Netflix CEO Apologizes, Rebrands and Stock Soars

In a blog post just a few days ago, Netflix Co-Founder and CEO apologizes for the way the new pricing model was introduced after angry fans dropped the service and the stock plummeted.  He then rebrands the DVD-by-mail services as “Qwikster,” keeping streaming rentals under the name, “Netflix.”  Stock soars almost 4% overnight!

As Netflix announced (rather unceremoniously) a change in pricing for the DVD-by-mail and instant streaming services, the company had to lower its September-quarter subscriber estimate, as some users quit the service in protest over what amounted to a price hike. Because of that change in estimate, the Netflix shares plunged last Thursday.

“It is clear from the feedback over the past two months that many (Netflix) members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology. I’ll try to explain how this happened.” Says Netflix CEO, Reed Hastings, on the company’s blog.

The move to segment Netflix’s DVD-by-Mail and Instant Streaming services using a micro-branding strategy, shows that Hastings has learned his lesson.  Not that we’re big fans of the new name, but we are fans of the new rebranding initiative.   It just makes more sense to pay a higher price for added services rather than brand it the same service at two different tiers where once there was only one.  The market would tend to agree–up 4% as of yesterday.

In the near future, Netflix will add video game rentals to Qwikster, something users have been asking for and that Blockbuster already offers.

We believe the future for Netflix and the new micro-brand, Qwikster, is bright–as long as Netflix and Hastings remember this rather expensive branding faux pas.