Netflix CEO Apologizes for Price Hike, But is it Too Little, Too Late?

Netflix co-founder and CEO Reed Hastings just found the worst way to weather a storm: by apologizing to consumers just before announcing another mistake. To his credit, Hastings must be scrambling right now. After infuriating consumers with an unnecessary and arrogantly promoted price hike, the company's stock is in the toilet. Analysts are quickly lowering their price targets, even as Netflix NFLX moves forward with its plans to expand. Thus, Hastings did what any CEO would do and apologized for this on Netflix's blog. “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,” Hastings wrote. “That was certainly not our intent, and I offer my sincere apology.” While Hastings' comments sound a bit more heartfelt than the company's absurd press release (which hyped the price hike as a benefit to consumers), his blog was posted on a site that consumers have to look for to find. Instead of placing a link on Netflix.com pertaining to the apology (as Zagat.com did regarding the Google acquisition), visitors have to scroll to the bottom, click on the tiny “blog” link (which is surrounded by a dozen other links), and look for the story. Those who do will be greatly disappointed. After getting through the apology, consumers will discover that Hastings has ulterior motives: he has another change to announce at Netflix. Once again, it involves the company's DVD service: “We realized that 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. It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to ‘Qwikster.'” Hastings said that Netflix chose the name Qwikster because it refers to “quick deliver” (yeah, that's exactly what I was think – “quick delivery”). The Netflix name will remain intact for streaming. Not surprisingly, Hastings couldn't even conclude his blog post without telling us one of the reasons we won't be happy with the name change: “A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn't show up on Netflix, and vice-versa.” Shall I pause for a moment of laughter or a moment of disgust? Most consumers would argue the latter. In the comments section of the blog, Joseph J. Finn scored more than 900 Facebook Likes for asking, “Seriously, you thought a good idea to make up for miscommunications was to separate the websites and make it more complicated for us to manages our queues? Really?” Julie Carter earned more than 750 Likes for saying, “This just further encourages me to drop one of the services (or both). Without integrating the two services, it makes things much more difficult for customers who'd like both dvds and streaming. We'll no longer be able to see when the dvds in our queue are available on streaming, so that's a huge detriment.” Meanwhile, Hastings couldn't even muster 100 Likes in his response to Finn's comments. “We think the separate websites (a link away from each other) will enable us to improve both faster than if they were single websites,” Hastings claimed. The only positive development to come out of this announcement is a laughable one: Qwikster will offer video game rentals in addition to movies. While it's no surprise that Netflix is desperate for new revenue streams, it's a bit ironic that the company would go after an old-school medium this late in the game – especially when it is doing everything in its power to kill off the old-school medium that made Netflix what it is today. It's true that game discs and cartridges will outlive movie DVDs, partially because of our limited technology (it's harder to stream games than movies), and also because of consumer resistance (while music is fully accepted in digital form, video games are not). However, we are closer to a digital-only world for games than we were five years ago. Video game rentals aren't as big as they were when the Xbox 360 launched in 2005, especially with demos readily available on Xbox Live and PSN. So why now, Netflix? Why go into video game discs at a time when GameStop GME, the biggest video game retailer in the world, is getting ready to introduce a streaming game service? Follow me @LouisBedigian