In response to negative feedback from its customers, Netflix has decided to drop its plans to spin off its DVD rental-by-mail service into a separate company which would have been called Qwikster. Instead, the company will continue to keep both its DVD rental and internet streaming services under the same umbrella.
Netflix’s announcement of the split last month was met with almost instant criticism, with the inconvenience of having to manage to separate accounts seeming to be the biggest complaint. Netflix CEO Reed Hastings addressed those complaints head-on in a blog post and email to subscribers that was sent out this morning –
It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs. This means no change: one website, one account, one password… in other words, no Qwikster. While the July price change was necessary, we are now done with price changes.
The July price increase that Hastings is referring to was the announcement that Netflix was splitting the billing for the two different services, which resulted in an approximate one million customers cancelling their subscriptions and the company’s stock taking a drastic tumble, The company’s stock took a further beating with the Qwikster announcement, ultimately dropping from a high of $304.79 a share on July 13 to a low of $107.63 a share on September 30, a week and a half after the company announced the creation of Qwikster
Even with this announcement today, Netflix’s stock closed $5.59 down from it’s opening bell price at $111.62 a share.
The Qwikster plan was also criticized as being not too well thought out. In addition to the company not anticipating the complaints from customers over the inconvenience of having two accounts, the company missed small, but important details, such as making sure that they had registered the @qwikster Twitter account. Hastings acknowledged that mistakes were made when it put forth the Qwikster plan in a press release.
Consumers value the simplicity Netflix has always offered and we respect that… There is a difference between moving quickly – which Netflix has done very well for years – and moving too fast, which is what we did in this case.
While I would like to give Netflix credit for responding to its customers and withdrawing a vastly unpopular plan, I have to think that Hastings was under some enormous pressure from stockholders to set things straight. But is this mea culpa enough to set things straight? Having irritated its customer base twice in the past several months, I think the company is still going to have to work hard to regain their trust and this is only the first step.