Netflix CEO Apologizes, Introduces Qwikster in Customer Email

If you’re a Netflix customer, your inbox this morning contained an email from Reed Hastings, the CEO of Netflix, that opens with, “I messed up. I owe you an explanation.”

With that, Hastings discusses the need for Netflix to move into streaming, his business fears, and the differing cost structures for a DVD business and a movie streaming business that made the cost increases that angered customers necessary. He also introduces “Qwikster,” the new DVD service that will have its own website and logo when it launches in a few weeks, splitting the company into two businesses.

Netflix has had a hard go of it since it sprung its price increases on consumers. Subscribers have fled and the stock has taken a beating.

But, this is exactly what PR experts advise a company in trouble to do; come out and speak directly to consumers, let them know their feedback has been heard, and respond. However, in PR as in life, there are no guarantees. People are in the comments on the company’s blog post saying this isn’t a real apology (he doesn’t apologize for jacking up prices) and continue to voice their complaints. Not to mention the criticisms of the new name for the DVD business. Qwikster?!

And as if that weren’t enough, it looks like the Qwikster Twitter handle has been taken by someone who never won any spelling bees.

CNET gives Hastings the benefit of the doubt, saying the apology sounds genuine, but says the CEO buried the lede: “By separating the services and charging for both ($7.99) we can license more streaming content. We are hungry for better streaming service.”

Rather than the apology for making people mad, more detail about why the prices had to go up may have been a better message, CNET continues.

Netflix had little wiggle room on this issue from the start, so this has turned into a costly communications misstep. People are feeling the pinch of the recession, they’ve cut back on their entertainment budgets, and paying more to stay home and watch a movie wasn’t going to sit well. Information about the needs and direction of the business needed to be laid out well before the increases were even introduced. That way, the company could’ve responded to feedback before rather than after the fact.

We can’t go back in time, so the correspondence is a good first step. Perhaps the company will be able to respond to feedback about Qwikster in time for the launch and regain some of the lost love from subscribers. If he has time, there are already almost 10,000 comments on the blog post for Hastings to sift through.

Below is the full email and a short video about Qwikster that was posted on YouTube.

Dear Tonya,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

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). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.