When Netflix announced an unexpected 60 percent price hike more than one month ago and thousands of angry customers spoke out against the streaming video and DVD-by-mail company, many said they would exact revenge against the then-high-flying company.
Now, it's clear Netflix angry customers have done just that, as the company's stock price has spiraled lower -- and now the company co-founder and CEO has apologized for the way Netflix handled the announcement of the price hike and separation of DVD and streaming businesses.
I messed up, Netflix CEO Reed Hastings wrote in a corporate blog posting late Sunday night. I owe everyone 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.
Netflix said in July it was separating unlimited streaming and unlimited DVDs-by-mail in the U.S. to better charge for related costs for each service. The company priced unlimited streaming only at $7.99 and unlimited DVDs at $7.99, resulting in a $15.98-per-month subscription charge for both. That resulted in a sudden 60 percent price hike for customers, and tens of thousands lit up the Internet at the time, angry at the company for the move and handling of it.
Initially, Netflix said it was prepared to lose some customers -- standing by how the price hike was handled. But recently Netflix reduced its forecast for streaming subscribers to 21.8 million from a previous 22 million -- signaling an end to rapid growth the company had experienced.
Hastings said that the company realized that streaming and DVD by mail are becoming two different businesses and that each should be allowed to grow independently. So now the company will rename its DVD business Qwikster and the Netflix name will remain with the company's streaming video service.
Netflix stock is trading down in premarket activity before Monday's market open on the news, dropping $2.89, or 1.86 percent, to $152.30. In July, before the Netflix's price hike announcement, the company's stock was trading near $300 per share.
For subscribers, the split will mean little -- except that Qwikster services, including the addition of a video game rental option for Wii, Playstation 3 and Xbox 360 games and a different name. There are no price changes with the renaming and split. Current subscribers won't have to do anything if they already subscribe to Netflix's DVD-by-mail service.