In announcing the changes, CEO Reed Hastings also apologized to subscribers for the way the company communicated its decision to split the two services, which raised the prices for those who want both.
The mail order plan will be renamed “Qwikster.” In a few weeks, Netflix subscribers who want to get DVDs by mail will go to a separate website to access Qwikster. The streaming business will continue to be called Netflix.
It’s a risky bet. The amount of streaming content the company offers is still far less than the number of DVDs in its catalog. And competition, from Hulu, Amazon, Coinstar’s Redbox kiosks and other services, is growing. Netflix could even alienate customers further by asking them to now deal with two separate websites and accounts instead of just one.
The changes come as the company faces increasing scrutiny from customers and shareholders over the decision announced in July to separate its mail order and Internet streaming services into two separate plans. The change raised the prices for users who want both services, by as much as 60 percent for some.
Hastings said he “slid into arrogance based upon past success” when he did not adequately explain the reasons behind the plan separation and effective price hike. He said the reason is that instant streaming and DVD-by-mail are becoming “two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
Netflix announced its move just as the once-mighty Borders Inc. shuttered the last of its bookstores around the country. Hastings’ blog post seemed to take heed. He said that for the past five years, his “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,” he wrote.
Hastings said the DVD service will be the same as ever, “just a new name.” But customers will see a video games upgrade option for game rentals on the Qwikster website. Andy Rendich, who has been working on Netflix’s DVD service for 12 years, and leading it for the past four years, will be the CEO of Qwikster.
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