After a week in which his company's stock plummeted 26 percent on the news that its subscribers--furious about a price hike--were leaving in droves, Netflix chief executive and co-founder Reed Hastings announced on the company's blog late Sunday night a plan to split its DVD-by-mail and streaming businesses in two. Netflix will now be a streaming media company, Hastings wrote, and the DVD-by-mail business will be named Qwikster. The blog post sent the techology, film and financial communities into a frenzy of confusion.
"I messed up," Hastings wrote on Sunday. "I owe everyone 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," he continued. "That was certainly not our intent, and I offer my sincere apology."
Hastings then attempted to explain what went wrong:
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) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.
When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong. In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, "Actions speak louder than words," and we should just keep improving our service. But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn't have changed the price increase, but it would have been the right thing to do.
He then announced the rebranding of Netflix's DVD-by-mail service as "Qwikster."
"We chose the name Qwikster because it refers to quick delivery," Hastings wrote. "We will keep the name 'Netflix' for streaming."
"So "Qwikster" is the slower way of getting movies from Netflix?" CNBC's John Carney quipped on Twitter. "That won't be confusing."
"Qwikster," Technologizer's Harry McCracken wrote. "Not to be confused with Quixtar, QuickStar, Kwikster, Quickster, Kwik Star, Quik-Star or Kickstar."
But there's another branding problem with the "Qwikster" name: a Twitter user named Jason Castillo tweets under the "@Qwikster" handle.
Castillo did not immediately return a Twitter message from The Cutline seeking comment.
"What's most problematic about this lack of foresight is that the first thing many tech pundits do upon hearing industry news is check a prominent brand's Twitter account to see if it's active and on message," TechCrunch's Alexia Tsotsis noted.
Castillo's account is not exactly on message for Netflix. His Twitter avatar is what you might correctly describe as "Stoned Elmo"; his last formal tweet, on June 23, states: "Bored as shyt wanna blaze but at the same time I don't ugh fuck it where's the bowl at spark me up lls."
Brand confusion on Twitter is likely the least of Hastings' problems right now. Despite the apology, Netflix customers in the comments section let their displeasure with the move be known.
"Hastings tried to assuage customer wrath about the company's price hike," CNET's Stephen Shankland wrote, "but instead ended up triggering a new round."
"You're not a DVD company and a streaming company: you're where I go to watch movies. That's it," Jeremiah Cohick wrote in one of the 13,000-plus comments on Hastings' post. "The future clearly is streaming, but by separating and charging more for access, you're wildly less valuable to me. [I'm] likely [to] cancel. You haven't listened to customer feedback. You're delusional and you're lost."
At the time this article was published on Monday afternoon, Netflix stock was down more than 3 percent.