Media & Technology 19 Sep 2011 09:09 am

Netflix CEO Gets Humble. Qwikster is Born

by Sean Hackbarth

Netflix CEO Reed Hastings explains that the company’s decision to separate its DVD and video streaming services is because the DVD business will become Qwikster. Hastings writes that his company “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.”

Customers who get get DVDs in the mail will soon receive separate bills from the Netflix-owned subsidiary.

On the company’s weblog, Hastings goes on to admit he did a poor job communicating recent changes to his customers:

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.

This is an interesting business strategy. Consumers want more on-demand, “right now!” content, and Netflix is choosing to deliver bits over atoms, while not being held back by the latter.

Netflix Separates DVD and Streaming Services”

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