Al Lewis: Netflix Moving a Little Too 'Qwikster'
I do not accept Reed Hastings's apology.
The Netflix Inc. (NASDAQ:NFLX) CEO sent me and millions of other video customers an email Sunday, saying he's sorry "many members felt we lacked respect and humility."
I know this trick. I've used it myself: "I am sorry that YOU were offended." It is a non-apology. And whenever I use it, I mean it from the bottom of my heart.
Despite Hastings's feigned groveling that he "slid into arrogance," he's standing by his 60% increase in monthly fees in the middle of an economic slump. And to make up for it, he's splitting his company into two operations. Now his customers will get two bills instead of just one and have to sort through two websites instead of just one.
Hastings wants to separate the old business, DVDs, from the new, video streaming. This makes perfect strategic and operational sense. But it makes little sense to the one part of the business that is supposed to come first: the customers.
"It's as if I went to Mickey D's and had to stand in one line to order the bun, and another to order the meat," writes Netflix customer Lory Montgomery under Hastings's customer letter, which he also posted online.
Netflix customers have been leaving in droves since the price increase in July, precipitating a decline of more than 50% in Netflix stock.
Thousands of customer comments posted under Hastings's letter likely contributed to a plunge of more than 7% on Monday. The stock was down $11.44 to $143.75 as the market pondered how far the exodus would go.
"Thanks for the note, Reed," writes customer Martha Irvine. "I was thinking about canceling my Netflix account, anyway. This gave me the nudge I needed to do it."
"Redbox baby!!!" writes Sandy Salinas, referring to the $1 video-vending machines.
"One more reason to regret switching from Blockbuster," writes Pedro Pereira.
Blockbuster Video President Michael Kelly and Dish Network CEO Joe Clayton are planning a press conference in San Francisco on Friday titled, "A Stream Come True." Here, they're likely to gloat about landing Netflix's former customers. "Blockbuster quickly responded to the cries of Netflix customers," Kelly said in a press release in July. "We find it shocking that anyone would raise rates as high as 60%."
I find it shocking that Hastings has chosen to call his separate DVD business "Qwikster." I don't want to explain to my wife why I'm going on the Internet and ordering a Qwikster.
"Don't get me started on the name choice...really lamester," writes Joelle Sailers.
"It's like Napster. Or Friendster. Or Hampster," writes Sam Warren.
So after many years of using Netflix, I am thinking of canceling, too.
Hastings's apology reminded me how often I have three DVDs lying around, often for weeks on end, because I don't often have time to watch them. It also prompted me to look the fee I pay for this service I so slowly use--$25.86 a month--on top of a hefty cable bill.
Netflix spokesman Steve Swasey told me Netflix was holding its course, despite mass consumer defections and the thousands of negative comments piling up on its website. In the end, Netflix customers will see that separating DVDs from streaming is a better deal for everyone, he explained. And what Hastings was apologizing for was miscommunication, Swasey said, not the changes.
"This is how good companies die," writes Jessie Smith-Larson. "They don't listen to the people who actually matter."
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at al.lewis@dowjones.com or tellittoal.com)