Netflix Subscribers Receive Apology, and More Bad News
Launch of Qwikster Is Death Knell for Netflix DVD Service
by Branford Lyles on September 20, 2011
In an email to subscribers of Netflix, CEO Reed Hastings apologized for past price hike and announced that the company would be divided. Netflix will no longer ship DVD through the mail, but will only concentrate on streaming movies. A new company, Qwikster, is being founded to handle the DVD service as well as renting video games. Consumer reaction has been far from elated.
In July, the company announced that it would no longer offer a plan which included both streaming and via-mail movie service, which amounted to a 60 percent price hike to retain the same plan. Apart from a significant drop in stock value, the hike created a firestorm of negative comments about the company across the Internet. So much so, in fact, the Hastings’ email begins with, “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.”
While consumer reaction has been unhappy at best, business analysts have credited Hastings’ with eliminating an obsolete division of his business before it could drag the company down any further.
Engadget writer Darren Murph commented on the matter by saying, “Think of it this way: If Reed’s forecasting a future where it no longer makes sense to continue the pursuit of a by-mail DVD business, how would he rather say good-bye? Flushing half of Netflix away and dealing with the backlash? Or quietly shuttering an awkwardly named website no one was particularly enthralled about from the get-go?”
While Hastings has denied plans to sell the Qwikster business anytime in the near future, it remains to be seen how much value will be placed by Netflix in the company’s future. According to the email, Qwikster service will be the same price as it would have been on Netflix. It is not known yet just how much video game rentals will be.
The service will not be helped by recent budgetary problems in the Postal Service, especially if President Obama’s plan of eliminating Saturday deliveries instead of laying off employees is pushed through.
Whatever the case, both companies will face stiff competition from Amazon, Google and other competitors entering the streaming marketplace. Qwikster has already labelled itself in direct competition with Gamefly, which specializes in a video game rental service via mail.
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