Since its July decision to raise prices by charging separately for mail-order DVDs and instant streaming, Netflix has been in a free-fall. The company has seen its stock fall by 50%, experienced massive negative feedback from users, and has lost customers and content partners alike. Yesterday, CEO Reed Hastings addressed the situation in a blog post: he apologized for Netflix's price hike, and also announced that the company will be splitting into two. The instant streaming portion will remain Netflix, while the mail-order DVD division will become a new company called "Qwikster."
Hastings set the tone for his long post with the following opening paragraph: "I messed up. I owe everyone an apology." One has to give credit to Hastings for at least being honest, as this is quite an admission from a CEO of such a major company. He also deserves credit for adding a video-game rental division to Qwikster, something many Netflix customers had wanted for a long time.
That, however, about ends the accolades for Hastings. His post also raises many questions and illuminates many negative aspects about the switch. For example, Netflix and Qwikster will not be integrated, so users will now have to have two different accounts, two different queues, etc. Additionally, Hastings claimed that Netflix will see large amounts of new content in the next few months; promises are fine and dandy, but Netflix users are clamoring for real information. All they know, as of now, is that in February, Netflix's deal with Starz will run out, and eight percent of its streaming content will vanish.
Finally, we just have to ask: what is up with the new name? Qwikster? Really? Hastings said they chose the name "because it refers to quick delivery." Well, fine, but surely there are other better options that also refer to quick delivery. It is not exactly original, either; there are existing products and services by the following names: Quixtar, QuickStar, Kwikster, Quickster, Kwik Star, Quick-Star, and Kickstar. And, for a good laugh, check out @Qwikster's Twitter page. Not exactly the type of content a struggling company wants to identify itself with.
So, the road for Hastings, Netflix, and Qwikster will be a long one. Was it the right move for the CEO to apologize? Yes, it was. Placing the apology in the same announcement as this questionable split, however, may not have been so smart. In Hastings' own words, "Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight."
Do you think Netflix will land on its feet after this apology? And will Qwikster flourish or fail? Leave your comments below. And for more web and tech news, make sure to check out the Hudson Horizons blog.