Reed Hastings apologizes, announces Netflix as streaming only, rebrands DVD business as Qwikster

Reed Hastings, the co-founder and CEO of Netflix has put up a video and blog post this morning apologizing to customers for the way their recent plan changes and increases were handled, and announcing that while streaming services will retain the Netflix name, the DVD (and now video game) mailer service will be spun off as Qwikster. Phew. This only really matters to US customers, and to those who in addition to streaming on iPhone, Apple TV, iPad, and iPod touch also have DVD mailer plans, but it’s an interesting case study in corporate communications none-the-less.

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

Commendable fearlessness. Apple has often said that if anyone cannibalizes their business, it’s going to be Apple themselves, and it’s good to see other companies take those types of risks.

So 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”.

It’s going to be a different website — you’ll have to go to netflix.com for your streaming and qwikster.com for your discs — and different entries on your credit card statement. Hastings assures everyone, however, that the price hikes are done and the characteristic red envelopes will remain the same. However, for customers of both services, it could mean twice the overhead in managing those services, and a dilution of what Netflix means to them. (Twice as much is often half as strong.)

I want to acknowledge and thank our many members that stuck with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Check the video above and full post via the link below and let us know how you think he did, and whether you’ll be sticking with Netflix — and Qwikster — going forward.

[Netflix