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Netflix Apologizes to me (…and everyone else)

Posted on Sep 19, 2011

This morning I received an email from Reed Hastings, Co-Founder and CEO of Netflix, apologizing for the wayNetflix Leaves Us Brokenhearted Netflix recently broke apart their streaming and dvd-by-mail services. (Full text of the letter below).

The odd thing was that the apology was accompanied by more bad news about the service which is now being formally broken in half including getting two different names – Qwikster for dvd- by-mail and Netflix for the streaming service.  In addition, the two services will be completely separate with different credit card charges, user names, websites and queues.

The pseudo-heartfelt email did nothing to rescind the recent doubling of the price.  The only small consolation offered is that Video Games (Xbox, PS3, Wii) will now be available as part of the Qwikster rent-by-mail service.

The email seemed sincere and truly like it was painful for him (or his PR team) to write. At least he seemed upset about losing the name “Netflix” for the DVD-by-mail-service.  And he waxed poetic about the red envelope arriving in the mail.  So how come I feel like I just got dumped?  And by email no less!  With no meaningful action behind the peace offering, his letter smacked of “It’s not you, it’s me!”

As a business person always trying to do right by my clients, the apology is appreciated.  But without a change in their pricing policy, Netflix has left many of its users not just broke, but broken-hearted.

Text of Letter from Reed Hastings, Co-Founder and CEO of Netflix to Troy Bolotnick and all other Netflix users – 9/19/11 entitled: “An Explanation and Some Reflections”

Dear Troy,

I messed up. I owe you an explanation.

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. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my 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. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the and websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

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