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Netflix rolls out new business venture from same business venture

Netflix has been struggling to figure out how to continue to grow as a company while continuing to adapt to both new technologies and current customer needs. The company started as a DVD mailing service, but eventually incorporated online streaming of entertainment into its offerings. Initially, both sides of the business were connected, but now Netflix is rolling out changes that separate the two services. Netflix will continue to be the name of the streaming service, while the DVD mailing business will be named Qwikster.

Earlier this week, the CEO of the company, Reed Hastings, sent out an email to all Netflix customers apologizing for not communicating company and price changes better to them. Customers were upset that Netflix was suddenly increasing its prices by 60 percent for people who wanted to use both the streaming and DVD mailing services. Netflix said that it has lost 600,000 subscribers due to the changes and the way they were communicated.

In the two days following the changes, Netflix’s stock prices fell by 26 percent. The company says that they have made the changes in order to keep shipping costs low and revenue high so that they can build up their streaming selection by acquiring rights to movies and television shows. In his email to customers, the CEO said that he had been arrogant because of the company’s past successes and so took the customers for granted, rather than properly communicate changes to them. It will be interesting to see whether any of those customers will go back now that the company is being more transparent in its decisions.

Source: Los Angeles Times, “Netflix CEO admits ‘arrogance,’ renames disc business Qwikster,” Ben Fritz, Sept. 19, 2011

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