so now you don't really care, do you........GREED & a BRILLIANT Business plan in action......PRICELESS (how many BILLIONS) did your stock drop so far????? Keep up the GREAT WORK.........I heard the CEO is in Tahaiti partying and laughing his ASS off after ripping off investors, pissing off Customers, and looking out for his interests only...........PARTY ON

September 20 2011 at 10:39 AM Report abuse rate up rate down Reply
Stephanie

eff netflix so glad i left

September 20 2011 at 10:36 AM Report abuse rate up rate down Reply
raidrmik67

I had them until the price increases. NEW releases were not all that new and they didn't seem to have current releases(movies you can purchase) available which seemed kind of stupid. Some of the classic stuff they offered was cool but I could find myself going through dozens of titles trying to find something new to watch.

This may go down in business history as one of the biggest blunders of all time.

September 20 2011 at 10:28 AM Report abuse rate up rate down Reply
jaizz504

Great job to the fleeing customers, including me, who let Netflix know that we will no longer be taken advantage of and treated as if we don't matter! Next up, cell phone companies, politicians, banks and other business who openingly disrespect and disregard their customers in the interest of higher profits for their CEOs and upper management (unfortunately, these higher profits don't trickle down to the non-management people who actually do the work and many live from paycheck to paycheck). It's about time we as consumers stop talking about how badly we're treated and actually do something about it! There are many choices for all goods and services we need and want. Let this be a message to all retailers and service providers. We have a choice and we will choose the best goods and services at the best and fair prices!

September 20 2011 at 10:12 AM Report abuse rate up rate down Reply
shipfixr

Netflix made a great start but it appeared that as the quality of their product slipped, their greed and arrogance grew; the recent price increase was the last straw for me, I became one of many who dropped them. Also, like many, I will check out Blockbuster who appears to be making a comeback in the field. The 'Redbox' is also a good option.

September 20 2011 at 10:09 AM Report abuse rate up rate down Reply
Barbara

AUTHOR of this article. You should spell check. You used no for not.

September 20 2011 at 10:01 AM Report abuse rate up rate down Reply