Netflix Responds to Price-Hike Complaints by Making Their Service Exponentially Less Convenient

These are tough times for Netflix loyalists. The company’s recent subscription price uptick invoked a fury across the Internet that was, frankly, a little disproportionate; sure, they could’ve handled it better, but seriously, the $20 a month your author is paying for unlimited streaming and one-out-at-a-time DVD or Blu-ray is, any way you slice it, a bargain. The end of Netflix’s streaming deal with Starz that was announced shortly thereafter was ill-timed, but we seldom watched those “Starz-Play” titles anyway, since they were usually in the wrong aspect ratio. The subscriber drop that followed the price increase wasn’t good news for anybody, but the way we saw it, that translated to a shorter wait for that Blu-ray of Thor.

But now there’s this “An Explanation and Some Reflections” email and blog post from Reed Hastings, Netflix’s co-founder and CEO, and even us apologists can’t explain away this madness. Read it (and our contributions to the blogosphere-wide chorus of “WTF?”) after the jump.

Dear Jason (he said my name he said my name!),

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.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

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.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

Let’s put aside some of the dodgier specifics here (if anyone should know that “nearly every movie ever made is published on DVD” is a giant factual error, it should be the CEO of the biggest DVD rental outfit in the country) and take a more general overview. To wit: the powers that be at Netflix looked at their PR nightmare and said, “Well, we raised our prices, lost a big chunk of our customer base, and alienated many of those who remained. How could we make this right?”

“By lowering the prices back down to the previous levels?”

“Shut up, Bob. Anybody?”

“By offering some kind of one-time credit or extra premium to loyal customers?”

“Shut up, Regina. Anybody with any good ideas?”

“Hey, how’s about this: What say we take the company and split it up into two separate entities, one for physical discs and one for streaming?”

“Um, what would that solve?”

“How’s that?”

“What the hell would that have to do with our current, y’know, PR nightmare?”

“Well, because then the people who don’t want to pay for streaming or don’t want to pay for discs, wouldn’t have to! They could just have the one that they wanted!”

Riiiiight. But they can do that already, within their Netflix account.”

“Really? How about that. I didn’t know, I just started here. Anyway, we would make sure that those websites weren’t integrated with each other, so every customer would have to create new queues and new ratings, and bill separately, so they’d have to maintain two accounts when earlier they only had one.”

“Uh huh. Uh huh. And what exactly would this accomplish?”

“Well, in the short term, absolutely nothing.”

“Okay.”

“But in the long term, when we finally phase out physical DVD rental because it’s so much more expensive to maintain than streaming, it won’t be Netflix’s failure — it’ll be this other, unintegrated company!”

“Right!”

“It’d be Qwikster’s, and what the hell is that? We don’t even know who those assholes are!”

“Gotcha! But why do it now?”

“What’re we gonna do, make our subscribers hate us more!?”

“Jenkins, I see a promotion in your future!”

(Cigars lit up around. Scene.)

This little playlet by the Flavorwire Community Theater sums up our feelings on Netflix’s most recent debacle; what do you think?