LOS GATOS, CA: Netflix admitted to failures in communication and said there would be a standalone marketing team for its newly separated Qwikster by-mail DVD service.
Reed Hastings, cofounder and CEO of Netflix, sent out a mass email Monday morning to users apologizing for his failure to communicate during the company's 60% price hike in July.
The email continued by announcing the impending split of Netflix's instant streaming service from its DVD service, with the latter part of the business becoming a new and separate operation called Qwikster.
Hastings explained the upcoming split was behind the summer price hike. And Steve Swasey, VP of corporate communications for Netflix, told PRWeek that not announcing the split in July was “a failure to communicate.”
Netflix customers who want to subscribe to both streaming movies and DVD films will now need accounts with both companies, organize distinct queues on the respective websites, and be charged separately for each service.
“This split has been in progress for years. It is part of the natural progression of the company,” said Swasey. “It's an inconvenience now. But we just have to ask that people are patient with us. By creating Qwikster, we are able to put the management and muscle behind our DVD service that we've always wanted.”
“That is rhetoric,” said crisis management expert and CEO of Group Gordon, Michael Gordon. “Multiple companies have multiple lines of business, so that doesn't mean anything.”
Qwikster's new headquarters are located in San Jose, CA, and Andy Rendich, who headed Netflix's DVD operation for the past four years, has been appointed CEO of Qwikster.
No other official appointments have been announced, but Swasey said the hunt was on for a CMO, communications head, and other corporate positions for the operation, though he added: “The plan for marketing, PR, all of that is not firm.”
When asked if streaming-only customers were better served by the previous one-stop-shop model, Swasey said: “For now that's true. But over time we believe people will benefit from a streaming-only plan.”
Netflix has not announced any improvements consumers can expect from the split besides the addition of video games to its DVD service. “The split has made their business much more complicated for their customers,” states Gordon. “Hastings needs to explain what the actual benefits for customers will be.”