February 28, 2024

Media Decoder: Netflix to Break Business in Two

In a letter posted on the Netflix Web site late Sunday night, the company’s chief executive, Reed Hastings, apologized for the way he handled recent changes in pricing and subscription services, and announced that the company would split into two businesses, with the DVD-by-mail service to be renamed Qwikster.

The pricing changes were announced this past summer and have since caused Netflix customers to walk away in droves. “I messed up,” Mr. Hastings said. “I owe everyone an explanation.”

He said the DVD-by-mail service, which is how the company began, would become the Qwikster brand with its own management team. The name Netflix will remain for movie streaming, according to the company’s statement, which was posted around 9 p.m. Pacific time. Qwikster and Netflix will now appear as separate lines on customers’ credit card bills.

The price of the company’s services will not change.

“We’re done with that!” Mr. Hastings said.

It was, after all, just that kind of change that prompted outrage among Netflix customers this summer, when the cost of a subscription that included unlimited online movie streaming plus one DVD-by-mail at a time went from $10 per month to $16 per month. That 60 percent increase has cost the company about 1 million of its 25 million customers, a greater exodus than they expected, company representatives have said. Netflix shares fell 15 percent last week when the customer figures were announced.

But Mr. Hastings did not apologize for increasing subscription fees, or for asking customers to think about the two services separately. Instead, he blamed his own “arrogance based upon past success” for a failure to communicate in the face of a fast-changing business model.

“We realized we should have communicated better in July when we announced the price change,” said Steve Swasey, company spokesman. “That’s a mea culpa on that.”

Article source: http://feeds.nytimes.com/click.phdo?i=0c12cc842b9c4a412012f24d43664f76

Speak Your Mind