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Netflix Apology Pours Salt on Price Wound
Netflix Apology Pours Salt on Price Wound
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
SEPTEMBER
19
2011



Some might call it pouring salt into a wound. Netflix CEO Reed Hastings apologized for how he handled the price increases on the company's service, but his words seem to be akin to picking a scab.

Hastings started out his apology with candor, admitting he "messed up" and owes everyone an explanation about why Netflix was separating its DVD and streaming services, and the price changes that go along with that move. He then went into a long explanation that started back with AOL dial-up and Borders bookstores and noted how these companies made mistakes by moving too slow.

Hasting's error, as he sees it, is not communicating well enough during the company's rapid evolution. Now, he's trying to do what he believes he should have done from the get-go: communicate. But customers don't seem to be buying the spiel.

Foot in Mouth

"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," Hastings said. "We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service."

Hastings went on to say the DVD by mail service was getting re-branded as Qwikster. DVD members will now have to go to qwikster.com to order discs -- and now, the addition of video games -- by mail. The name was chosen because it refers to quick delivery. Netflix will be reserved for the streaming service.

That complicates things for Netflix subscribers, who now have to subscribe to two separate services that are no longer integrated. If you subscribe to both services, and if you need to change your credit card or e-mail address, you have to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn't show up on Netflix, and vice versa.

Angry Movie Fans

For this, Netflix is charging consumers more than before. Qwikster unlimited DVD-only plans in the U.S. are $7.99 a month for the one-DVD-out-at-a-time plan and $11.99 for two DVDs at a time. The unlimited-streaming plan will remain at $7.99 a month. The price for getting both unlimited streaming and unlimited DVDs will be $15.98 a month.

"You're diluting your brand with 'Qwikster,' you've financially drilled and disrespected your customer base with the cost increases, and now you are making it harder for them to manage their queues and basically charging them for it," Ross Brandt commented. "My personal solution was simple: delete DVDs."

Another commenter, Grant Gouldon -- a self-described Netflix evangelist -- said Hasting's arrogance is so thick it's palpable. David Isaacson, another commenter, called Hasting's blog post "offensive." Others talked about migrating to Blockbuster, Hulu Plus and Amazon Prime.

Treating Customers Like Dummies

Roger Kay, principal analyst at Endpoint Technologies Associates, got the same email other Netflix subscribers got at about 4:30 a.m. ET. As Kay sees it, Hastings doesn't seem to realize that there is a recession going on -- or he wasn't paying any attention to it. Netflix, he said, failed Marketing Communications 101.

"Netflix is counting on customers separating themselves into either DVD or streaming consumers," Kay said. "Netflix is unencumbering the streaming business from the heavy logistics business and going for a pure web play at some later point, which actually makes a lot of sense. But they communicated all this poorly, treating the customers like children who are too dumb to understand."

Tell Us What You Think
Comment:

Name:

Abby Morgan:
Posted: 2011-10-10 @ 3:56pm PT
My husband and I plan to stay loyal to Netflix. Getting our DVDs is still a treat. A little change hasn't discouraged us.

Patti:
Posted: 2011-10-08 @ 12:37pm PT
Getting new movies late, couldn't find anything except old movies, and raising the price ....too much for me....had to let Netflix go.

Gregoire:
Posted: 2011-10-05 @ 11:38am PT
Is it like pouring salt in a wound or picking a scab? You must choose.

rose:
Posted: 2011-09-21 @ 11:00am PT
I think Netflix is just making one wrong choice after another. Iím not sure what they are thinking they are going to accomplish, but I donít think it will do anything but make things worse for them. I switched over to Blockbuster through my provider/employer DISH Network when I heard about the price increase. With Blockbuster I can get games, Blu-ray DVDs at no extra charge, and new releases 28 days before Netflix does. They have also restructured their prices so on top of getting all of those great things I pay a very good price for it. I also get Blockbuster free for 3 months through DISH. I am so glad I made the switch when I did.

Carrie Sneed:
Posted: 2011-09-20 @ 3:06pm PT
It is hard to believe just a few months ago all the Blockbusters in my town went under because Netflix was so genious. Way to sink your own ship Mr. Hastings.

Dan:
Posted: 2011-09-20 @ 2:56pm PT
We just lost the best thing netflix had ONE SITE for both DVD and streaming, I was able to do ONE search and add to DVD Queue or Streaming Queue, with the loss of that I can look for another provider

Brian McDonald:
Posted: 2011-09-20 @ 1:32pm PT
I have had both services and plan on getting rid of both. I have been with Netflix since 1999.It seams that if you are a loyal, long term customer they do not care about you. Goodbye!!!!

jon:
Posted: 2011-09-20 @ 7:39am PT
As a netflix subscriber who uses instant stream and mail services, I am not pleased and have yet to make up my mind, but I am not happy to hear it will be 2 different services.

Gabe Nava:
Posted: 2011-09-19 @ 9:54pm PT
I received the email today and this is what I wrote Mr. Hastings:
Dear Mr. Hastings,

I appreciate your explanation, and as a small business owner in Southern California I know how hard it is to keep customers satisfied, however if I was to do what you did and cause my customers to go somewhere else for the same service; I would no longer be in business.
I started with Netflix many years ago and switched to Blockbuster for faster service then switched back to Netflix because of your streaming/DVD incentive and was very satisfied until you decided to pull the rug out from under me and pretty much tell me that you didn't need my business any more. Now you think by simply explaining yourself without an incentive to come back is gonna work? Mr. Hastings your sadly mistaken, and extremely presumptuous to think after what you pulled you'll win back hard working Americans like me with a lame excuse - - again sadly mistaken and now insulting!

Let me tell you what I would have done: I would have continued DVD/streaming for your long time loyal customers of say 5 year plus as a goodwill gesture, and offer to your 4 years or less existing customers a discounted rate to add DVD service, and sock it to the new customers that would have heard from their family, friends, and coworkers how great and loyal a company Netflix is for doing what they did. Now that's a great marketing plan that would have increased your business beyond what you could have imagined.

You need to realize we are living in trying times and the average American who probably still could have absorbed the increase, canceled not for the money but on principle and those customers like myself are not won over by a nice letter, but on principle like an incentive.

Think about it.

Gabe Nava
Former Netflix customer

val:
Posted: 2011-09-19 @ 6:01pm PT
I did not received this apology. But it is clear this CRETINO Hustings must be fired right away. This is the beginning of the end of Netflix. It was a great company, now is almost dead. Fire him and return to the honest business.

Laura:
Posted: 2011-09-19 @ 4:58pm PT
Netflix got me so upset with their price hike!

Steve:
Posted: 2011-09-19 @ 4:10pm PT
They have insulted me by taking my loyalty over the years for granted. They act like I have no other choices. I am cancelling Netflix and will badmouth them to all my friends for the rest of my life. What a bunch of out of touch Idiots!

jcm:
Posted: 2011-09-19 @ 2:56pm PT
cancelled in August. The streaming material was getting pretty tired and even the dvds by mail weren't that hot.

Byron Sayre:
Posted: 2011-09-19 @ 2:51pm PT
I called when I saw the price increase on my bill and the representative told me that they were doing me a favor by simplifying things for me??? At a 60 % increase I get what I had before??? Gee, thanks Netflix. I hope you go the way of the dinosaur. Listen to your customers.

K WILLIAMS:
Posted: 2011-09-19 @ 2:29pm PT
I COMPLAINED TO NETFLIX AS SOON AS I HEARD ABOUT THE INCREASE IN THE PLAN. THEY SHOULD HAVE GRANDFATHERED ALL EXISTING PLAN HOLDERS IN. THIS IS CRAZY. THE ORIGINAL PLAN WAS GREAT...TWO WAYS OF WATCHING MOVIES. I CHANGED MY PLAN AND MAY LEAVE BECAUSE THEY HAVE VERY LIMITED ITEMS AVAILABLE ON STREAMING. NETFLIX MAY DIE.

lori:
Posted: 2011-09-19 @ 2:28pm PT
if they want people to stick with netflix they need to actually have good new movies on streaming...right now it's all b movies or old stuff with a only a few new ones...we cancelled.

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