Netflix CEO: I messed up

Netflix

Netflix's chief executive officer apologized to subscribers for "arrogance based upon past success" in a remarkably frank mea culpa he posted on the Internet late Sunday while announcing plans to separate the company's DVD and video streaming services.

"I messed up," Reed Hastings, the company's co-founder and CEO wrote in a blog post.."I owe everyone an explanation."

A couple of months ago, Netflix split its streaming and DVD-by-mail services, raising prices by as much as 60 percent. The customer backlash was immediate and Netflix now says that it expects a total of 24 million subscribers in the third quarter, down from the 25 million it forecast in July.

Netflix's stock price has fallen more than 40 percent below where it stood before the company unveiled the higher prices. The cost to shareholders so far: more than $6 billion in paper losses.

"In hindsight, I slid into arrogance based upon past success," wrote Hastings, who went on to criticize the way the pricing change got communicated to subscribers.

"We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, "Actions speak louder than words," and we should just keep improving our service," he said.

"But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both," he continued. "It wouldn't have changed the price increase, but it would have been the right thing to do."

The DVD-by-mail service will now be called Qwikster. The company said that its streaming service will continue to be offered under the Netflix brand. While customers can still subscribe to both, the sites will no longer be integrated. The websites will have separate billing and ratings systems. Hastings elaborated on the changes in the accompanying YouTube video.


  • Charles Cooper On Twitter»

    Charles Cooper is an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet. E-mail Charlie.

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