Last night, Netflix CEO and co-founder Reed Hastings posted a blog, wherein he apologized for how the company handled its price increases, and announced that the mail order DVD part of Netflix will be split off as Qwickster in the coming weeks.
Hastings was no doubt spurred by the kicked hornets' nest of customers who voiced their displeasure when Netflix announced in July that the unlimited streaming plus one DVD by mail service would increase from $10 a month to $16. Netflix said customers could opt for streaming-only or DVD-by-mail-only services that each cost $7.99 per month.
The backlash resulted in a loss of about 1 million subscribers. Last week, Netflix said it expected to lose about 600,000 U.S. customers in the third quarter.
"I messed up. I owe everyone an explanation," Hastings wrote. "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."
Hastings went on to cite AOL's dial-up data service and Borders' bookstores as examples of companies that failed to see how their respective business models failed to evolve with advances in technology.
While Hastings' blog post, and subsequent email letter to customers, was an attempt at damage control, the pricing structure didn't change.
Instead, customers who want to get DVDs by mail will now have to go to the separate Qwickster website, while the streaming side of the business will soldier on as Netflix. As an added benefit, Qwickster customers will be able to rent video games via an upgrade option.
On the Netflix streaming side of the business, "substantial" streaming content will be added in the coming months.
Splitting the services into two separate entities will also require a little more legwork from customers. The two sites won't be integrated, so searches won't work across both sites. Customers who change their credit card numbers or passwords will need to do so separately on both sites, and credit card statements will also be separate.
"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," Hastings wrote.
Netflix followed Hulu as the latest over-the-top threat for cable operators. Netflix's agreement with Starz ends in February.