Netflix CEO Apologizes for Price Increase, Announces Qwikster Service to Mail DVDs

You may have received an effusive email from Reed Hastings Sunday night or this morning. If you don’t know who he is, the first line offers a hint: “I messed up. I owe you an explanation.”

Hastings, the co-founder and CEO of Netflix, has now sent an apology to its customers, 600,000 of whom are quitting after the company hiked prices up to 60 percent for people who both stream movies and order them by mail on DVD. Netflix stock has dropped about 50 percent since the July announcement.

“I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices,” Hastings said in the email and a blog post Sunday night. “It wouldn’t have changed the price increase, but it would have been the right thing to do.”

Hastings announced Netflix will give its DVD-by-mail service a new name: “ Qwikster.” But for the company, the future lies in streaming video. It is faster, available anywhere — and less expensive for the company — and that’s what you’ll find in the future at the Netflix website.

“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,” he said. “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).”

He closed, “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.”

By mid-morning today, close to 10,000 people had replied publicly on Hastings’ blog or the accompanying YouTube video, and most of them were not happy. Many complained that not only were they still stuck with the price hike, but they now had to choose between two different services. All they wanted to do, they said, was watch a movie.

“Are you trying to make it worse?” replied a typical customer. “The only saving grace with the recent price hikes was having an integrated website where you could manage both DVDs and streaming video from the same queue. Now you are splitting that out? This may be the end of it for me.”

There were others, some using profanity in their anger at Netflix, though to the company, few could have been as cutting as messages like this one:

“I can’t wait fir [sic] blockbuster streaming to come online.”


Update: It turns out there’s an extra wrinkle to all this. Read Maggy Patrick’s post on it HERE.