Reed Hastings, CEO of Netflix, sent me a nice apology letter this morning. Here’s some of it:

I messed up. I owe you an explanation. It is clear from the feedback over the past two months that many 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. Let me explain what we are doing.

Hastings goes on to say that Netflix jumped into streaming because he didn’t want them to lose out on the next big thing (and he makes comparisons to AOL and Borders, two companies who did not “become great at new things people want” as Hastings put it.)

The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

Now get ready for the LOLs:

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming. Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

So who are the “ad wizards” who came up with this one? As my friend O’dette commented, a whole team of marketers worked overtime for weeks to come up with the name “Qwikster”, which, quite frankly, does not make me think of “quick delivery.” No, Qwikster makes me think of doomed services like Friendster and Napster. I’m also having visions of brands like Edsel and New Coke.

And may I suggest that Hastings get a hold of one Jason Castillo, who already maintains a twitter account under the name Qwikster. Here is a sample of Jason’s tweets:

I recommend influencing Jason to give up his Twitter name by placating him with free video games from the new games rental division that “Qwikster” will be adding their lineup. Throw in a couple of blunts, too.

Reed concludes:

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly. Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

That’s right, Hastings, you better grovel. Netflix’s stock only declined over 25% last week. That’s over $2.8 billion that just went poof.

I must ask, though, why you think that making it more difficult for customers by first raising prices through the roof and then making them maintain two separate queues on two different websites will entice customers to stick around.

My guess is that Hastings sees the DVD rental business as a dead end. I wouldn’t make that assumption, myself, not with companies like Starz refusing to give up its content so easily. There may be less DVD subscribers now, but with more entertainment companies waking up to the fact that streaming can be hugely profitable for them, and the rumors that broadband providers may throttle bandwidth, the future costs of Netflix streaming may outweigh the benefits. Then – in a bitter irony – we’ll all find ourselves back at Blockbuster again.

- Bill

Update! October 10, 2011

Well it seems that the extremely negative reaction (and stock drop to about 117 on my last look) has caused Netflix to rethink its Qwikster idea. This morning I received this:

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs. This means no change: one website, one account, one password…in other words, no Qwikster. While the July price change was necessary, we are now done with price changes.

We’re constantly improving our streaming selection. We’ve recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros., Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we’ve added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.

It seems Qwikster is dead. Sorry, Jason Castillo! No payday for you, but hey, you don’t need any lifestyle changes. Back to the bluntz.