Peter Kafka

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Netflix Renames DVD Business, Apologizes — But Doesn’t Back Down

After an outcry from customers and a beating from Wall Street, a rare mea culpa from Reed Hastings. The Netflix CEO says he mishandled his price hike, and apologizes. But he’s not changing his plans.

He is, however, renaming his DVD rental business: Anyone want to subscribe to “Qwikster”?

Hastings says that instead of backing down from his decision to split off the company’s DVD business and charge extra for it, he’s going to double down and make it even clearer that Netflix is getting out of the disc business: DVD rental customers will soon get their stuff from a separate Netflix unit, with a separate name. One small bit of news: The new/old disc service will begin to offer videogame rentals, as well.

In this video, Hastings and soon-to-be Qwikster head Andy Rendich try to explain their reasoning, and what it will mean for customers.

Hastings’ message to subscribers — and investors — is an interesting mix: On the one hand, he steps up and says he erred — by not communicating his reasoning behind a recent price hike for customers who want both streaming video and DVDs by mail.

On the other hand, he explains that he didn’t really make a mistake — he just didn’t speak clearly enough.

It’s a bit like like the apologies that certain celebrities and athletes make after a gaffe. “I’m sorry if I offended anyone” is quite different than “I’m sorry I screwed up.” (Note, though, that Hasting’s first sentence is indeed “I messed up.” He gets the difference, too — he just can’t say he’s sorry for something he’s truly not sorry about.)

As far as I can tell, Hastings’ argument/explanation about his reasoning hasn’t changed a bit from the messaging he’s previously sent out. It’s just that he’s saying it with a bit more force. That is:

  • Netflix is getting out of the DVD business sooner than later; and
  • Netflix says its streaming video business is going to become more attractive, not less. And that will also happen soon: “The additional streaming content we have coming in the next few months is substantial.”

Will that be enough to appease angry customers and disappointed investors? We’ll get an answer for the second group in a few hours, when NFLX shares, which once hit the $300 level, start trading again. Right now they’re at $155.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work