Netflix CEO admits ‘arrogance,’ renames disc business Qwikster

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McClatchy-Tribune News Service

LOS ANGELES — After watching customers leave and the
company’s stock price plummet, Netflix Chief Executive Reed Hastings on
Sunday admitted that he had fallen victim to “arrogance” and announced
changes to the DVD offering.

The company’s DVD-by-mail service will get a new name, Qwikster, and add the option to order video games along with movies.

“We
chose the name Qwikster because it refers to quick delivery,” Hastings
wrote in a blog post and an email sent to subscribers. “We will keep the
name ‘Netflix’ for streaming.”

Netflix in August
announced that it would separate the pricing for online video streaming
and DVDs, resulting in a price increase of as much as 60 percent for
people who utilize both options. A number of customers were outraged,
and last week Netflix disclosed that it is on track to lose 600,000
subscribers in the current quarter, after previously telling investors
to expect that it would add 400,000.

As a result, Netflix stock fell 26 percent in two days, equating to a loss of $2.6 billion in market value.

In
the post, Hastings defended the policy, which he said will generate
more revenue and lower shipping costs so the company can spend more
acquiring digital rights to movies and television series. He said the
problem was in communication.

“In hindsight, I
slid into arrogance based upon past success,” he wrote. “Inside Netflix I
say, ‘Actions speak louder than words,’ and we should just keep
improving our service.

“But now I see that given
the huge changes we have been recently making, I should have personally
given a full justification to our members of why we are separating DVD
and streaming, and charging for both. It wouldn’t have changed the price
increase, but it would have been the right thing to do.”

A
new Qwikster website will launch within a few weeks, Hastings said,
separating the company’s DVD library and ordering process from the video
streaming one. People who use both will have separate charges on their
credit cards.

The addition of video games to
Qwikster is a change of policy for Netflix after the company for years
denied that it was interested in adding titles for the Wii, PlayStation 3
and Xbox 360 to its DVD collection. It also puts Qwikster into
competition with GameFly, the long-standing leader in subscription video
games by mail.

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%uFFFD2011 the Los Angeles Times

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