Netflix CEO Reed Hastings apologized last night for the manner in which the company announced plans to split its streaming and DVD-by-mail services into separate offerings with a higher combined price. Not the fact that Netflix hiked prices, to be clear, but the way the company announced the price hikes.

“It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes,” he wrote in a blog post that was also distributed as an email to Netflix members. “That was certainly not our intent, and I offer my sincere apology.”

Hastings went on to announce that Netflix will rebrand its DVD-by-mail service as Qwikster, with a separate website, billing and account management.

The mea culpa follows the news last week that more people than the company expected were canceling their Netflix subscriptions following the price hike.

GeekWire readers actually provided some advance warning on that front, with more than 40 percent of respondents to our July poll saying that they would cancel their Netflix accounts. It wasn’t strictly representative of the population, but it did indicate the general trend.

In that spirit, let’s here’s our follow-up poll based on the latest news …

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  • Guest

    This question is moot, Todd, because Reed didn’t apologise.

    Bing “non-apology apology.” This is a statement in the form of an apology that is nothing of the sort, a common gambit in politics and public relations. Reed didn’t apologise for this customer-hostile move, but rather for the manner in which it was communicated.

    A genuine apology would address the complaints of literally over 10,000 Netflix customers who have turned the Netflix blog and Facebook page into their own personal Tahrir Square. A genuine apology would acknowledge the fact that both Netflix and Qwikster have the same monthly price even though the former has much worse selection (and isn’t getting any better).

  • JH

    The mea culpa email simply demonstrates to me that Netflix does not understand their customers or the consumer market.  First, the streaming service is mediocre (as all of them are) and doesn’t have enough quality content to serve as a replacement for the DVD service.  Look up the top 10, 20, or 50 movies of 2010 and see how many of them you can stream.  I think you’d be hard pressed to find 10% of them available for streaming.

    Second, look at the consumer market today. Had Netflix done several 5% or 10% price hikes instead of one large one, consumers would likely have understood better why it was being done.  Implementing what amounts to a 30%+ hike in the middle of a bad economy where many Netflix customers use the service as a substitute for more expensive entertainment alternatives.  Bad economies are times to grow share and if you eat some margin to do so, you will reap great benefits when the economy does turn. 

    Netflix should have just done a 10% increase (if any) and keep working on their streaming offering. 

  • Kerry

    I wouldn’t mind paying more for both services if both were poised to offer more value over time. Instead, Netflix is losing major content deals that will make its already anemic selection ever more sparse. That’s what I wish Reed Hastings had addressed. Is this move making room for the streaming business to grow, or is it hedging bets so that streaming can be easily dumped if it fails?

    • Dennis Hamilton

      I think analysts see the move happening in the reverse.  Streaming promises greater profitability than DVD rental and it looks like they are poised to kick the DVD rental business under the bus when the time comes. 

      I think decoupling is going to cost them more than they realize.

      PS: Many of us view streaming for its older content.  I am watching Stargate: Universe for the first time right now, and I love the procedural mystery series that are abundant on Netflix streaming.  For big theatricals, I prefer the DVD or in-theater experience.

  • Guest

    We’re probably going to dump Netflix streaming now and jump over to Qwikster if the terms of service are acceptable. If not, Redebox, here we come.

  • JTS

    I’m curious if this split will mean it is easier for Netflix to sell their streaming-only business. Didn’t geekwire speculate that Netflix was not an acquisition target from Amazon because of the physical presence of their warehouses in states that collect sales tax? What if Netflix was able to get rid of those warehouses by splitting the business like they’ve just done, would they make themselves more attractive to someone like Amazon?

  • Dennis Hamilton

    I thought it was more of a clarification and it made me less happy with the deal.  One great feature of the combined DVD+Internet is the way I can tell what forms any feature is in and also switch from one list to the other if it is opportune.  That there is no longer combined searching and cross-over information, where the DVD queue indicates when a feature is also playable on-line, I think the beautiful functionality (as well as the great mail-return system) is crippled.

    It just shows, to me, that they are compounding the error.  This is not about cost to users any longer, it is about functionality and level of service.  That may cause those of us sitting on the fence to do something they won’t like.  For one, it makes any other competing streaming-only service a plausible substitute on price, features, and inventory.

  • cat22

    As for me, the only thing he needs to apologize for is that stupid name Qwikster (sp?), it is wrong on so many levels.

    • FrankCatalano

      And if they open physical rental locations, they can call them QwiksterMart.

  • Ted Ellis

    This is purely a play to sell off a portion of their business.
    How it should have unfolded:
    1) Hastings should have announced they would be splitting the businesses – and price changes would be coming
    2) After price point / test marketing – they could have announced new pricing
    3) They carve up and sell whatever piece of the business they are planning.

    • Anonymous

      This is true, and it’s why I found the apology disingenuous.  

      The excuse he used for separating the ratings, for example, was that each business could “focus” on building a simpler experience. This makes no sense on a technical basis, usability basis, or any other basis aside from having a clean separation of IP/assets.

      This is a business-first, customer-second move and the apology not only doesn’t mention it, in my opinion it deliberately hides it.


  • Earth4mark

    Eventually the question will be asked “what ever happened to Netflix?”

  • Anonymous

    I remember reading an article about this guy and he said that he only hires the brightest of employees and pays them extremely well.  And if you fall below expectation you are immediately fired…  … … …

  • Tom

    I like the theory that Netflix wants to kill DVDs. If they can reduce the demand for DVD copies and increase the demand for streaming then they the studios will make more high-quality content available.

  • nate

    At the start of September I just put my account on hold. This apology make me flat out cancel.  However, I have to thank Netflix for freeing up my laptop now that my kids get to play instead.

  • JimmyFal

    This decision will go down as one of the more phenomenally stupid tech corp. decisions in history. Bye Bye Netflix. Bring it back the way it was at a SLIGHTLY higher price or you are so going down.

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