Netflix apologizes. Is it enough?

Netflix apologizes. Is it enough?

The CEO of Netflix, Reed Hastings, send out an email to all Netflix subscribers apologizing for how he handled the recent pricing adjustments. That’s right, they’re not sorry they raised prices, they’re sorry about how they handled the announcement. The apology begins,

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’m not sure people responded the way they did because the announcement was worded poorly. I’m pretty sure it was because the price increase, and the justification for it, were out of line with consumer expectations.

The explanation remains,

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.

That’s right, the price increase is necessary because Netflix wants to market the services we’re already paying for to us differently.

Of course I might just be treading old ground here and burying the lead: Netflix will no longer deliver DVDs by mail. That sounds worse than it is. Netflix is rolling out Qwikster (which sounds like a convenience store) for the DVD service, and the Netflix brand will stick with streaming. There will be two different websites, and two different queues (another WTF? for Netflix, though Hastings is aware this is a “negative”).

On the plus side, Qwikster will be adding upgrade options for video game rentals. We’ll discuss the costs when they are announced.

Clearly the handling of the price change was poorly executed. They announced the plans a couple months before the changes happened, and then about a month after that they’re splitting the business in two. In the meantime, they lost millions of subscribers.

But even this apology was handled poorly, because it’s really an announcement for Qwikster, which should have had its own announcement.

How should it have been done? Netflix should have held off any plans for the future until they announced Qwikster, at which point they could have told their Netflix subscribers that Netflix was out of the DVD-by-mail business, and all accounts would become $7.99 per month streaming accounts. Then point their subscribers to the new Qwikster service for those who want to sign up, and even offer coupons for loyal subscribers for free upgrades or a month free at their current DVD limit level.

Hey Reed, I’m available any time you want advice. Hit me up.

About Steven Kippel

Steven Kippel has worked as a systems designer for a leading high-end audio/video custom integrator in Southern California since 2003. He is responsible for researching new technologies and integrating them into existing systems and new construction projects. He has designed several high-profile systems for discriminating clients on the cutting-edge of technology. When he is not hard at work, Steven is spending time with his wife, playing with his band or promoting concerts and bands in the Inland Empire. His favorite bands include The Cure, U2, Eisley, Living Sacrifice and DragonForce.

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