Dear Keith,
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 qwikster.com 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 Qwikster.com and Netflix.com 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 Qwikster.com 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
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If you are a Netflix member you probably got a similar email this morning. It’s an interesting announcement that I can’t quite figure out.
Mr Hastings (may I call you Reed?) appologizes for mucking about with our beloved $9.99 Streaming +1 DVD at a time plan, but then reveils a bit more of the Netflix grand plan.
It seems the DVD service is being split off into it’s own company, now named Qwikster, and Netflix will be the name of the Streaming service. If you still have a DVD & Streaming plan, you will now have an account at both sites and you will billed separately for each service… Can you say spin off?
It’s a move that in one way makes perfect sense, Netflix kind of always was meant to be internet based, heck it’s in the name. But in another way this seems like a colosal mistake. With out the huge power of the DVD service behind the new Netflix company, I think they will lose a huge bargaining chip when it comes to content deals with the movie & TV studios.
It’s content that will make Netflix or any streaming service sink or swim, and it’s not like there isn’t competition in streaming anymore. Hulu is still hanging in there with both TV’s and Movies with a lot of content that Netflix can’t touch. Amazon Prime is a sleeping giant, and there are upstarts like Crackle, Vudu, and others just waiting to grab some market share.
In fact it seems to me like such a hugely idiotic move from a company that has made all the right moves in the past, that it leave me wondering (or hoping) that this is just a prelude to a bigger move comming soon.
Perhaps splitting off the DVD service is a preventative (anti trust?) measure for buying or merging with another company. Hulu is for sale, heck they have everything but the for sale sign poked into the front lawn of their website. Blockbuster has been floundering and might be ripe for the picking.
What do you think? Is Netflix just making all the wrong moves? Or is this the prelude to something awesome?
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