Reed Hastings apologizes, announces Netflix as streaming only, rebrands DVD business as Qwickster

Reed Hastings, the co-founder and CEO of Netflix has put up a video and blog post this morning apologizing to customers for the way their recent plan changes and increases were handled, and announcing that while streaming services will retain the Netflix name, the DVD (and now video game) mailer service will be spun off as Qwickster. Phew. This only really matters to US customers, and to those who in addition to streaming on iPhone, Apple TV, iPad, and iPod touch also have DVD mailer plans, but it's an interesting case study in corporate communications none-the-less.

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) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

Commendable fearlessness. Apple has often said that if anyone cannibalizes their business, it's going to be Apple themselves, and it's good to see other companies take those types of risks.

So 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. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.

It's going to be a different website -- you'll have to go to for your streaming and for your discs -- and different entries on your credit card statement. Hastings assures everyone, however, that the price hikes are done and the characteristic red envelopes will remain the same. However, for customers of both services, it could mean twice the overhead in managing those services, and a dilution of what Netflix means to them. (Twice as much is often half as strong.)

I want to acknowledge and thank our many members that stuck with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Check the video above and full post via the link below and let us know how you think he did, and whether you'll be sticking with Netflix -- and Qwickster -- going forward.


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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Reed Hastings apologizes, announces Netflix as streaming only, rebrands DVD business as Qwickster


Um, yeah. Good luck with that. You just further diluted the brand and alienated the few customers who stuck with the DVD mailing + streaming option. I suppose adding video games might be nice for some. For me, I'll still use Netflix for streaming, but I have moved on to Redbox for everything else.

I think this comment makes the point -- netflix is all about streaming now; dvd by mail is a dying business. Like landline, non-VOIP phones.

I love the streaming service. The price is still cheap compared to what you get. I watch movies on my iPhone and this fits my life style. I expect some improvements going forward. I'm sticking with them. The cable companies are another issue.

Ok there goes Netflix as we know it and I believe this will be the time Apple steps in and takes the customers Netflix lost!
Having two different services is a bad thing as it confuses people!
They gonna call the game service Gamester or something like that and have three different brands remember Gamefly is already out there and doing quite well as they offer a very good price for what they offer!
All in all I think this is the end of Netflix as we know it as I have noticed you can only stream now from one device on your account where you used to be able to stream from multiple devices and this is a bad bad thing to do in this day and age!
I wish Netflix good luck but before the announced the price increase I got out and canceled my service and I will be looking for a service like Netflix was to give my business to!

I stream from multiple sources no problem. At least know what you're talking about. The dvd business isn't longterm and Netflix knows it. Spinning it off as a new brand is basically killing it..but in a slow manner.

I've watched one or two movies via iTMS, and I think my wife once bought a season of a TV series she was into, but couldn't get any longer here in Canada. But, overall, Apple's pricing is too high... as is most any kind of pay-per-view service except Netflix.
My guess, is that for most people like me (on a budget)... if Netflix becomes a non-option, we'll not be going to any other company, we'll just stop watching.
I think the media industry needs to be realistic. I'll pay, maybe, $1 per TV episode (commercial free), and am more likely to pay for a season if it is discounted from that $1/episode pricing... and I'll pay $2-5 for a movie (depending on how current), if it is an occasional thing. If it is more than occasional, it needs to be some kind of service like Netflix that brings the cost/movie under that $2 mark.

Well, I understand that their costs are pretty high. So a price increase is not completely wrong, though in bad economic times, a lower profit target might have endeared them to customers more - especially if they figured a way out of letting people know they were doing it without sounding like smarmy PC crapola. Which kind of sneaked into this email/video/Blog entry.
I can see why streaming got to keep the name, since streaming is built into a lot of hardware. It's already in my two TVs, PS3, Blu ray player, and XBox 360. No way the new name for the disc service was a wise move. They should have come up with some name that was a little bit less precious.
I actually didn't like the way you had to manage streaming and disc queue with the same list. This will make it much less confusing. As long as they don't delete both queues and make me start over. Maybe I need to get a screenshot of them before they screw it up?
Streaming is so ludicrously over-hyped in an environment where the cable companies are doing everything they can to discourage such progress. Netflix has done a remarkable job of making the quality for streaming improve. I have to give them credit for that. But it's no substitute for Blu-ray no way no how. And until the Sword of Damocles of bandwidth caps disappear, streaming is a compromised promise of a future where watching movies can cost you a lot more than you planned.

Fearless, yes -- but sometimes there is good reason for fear.
This is not Apple removing floppy or optical drives, because Netflix has supplier issues outside of their control, and consumer demands that cannot be transitioned over (like USB were sticks for floppies.)
Netflix DVD business offers one huge advantage -- its selection is unmatched.
Netflix Streaming offers one huge advantage -- instant gratification, but Amazon Prime, among others, is competitive in this realm.
The consumer-friendly icing on the cake was how each division reinforced the other. If you searched for Harry Potter and the Latest Sequel on streaming, you could see that it was DVD-only for now, and add it to your DVD queue. If you went to get the disks for Breaking Bad, you would see that all three seasons are available to stream. Items from one queue could influence the other. It was (is) a nice, well-integrated solution.
After Qwikster launches, customers will have to maintain two separate queues, two separate bills, and search in two separate places to find a movie. Those are all significant degradations in the customer experience.
What is the upside we get in return -- not for short-term Netflix investors, but for Netflix customers? What is Netflix going to be able to accomplish post-divide that they could not under the current, integrated regime? Without such a story, this is going to be just the first in a series of apologies to customers, and eventually to those investors, too.

This actually makes sense for me. I got Netflix for the streaming so I could watch on my iPhone at the gym, but it turned out I only watched on occasion. I watch an occasional Blu-Ray and always enjoyed that Full-HD, 7.1 Surround experience much more than the streaming. I dumped them when they increased the price. Now I might actually sign back up with their Qwikster brand because I'd be interested in the video games and occasional Blu-Ray.

Said 'see ya!' to Netflix after 7 years when the latest price hikes came into effect. This latest news just reaffirms that decision!