Qwikster fiasco proves Netflix still doesn’t know how to talk to customers

Poor Netflix just can’t catch a break. The company already caught hell from subscribers over its recent pricing changes, and last night it announced that it’s spinning off its DVD rental business entirely under the name Qwikster.

The response from consumers — judging from over 11,000 comments on CEO Reed Hastings’ blog post — has been overwhelmingly negative. While there are some interesting elements to Netflix’s latest plan, the company botched any chance of making its customers sympathetic to Qwikster by failing to communicate why the offshoot business was necessary in the first place. That gaff, coupled with the announcement’s close proximity to Netflix’s recent pricing change, was a recipe for disaster.

Ironically, Hastings spent a good chunk of his blog post last night apologizing for his poor communication about Netflix’s price hike. “In hindsight, I slid into arrogance based upon past success,” he wrote. “We have done very well for a long time by steadily improving our service, without doing much CEO communication.”

Hastings likely thought he was being gracious to his customers by explaining the company’s decision to form Qwikster: Basically, he felt that both the DVD rental and streaming video service would be better off being run by separate teams. But while he did a decent enough job of laying out the company’s logic behind the move, most subscribers don’t give a damn about the company’s long-term vision.

Instead, subscribers see that Qwikster will inevitably make their lives harder. Now they have to manage completely separate queues and billing information. They will also have to review movies multiple times, since Qwikster and Netflix’s websites won’t be integrated. From a consumer perspective, there’s practically nothing (aside from the useful addition of video games) to get excited about with Qwikster.

To make things worse, Hastings and new Qwikster CEO Andy Rendich filmed a cheap and poorly produced video explaining the decision to subscribers. The video seemed ill-fitting for such a massive announcement, and did little to drum up excitement for Qwikster.

Netflix would have been better off delaying the Qwikster news until it had more compelling advantages to splitting up its services, which also would have given it some much-needed distance from its pricing changes. Even better, Netflix could have delayed its price hike entirely until it had a more compelling reason to split its two services.

In time, we’ll probably see more innovation coming out of Qwikster that will ultimately benefit consumers. The addition of video games is just the start — Netflix could conceivably make a play for rival disc kiosk service Redbox. Down the line, having Qwixter as a separate company will also serve Netflix well when it’s time to sell off its DVD rental business.