The Qwikster Redemption: Netflix Tries to Reverse Fortune by Splitting the Company

Amid falling stock prices and rising customer outrage, Netflix has taken a calculated move to better their business and perception by splitting the company into two business, introducing the oddly named Qwikster.

By way of atoning for raising prices so dramatically months ago to the dismay of far more customers than predicted, chief executive of Netflix Reed Hastings announced, late Sunday night mind you, that the popular video-rental company would be divided, with Qwikster becoming the new DVD-by-mail service.

The new group would have its own management stream, though keep the same service fees, at $16 per month. Outrage began with the price increased 60% from $10 a month earlier this year, and lead to an mass departure of roughly 1 million of about 15 million subscribers.

In the announcement, Hastings did not explicitly apologize for the price increase, just simply that Netflix did not properly take care of its valued customers. “I messed up,” he said in the statement. “I owe everyone an explanation.”

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

So while Qwikster will take over the DVD services, Netflix will deal only with streaming services. The two groups will appear on bills separately, and Hastings is encouraging patrons to think of the services as very separate entities. For what it is worth, Netflix Canada, which is a completely separate entity still with it’s inaugural price, lower bandwidth usage, and different selection, only offers streaming service.

The change in strategy by Netflix in the States, however, has prompted more backlash.

The announcement was made a minute before midnight on the Netflix blog and can be viewed here. So far the message has earned nearly 26,000 comments, and many of them are negative. Some people are claim it’s too late to do anything, while others wish Netflix could return to their old ways and are making suggestions to help.

“This letter is disingenuous,” wrote David Barba. “You are offering an apology for not doing a good job of explaining the new structure but it is all about the needs for your corporation.”

Soon-to-be former Netflix subscriber Laurie Notaro added a comment, liked by 69 people: “Terrible idea. Bad after bad decision. What’s next, only offering movies made in the eighties? I’m getting tired of this. And you.”

So far the move doesn’t seem to be popular, as there are hundreds upon hundreds of such comments. However as many are aware, blog posts more often than not attract negative comments than positive ones, and may not be the best judge of the future of Netflix. “We have to take what we’re hearing through social media with a grain of salt,” said Russ Crupnick, an analyst for the NPD Group, to the New York Times. “Netflix and Amazon are unchallenged in terms of how pleased customers are with their service. It’s easy to confuse the noisy with the silent majority.”In time we will tell how the move helped or hurt the company, just as the price increase saw many people leave.

In the meantime, however, what are your thoughts on the moves of Netflix? It is desperation, or something more thoughtful and decided?

Publish date: September 22, 2011 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT