Posted on 09/19/2011 5:56:25 AM PDT by Usagi_yo
On Mon, Sep 19, 2011 at 7:49 AM, Reed Hastings, Co-Founder and CEO of Netflix wrote:
Dear Chris,
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
p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments
One word: Licensing. Early on, when videos still came on tape, video stores won enough legal cases (and they were challenged) that there is a body of case law protecting their right to rent any physical media that they've purchased, and they can purchase it as soon as it's released for sale.
Streaming requires a license that's more easily protected. Netflix can't stream all movies, because studios and distributors won't sell them a license to stream if they believe it will negatively impact other revenue streams.
So, Netflix often finds itself in a position where it has the physical media that it can readily ship for viewing, but cannot buy a streaming licensing because (for example) Comcast has purchased exclusive streaming rights for the same movie for 180 days.
But the key problem is still the streaming broadband. If you have a first class broadband service in an area with few users, it may work just fine. If not, you will either put up with choppy streaming at varying frequencies or adjust your viewing habits to miss the traffic.
Our broadband service was superb when we first got it. Not anymore.
There are no pricing changes (we’re done with that!).
Sure they don’t Pedro. I don’t know how much being a RAT plant pays these days but I hope its not enough to bring all your wives and kids over from Mehico. I have my sources and even if I didn’t its obvious that Americans arent going to spend all day putting dvds in envelopes for under minimmum wage.
Aren’t there other web sources for streaming old TV shows? I got out of Netflix last year before they redid their pricing. But the main thing I liked about it was you could order older movies that you can’t get at Redbox, and ordering more recent TV series that I wanted to watch from the beginning.
Must have been thought up by the same person who thought up the “New Coke” in the 80s.
It’s beginning. There are thousands of fewer movies, however, I’m finding that there is more to watch. It’s quality and not quantity.
We don’t have cable, we depend on these.
:)
This is going to be in future textbooks as an example of business ineptness.
Netflix is jettisoning an activity they are very good at - rapid delivery of a product to the consumer. An product that cost almost nothing to purchase.
To an activity where they are held hostage to a virtual monopoly by the producers of content.
The CEO keeps on talking about Blockbuster.
Blockbuster did not fail because people didn’t want to rent DVD’s. Blockbuster failed because it had huge costs in doing business. Redbox killed Blockbuster because it could supply people with DVD with almost no operating cost.
By the way folk, you are NOT punishing or sending a message to Netflix by cancelling your DVD service. That is exactly what they want you to do.
DVD cost money to buy, store, package, ship and receive.
Streaming has high upfront cost in licensing, but there’s hardly any cost after that.
The price increase was only 60% for the lowest end of subscriber (1 DVD and stream). Basically if you had DVD and stream they added $4 flat. My price went up 25% because I’m on 3 at a time, they’re basic level).
And actually the cost of DVDs HAS gone up, and the cost of postage has gone up over 25% since the company started, and the cost of their licensing for the streaming content has nearly quadrupled in the last year.
There are sites where you can test your broadband to make sure you are getting the speed you pay for. If it is consistently below what you are paying for, call them.
We are on WideOpenWest. My hubby tested and found that our broadband was lacking. He called and it was corrected. It happened again and they sent someone out to our house. A squirrel had chewed the wires. Now ours is perfect for 50.00 a month.
I think they were expecting that their customers are on the internet and would know this stuff. I’d heard about the licensing fees dramatic increase months before the price hike was announced.
I think people just like to whine and complain. All the moves make perfectly good sense, out here in real life prices go up. Also they’ve learned they really have 3 clearly identifiable groups of customers.
They’re responding to a changing market. That market might be changing in a way they can’t survive at all, but their responses make sense if you just take the time to pay attention to the situation they’re in.
If cancellations didn’t send Netflix a message, we wouldn’t have gotten this non-apology apology. The stock has tanked, and they have lost far more accounts than they thought they would. I think this is going to really accelerate the cancellations.
It’s not my fault an American didn’t come up with the service. And it’s not my fault that Blockbuster sucks. I’m USING our American values by spending my money on the service that best works for me.
It’s a “not what you say but the way you say it” type thing. The CEO has been a smarmy jerk from the beginning and instead of getting some HR expert to write up a smooze to the customers, he puffed up his chest and basically said, “Oh well. If you don’t like this, find something better.”
Well, many people are. There are hundreds of pirate sites. Entertainment is like taxes. When the cost is reasonable, we will pay it. When it becomes unreasonable, we will find the loopholes.
People are finding the loopholes and the loser is Netflix.
Sounds like WideOpenWest has great customer service. Are they a satellite service like Hughes or standard cable broadband?
Our only option here for standard cable broadband is Comcast and their service level is crappy.
They don’t chose not to stream everything, they have to negotiate those contracts separately. DVDs are easy, everybody that sells DVDs also sells DVDs for rental and anybody can buy the rental DVDs. Stream involves directly working with the content providers, the content provider sets the price, and if they’ll do it at all. The stuff Netflix is streaming costs them over 2 billion a year in licenses.
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