Netflix (s NFLX) CEO Reed Hastings issued an apology to members on the company’s blog Sunday night, while also providing some insight into how and why the company badly mishandled communications in light of a pricing change announced earlier this summer.
“I messed up,” Hastings began. “I owe everyone an explanation.”
From there, Hastings went on to detail the reasons for Netflix’s communication — or lack thereof — with the community that had embraced the service, and through great word-of-mouth, had driven massive subscriber growth over the last few years. That lack of communication has made some reconsider their allegiances to the service, and will lead to a subscriber decline in the third quarter. Noting that the company feared moving too slowly in its transition from a DVD-by-mail service to one that focused primarily on streaming, Hastings acknowledged that the company had “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.”
So Hastings fessed up that what’s really behind the change in its service plan is the move to rebrand its DVD-by-mail service “Qwikster,” rolling it out from the Netflix brand and creating a whole new website for the service. According to Hastings, each website will be focused on just one thing — whether it be streaming or DVDs — and each will have separate billing and ratings systems for users.
The move wasn’t necessarily expected, but it makes sense, as Netflix already separated the services and created a separate business unit for the DVD-by-mail business. Ensuring that each operates independently could make Netflix (the streaming company) more nimble, while letting Qwikster manage the winding down of the DVD business gracefully. Managing DVD-by-mail under a separate brand also gives Netflix some additional flexibility if it ever chooses to spin out, or sell, the Qwikster assets to someone else.
All in all, the hope, Hastings writes, is to rebuild the trust that has been lost over the past two months as it navigated the transition:
“Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.”