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Youtube link for mobile viewing

Netflix co-founder and CEO Reed Hastings this morning apologized for the confusion surrounding the splitting of the company's DVD and streaming services -- and for not better explaining the price increases involved.

The price increases stand, but the DVD side of the business is changing names. And thus Qwikster was born.

The long and the short of it is for DVDs, you'll go to Qwikster. For streaming on Android smartphones and tablets, you'll go to Netflix. Makes perfect sense.

It's all explained in the video above, and in Netflix's blog post -- and you've likely gotten an e-mail from Netflix mirroring all this.

Source: Netflix

Dear Edward,

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.

 
There are 44 comments

Doing this so they can separately raise the prices and not be criticized for raising prices 60% and not providing more services.. The fact they are adding video games to the mix will ultimately hurt the DVD side because video games are higher risk so once games start being lost in the mail the prices over all will go up.

bobbob1016 says:

Doing this because the Movie/TV companies were demanding more money... They can't say this directly, but didn't Starz or Showtime or someone want a "premium" tier on Netflix? That'd cost more $, so they split the Streaming and DVD to raise prices, but I never use the DVD's anymore, so it makes sense for me.

Quasar says:

It was Starz. Because Starz wanted so much money, there is no new contract so Starz will be removing it's content from streaming once the current contract ends. I think it's in March of 2012.

Unibrow says:

It's astonishing to me that someone that can create such a booming business, Netflix, can totally throw it under the rug and decapitate their own company. Qwikster? Seriously...what were they thinking? "um, to further separate our dvd and streaming business models I have this fantastic idea, let's choose a name that has ZERO name brand recognition and let's choose a name that you can pronounce whilst vomiting."

Further more the two sites aren't going to be integrated? Now you have to go to two sites? FAIL

S1LENT says:

@unibrow You are so correct you hit the nail on the head! I don't even need to say anymore.

BSG75 says:

OK, so that explains your business plan, which I don't think anyone was really questioning. If you are raising streaming prices, people want more streaming options. Period. That is all Netflix should be worrying about right now, from a cusomter standpoint. Lock in Game of Thrones and a few other big TV series for streaming and I think all will be forgiven (at least by me).

...and Quickster is stupid name from 2006.

El Jefe says:

Netflix will never get any HBO original programs. They have already made that clear in press announcements long ago. HBO has also since started their own mobile streaming app (HBO Go).

I wish it would happen too, but it just isn't ever going to.

Actually your "Game of Thrones" comment is the root cause behind all of these changes. Every studio (like HBO) wants to either have full control of their product or they want some ridiculous cut of the proceeds.

The sad thing is if Netflix the largest streaming site cannot keep the studio heads happy, then I don't think anyone can.

I could see an end game where we all have 10 different streaming apps to watch different content from each provider. It will be like the post-Napster pre-itune years. Every studio had their own service - all of which sucked.

PensHockey says:

Still sticking with Netflix and Qwikster. Everybody spends hundreds of dollars on there phone and thousands on a big flat screen. But then piss and moan over $8.

For what you get its a great service and you can't beat the price.

TvTechGuru says:

Thank you!! This is totally what I'm getting at with my long post below! People will drop $100+ per month on cell phone service, $2,000 on a plasma TV and $800 on an overrated iPad. But they'll complain about their service going up $5 bucks a month?! Please, give me a break.

LOLLY015 says:

I dig what you're saying, I really do. Having said that, for me, it was increasing the price without increasing the service. But that's just me. :D

tp72 says:

A phone and a tv are big purchases but only once. I hate when my monthly service goes up....and for no apparent reason. As much as I enjoyed Netflix, it was a convenience. I already pay quite a bit for DirecTv so I will have to wait til the movie I want to see comes on one of my movie channels. Like I said below, too many increases over the course of the year.

TV are getting smarter every 6 months and with HBO GO (other channels will soon follow) streaming shows which is included with my DirecTv....I don't need Netflix.

movielover76 says:

When you compare it to other monthly service costs, cable, satellite, even voip phone service, the price is still very good.
Studios are demanding more money for licensing, the fact is that the prices they were able to originally offer the dvd/streaming packages were amazing, I never got how they profited from such small fees.
With licensing fees going up, the prices had to go up, the dvd and streaming package is still a much better deal than any premium channel you'd add to your TV package, or VOD and with a much greater selection.

I will say I disagree with splitting the services completely, I only use streaming myself, but having to go to two completely different sites is a very stupid move, it's the only part of this announcement that bothers me they should have simply offered you to select with packages you wanted have a list with checkboxes

unlimited stream $$
1 dvd $$
2 dvds $$
3 dvds $$

then add up to total.

maguirejt says:

I agree! I'm sick of people complaining about the increase in cost and and lack of streaming content. IT'S NOT NETFLIX'S FAULT! Blame the movie industry for their outrageous increases in licensing fees. The movie industry hates Netflix because it takes away from the sale of DVDs. Netflix's licensing fees rose by more than a billion dollars. If you don't like it, go buy a digital copy of everything and then see how much it costs.

dacp283 says:

I'm slightly annoyed by this advice don't see the point of the seperation other than to changes prices independent of one another. I would like to stick with but if the content keeps going away and getting locked out and prices start changing I'm definitely going to cease my membership, but we'll see what they can accomplish.

Cubfan says:

This is really getting tiresome.

malockin says:

still not buying it.

rluzum says:

.

TvTechGuru says:

I didn't see what the big deal was to begin with when they first announced the price increase back in July. It's not that big of an increase and the anti's only used the percentage figure to make it seem big but it only applies to those who have both streaming and DVD and even then it's only a couple bucks a month when you really look at it! It only seems like a big amount because of the bad economy. I do think it's silly to give the DVD service a different name. They already separated the pricing, so why the name? I don't see the advantage or necessity! When you really look at the value you are getting with both Netflix's streaming and DVD/Blu-ray service, it's still the best deal on the market! NO ONE ELSE provides this sort of value! Hands down, end of argument! I had both streaming and Blu-ray service before the announcement and I'm keeping after the increase. I even recently bought a Roku box to enjoy the streaming on my HDTV instead of my computer monitor. I wish I could tell Reed Hastings that he still has loyal customers like me who didn't flinch at all through this change. Netflix will still lead this market in the future!

rluzum says:

50% of your statements ended in an exclamation point.

Although that made it sound better, it doesn't matter what you call it. The price still increased by aprox 60 percent for the same amount of service. That's the bottom line. That's why I quit them.

TvTechGuru says:

Netflix is always adding movies to Blu-ray and streaming. So don't make it sound like the service isn't changing with the price. And don't people understand Netflix's costs are rising too? They don't provide the customer with the movies for free. They have to pay hefty money each year to the movie companies!

tp72 says:

Yes and they also remove movies from dvd and streaming. I understand their cost go up but I went from paying $8.99 to $10.49 in a year then another price increase to $16? No thank you. Streaming was nice but not worth $8. I like to purchase my movies so the dvd side was only for movies that I didn't deem worthy to catch at the theater or worth buying.

carlosrey23 says:

As someone stated on the presser on Facebook, "this is an epic FAIL!"

And it is not really about the price structure, as most of us get over the shell shock of having to spend and extra $5 a month rather quickly. I think that where Netflix has completely lost touch with it's customers is in separating the service structure. Having two accounts, two sets of ratings, and not knowing on the DVD side when something made it to streaming is where I see this a total failure of a business model.

In today's environment is all about consolidation of services, take a look at cable companies, they over basic, and movie channels, but now also integrated DVR, On demand movies/tv/sports, etc, internet, home phone, wireless, etc... Even trying to expand on their online presence by joining with hulu to stream media online....and yet Netflix turns around and does the opposite.

All I hope is that the current media streaming devices acknowledge this and quickly start adding channels to their lineup that allows for alternate movie streaming services.

sremick says:

It saddens me that physical media with a high-quality source of video and audio is being replaced with low-quality, over-compressed, lossy streamed video with only 2-channel audio, all for the sake of "convenience". Peoples' impatience is ruining technology.

The same thing happened to audio (CDs -> MP3s) much to the detriment of the music industry (even original material now is mastered with only headphones in mind, with all levels cranked to "loud"). I hope there'll continue to be a media format in the future for those of us who care about quality and want to watch it on something beyond a 15" laptop screen.

We have all become Veruca Salt. Everything now with no exceptions.

Axe says:

I agree. I've always championed quality over convenience. Until the media stores sell/stream/download the same technical specification as on the audio CDs or BRDs, then I won't pay even a half rate price for them. The only way this all works is because Joe Smith doesn't understand the cost of his compromise. Why have we devolved into instant gratification? Because the companies sell it and you all devour it.

flyguydip says:

Netflix = more hassle than Blockbuster.
Netflix Account canceled.
Where is that "Forgot Password" link on blockbuster.com... oh, there it is.
Hello Blockbuster, sorry I've been gone so long!

Uninstalled netflix app that just started working on my Droid 2 only a few months ago.

Installed blockbuster app

I expect millions of netflix customers will do the same.

Lancer033 says:

oh hell no...the blockbuster app was the biggest pile of shit i've ever had on my phone. When i want to stream a movie on netflix, a couple of clicks and there it is. If i want a higher quality, i get the DVD or blueray and wait a day or so and it's in my mailbox. You never even have to leave the house?

seriously people...this price hike is way over rated. If you can't afford $6/month, then you probably shouldn't be using it anyways.

co.ag.2005 says:

people keep forgetting that the price isn't just increasing, the content is decreasing. Available streaming content sucks as it is, but now that Starz is saying Adios, it's going to get even worse. I guess some people like to pay more for less :rolls eyes:

Sorry but I can never forgive nor forget how unethical and greedy Blockbuster was when they were in charge.

ValZho says:

EDIT: Double Post from Browser Crash

ValZho says:

My guess is that the company split is going to really help contract negotiations for content for both streaming and DVD.

Netflix can concentrate on terms that will get more content, while Qwikster (I, also, am not a fan of the name), being DVD only, might hopefully be better able to get new releases sooner. Personally, I hope that Netflix can start getting recent/first-run stuff that is available across all platforms and kill off Hulu (I have and enjoy Hulu Plus, but the fact that I'm stuck at the computer for most of the stuff I actually watch is pretty irritating).

I have also had Gamefly for quite a while, and am curious to see how well they handle the gaming piece of it. Someone here mentioned a concern that it would drive all prices up (Netfli... Qwikster can just reprint a DVD that gets lost or damaged, not so with games—or Blu-Ray) ... I don't think so. As stated in the video, you would pay extra for games as you have to do now with Blu-Ray—the people that actually use those services take on the added cost of those services.

All-in-all, I think it was a good business decision that will allow, in the long-term, much better services at a somewhat minor present inconvenience. The price increase is ridiculously negligible for what you get (I have Netflix streaming, HuluPlus, and Gamefly, and I still pay less per month than I would for just the basic cable package), and a year from now (probably much less) people will have moved on, readjusted, and have their panties in a wad about something else as equally trivial.

Androidpwns says:

Raising prices again? Fine. I can deal w it. Was even going to keep both plans. Disintegrating my queues & splitting websites? Goodbye "Notflix".

pouxonu says:

As soon as I got my email a month or two ago about the price change I switched to blockbuster. Blockbuster gave you two dvds or a dvd and a game for just a dollar more. I thought how awesome was that so I cancelled and was now with Blockbuster for about 20 minutes until I found out that the streaming to your phone is not free, it's an ondemand services for 3.99 or 4.99 for movie just like in the market, and every game that was somewhat newer was on a very long wait so for a dollar less i get my dvd when i want it and can stream anywhere with my phone . i will kepp netflix unless blockbusterr adds free streaming.And as far as what devices work with the blockbuster app there are only 15 phones available to use it. Netflix may have taken a while to get it on phones but it can be put on juat about any phone with 2.2 or higher. I'll stick with Netflix/Qwikster,

bb5683 says:

It's more about hiding the amount of titles that are going offline lately, and
Reed Hastings letter was a load of crap... F that letter, so some reciprocity to the people who have been with you since the beginning ....

I think Netflix should seriously consider putting more movies on the streaming end.

I'm tired of looking at the same damn choices for 3 years.

facemymusic says:

Price increase... Ok, fine. But two completely separate services that are completely un-integrated? That's just a pain in the ass. And am I going to have to have 2 separate apps, too? One for streaming and one for managing my DVD queue? That's just annoying and inconvenient. And a waste of space on my phone. They obviously didn't consider customer preference or convience in this move, and THAT'S why I'm leaving.

cguella says:

I took for granted the Netflix service. Now with rebranding to Qwikster and all that I am confused. The new website isn't even available yet. Blockbuster has been around and is now a penny stock. I recommend signing up with Blockbuster 30 day free trial and see how it goes and buying some of their stock and short the netflix stock since it appears they have made a mess of this whole thing. With your profits you can pay for your $9-15 subscription for years to come... My .02.

amcooper says:

I think they are seperating their businesses for a couple reasons. First so they can negotiate independently with studio owners for streaming and DVD content. The second may be to set up the company longer term to just sell off "Quickster" and getting out of the DVD mailing business altogether. I can't see why they would seperate the web sites so much if the second option at least isn't being considered... I cancelled my DVD service and kept streaming but if content on streaming doesn't grow I will cancel that as well and find other ways to get the content.

dchawk81 says:

I have 54 movies in my queue. Once they're all watched or this Qwikster thing is forced upon me (whichever comes first), I'm cancelling and putting my money to better use.

kandiman1224 says:

Bottom line! Dont piss and moan about 8 little bucks for streaming and why use netflix's dvd service when theres realistically only 2 or 3 movies a month that you could just pay $1 at redbox for?

vdelsan says:

What a bunch of bull!!! The true reason is that they got to greedy and back fired now they're apoloyzing what a joke

Cushy11 says:

This is pretty indicative of how stupid the general public is. Listen up people, these aren't massive changes here as explained in the video. So you go to a different website, the name changes and so does the logo/envelope...BFD!!!! It amazes me how a CEO has to make a video apologizing for the "big changes". If you don't like the change, then stop using thier service. Afterall, this is a luxary item we are talking about here. I think the "name recognition" aspect is why over hyped. Quick someone tell Nissan that they should've never changed their name from Datsun. Put on your big boy pants and go with the flow here people. Things change all the time and unfortunately most people don't do well with change, but that's no reason to sit back and complain. Now the price increase on the other hand....