Video giant Netflix Inc. splits its DVD and streaming services. Apparently, the Chief Executive Reed Hastings addressed in the blog post late on Sunday that its DVD service is moved to a newer entity-Qwikster-setting off another round of complaints from customers after a recent price hike and sending its shares down by 7 percent.
Hastings admitted to the “arrogance”, over not explaining the changes adequately, in an apology that failed to gain acceptance among many. Hastings said his DVD-by-mail service will be now called as Qwikster, which will soon appear on the company’s signature envelope.
Hastings declared that its instant streaming service, inclusive of streaming television shows and movies, will reside separate. As a part of the explanation, Hastings said that he was separating the units because they were evolving as very different businesses that needed different marketing. “We need to let each grow and operate independently,” he said.
Customers flooded the company’s website venting their anger about the price hike. Netflix increased its DVD service price by 60 percent all of a sudden. Many customers are upset or confused by the splitting of streaming and DVD businesses. To which, Hastings said there will be no price changes and customers will have two names as Qwikster and Netflix on their credit card statements.
Justifying the price increase, sources said that Netflix is under pressure from Hollywood studios and cable programmers to pay much more for content.
Many Wall Street analysts applauded while praising Hastings foresight towards the higher-margin streaming business as a smart long-term strategy. They also justified the price hike saying that it was needed to pay for increasingly costly content.
Whatever be the case, according to the customers’ postings, Netflix consumers are really angry with the cost hike, which may lead to service termination by many. People are desperately looking for a cheaper option. As far as streaming is concerned, Netflix remains the industry heavyweight with 22 million streaming subscribers.