Netflix CEO explains price hike, renames DVD service ‘Qwikster,’ adds video games

Netflix CEO Reed Hastings isn’t sorry that his company raised prices on its DVD-by-mail service, but he is sorry that he didn’t explain it better. Back in July, Netflix ended its $10-per-month DVD-by-mail + Streaming package for no apparent reason and began charging $8 per month for streaming and $8 per month for DVD-by-mail service. Now we know why: Netflix is completely spinning off its DVD rental service as a new company called Qwikster.

“I messed up. I owe everyone an explanation,” began Hastings in the public apology and service change announcement. “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. I’ll try to explain how this happened.”

And explain he does. In the lengthy blog post, he unveils Qwikster, a new company owned by Netflix. All Netflix DVD customers will now be Qwikster subscribers. The new service will have its own website and will allow Netflix to advertise and improve its U.S.-only DVD-by-mail service independently of its fast-moving, hopefully global, Netflix Instant Streaming service.  Those who subscribe to DVD and Streaming services will now have two credit card charges appear each month. Oh, and the service will now add video games to its library, putting it in competition with GameFly. 

“Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our DVD by mail service,” writes Hastings. “Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail. It is possible we are moving too fast – it is hard to say. But going forward, Qwikster will continue to run the best DVD by mail service ever, throughout the United States. Netflix will offer the best streaming service for TV shows and movies, hopefully on a global basis. The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further.”

Hastings also revealed that the two services will be “a link away” but include some odd barriers. Dual subscribers will now have a few needless hoops to go through. Billing on both sites will be completely separate, meaning  they will have to enter and change their billing/credit card information twice, and TV/movie ratings will not be shared between the two sites.

Why Netflix feels the need to separate the services to the degree of annoyance, we do not know, but it got commenters all charged up. The blog post currently has 1,521 comments as of 7:30 a.m. EST. Hastings himself attempted to answer as many questions as possible, but his frustration showed through. 

“umm, can I clone you? (as you know, you are not in the majority right now),” he asked one positive commenter named Josh Hofer who praised the CEO. 

Below is a video apology from Hastings and an introduction by the new Qwikster CEO, Andy Rendich, a Netflix veteran of 12 years. 

Does this news impact you? While it sounds like Netflix is separating the services a little too much, it is nice that DVD rentals will continue to be an important priority for the company for some time to come. This change allows Netflix to improve its service in both areas and innovate independently. 

(Update 9:57 a.m. EST: Netflix has emailed out its apology blog post to all (or some) Netflix subscribers. We just received ours.)