NETFLIX Apology and Service Revamp - MY RESPONSE

TODAY 9/19 - if you are or recently were a Neflix subscriber you may have received this email from Reed Hastings Co-founder and CEO if Netflix.


"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 wouldnt 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.

Its 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 (were 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."


This is a trite backhanded excuse that is so absurd that it's not even laughable, it makes me want to cry  for the investors and for anyone who actually falls for this crap.


For some time I've been saying that Netflix has pursposefully limited content using it's algorithm, which is true, and that they suck because they have removed all of their user friendly content and tools, and the they have made it clear that they are either cash poor or can't make the big decisions to keep or grow their streaming contents (See blown STARZ deal).


Well with the announcement/apology I will admit that I was wrong ....well not like Hastings was wrong...but wrong all the same. I was wrong because I TOTALLY MISSED THIS SHIT!!!!


Netflix has completely pulled a fast one and they want customers and shareholders to come along for the ride. What this type of re-organization, if you can even all it that as they have basically created two distinct companies, does is separate assets. This is actually pretty smart. The DVD (and now game) portion is completely separate. As of right now the DVD service is supposedly the money maker for Netflix. I think it was a year or so ago, until streaming became popular, now I think it's a fading offering that will go away faster than it became popular. DVD is a dieing form of media that will soon go the way of books and music. (5 years tops).

The other side of the coin is the streaming service.


Why is this a ploy or a fast one? Well, if you have one service that is perceived as a "winner" (DVD) and another that is perceived as a loser (streaming), when you separate the assets like this it becomes easier to justify dollars spent in one vs. the other and it's easier to phase out one if it starts to fail.


The problem is that Streaming is VERY VERY popular with customers. Last year NF accounted for 21% of all bandwidth usage in the US (streaming service), this year it accounts for 30% of all bandwidth. THIS IS HUGE!!!!!

So why doesn't NF want to grow their streaming business? Bottom line...they can't!


They can't afford to do it. For year and Years they ate the Studio's lunches with their DVD service. They could essentially buy a DVD (retail), copy it and "rent" it out to as many people as they wanted, and thus the Netflix we know and love is born. Next, Streaming service is invented and becomes popular. NOW Netflix has to deal with the same studios that they were beating the hell out of with the DVD portion of their service. It's not hard to see that these guys want to make it as hard as they can for Netflix to purchase their content. STARZ is a perfect example. 4 years ago when the streaming serivce was little more than a wet dream, they made a $40M deal with NF. NOW the same deal is going for $300M - Netflix blew this deal and let STARZ walk away.

They think they can get other content providers...but reality is they can't. They can't afford the cost associated with adding and maintaining quality/new content from major providers.


The result WILL BE a limited poor quality service that potentially could shrink. Where as site like Hulu, Amazon Prime, and VUDU will continue to grow.


SO MR. REED HASTINGS...I for one do not accept your apology, or your rationale for splitting services. It's too little too late and really it's a ploy that I and MANY others will see right through.


I suspect that MANY more customers will either migrate to one other the other, or leave after this even further split of offerings.


"Going down, down, down, in the burning ring of fire"!



Uploaded 09/19/2011
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