Netflix Quickly Takes Cover with Qwikster

Facing an overwhelming backlash from subscribers, Netflix CEO, Reed Hastings has come forward and apologized for what has probably become the biggest public relations debacle in the history of Netflix.

When Netflix abruptly spilt its DVD-by-mail service and streaming video service into two separate services and effectively increased subscription fees by 60%, many--perhaps millions--of Netflix's subscribers became angry and threatened to close their accounts. Arrogantly, Netflix did little to manage the crisis. Netflix's attitude seemed to be: We are the leader in the video rental business. If you want our services, you will accept delivery however we choose, and you will pay whatever we tell you to pay.

Netflix did not use those exact words, but that is what the public heard. Rightfully so, the subscribers rebelled and began canceling their subscriptions.

Under such pressure, one would assume Netflix might retreat and come up with a plan to assuage consumer anger, but Netflix did not do that. Sure, Reed Hastings/Netflix apologized for being arrogant and communicating poorly, but that is about it. In a further act of arrogance, Netflix has chosen to rename its original DVD-by-mail service and permanently break it off from Netflix (as if that will fool enough people).

The new name is Qwikster. Yes, Qwikster is a cheesy hipster appellation, and this playfully misspelled name is so 1990s. Sure, Qwikster sounds like some shady file-sharing Web site from Romania, but it is actually a repackaging of Netflix's DVD-by-mail business.  (Yes, this probably will fool enough people.)

If you want to be a member of Qwikster, you are going to have to pay for it, and it will show up as a separate charge on your credit card each month. Even if you maintain a Netflix subscription for streaming content, your credit card statement will have a charge for Netflix and another charge for Qwikster.

Adding to the inconvenience for subscribers, Netflix and Qwikster are to function independently. For example, if you review a movie on Qwikster, the review will not appear on your Netflix account, even though you may be paying for both services. Also, if you need to update your credit card information, email address, home address, phone number, or other account information, you will have to do so twice: once on the Netflix site and once on the Qwikster site.

Some consumers may feel more comfortable with paying for two subscriptions when the subscriptions are under different names, but the reality has not changed. Netflix has reduced subscriber benefits and is charging significantly more for significantly less. If making payments under two different company names makes subscribers feel better about it, then so be it.

Canceling Netflix? You Are Not Alone

Angry subscribers warned Netflix, but Netflix did not listen. Netflix subscribers threatened to cancel their subscriptions if Netflix raised prices. Netflix raised the prices anyway, and many subscribers appear to be following through on their threats.

If you are one of those incensed subscribers and you are ready to exit Netflix, you are not alone. Read "Higher Netflix Prices Equals Fewer Subscribers" by Michael Liedtke for the details.

If the Netflix member cancellations continue, it could possibly become fashionable to drop Netflix. These customer backlashes tend to take on lives of their own and snowball. Just ask the last company who dominated the video rental business, got too cocky, and started screwing around with their customers. How did that work out?

With the added revenue from much higher subscription fees, Netflix may very well weather this storm, but the New Red Menace may have gone a bit too far this time. We will just have to wait and see how many subscribers are going to continue taking the abuse from Netflix and how many are going to find somewhere else to wait weeks for new releases, rent scratched DVDs, and have their ISPs and computers blamed for streaming video problems.