Netflix creates Qwikster, their new DVD-only brand. Does this make the price hike better?

Photo from from a massive mea culpa sent by email on Monday, Netflix CEO and co-founder Reed Hastings apologized to angry customers and tried to explain the reasons behind the DVD-by-mail company's unpopular price hike in July.

"I messed up," wrote Hastings in the email, which was also posted on the Netflix blog late Sunday night. "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."

He went on to explain Netflix's latest business decision: to completely separate its DVD-by-mail service from its streaming video service. Starting soon, DVDs will be offered only through "Qwikster," which will have its own website, movie catalog, and accounts; customers who currently subscribe to both services will have to log into two different accounts and will see two entries on their credit card bills. (Another price hike is not on the horizon. "The total will be the same as your current charges," he wrote.)

"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," wrote Hastings. "DVD members will go to to access their DVD queues and choose movies" and, after the site officially launches in a few weeks, video games for Wii, PS3, and Xbox 360 as well.

But the move-and the apology-just seems to have made a bad PR situation worse. Shares of Netflix stock plunged to $151.54 by noon Monday (down from a high of $298.73 in July), and of the 14,000 (and rising) comments on their apology post, almost none of them were positive.

"I just got your email, and, as a long-time customer, quite frankly found it to be offensive," wrote David Isaacson of Chicago in a comment. "Your best customers are those like myself that use the DVD AND the streaming services. But those are the very customers that you are alienating."

Daniel Kirksey pointed out: "Blockbuster by mail already HAS video games. And they have the added benefit of having a handful of physical stores left. If I have to manage two queues and two memberships, you've instantly ceded ground to your only competitor."

"I am not willing to have to search two separate websites to see if content is available to me," wrote Beth Tucker Long, Editor-in-Chief at Blue Parabola. "I'm not willing to to pay extra to lose my one-stop-shop for everything related to movies and TV."

"Nice. Dilute the Brand and remove the convenience after already alienating your customer base by a rate increases. Solid choice there," quipped another commenter, Elmo Martin.

Did you keep your Netflix subscription after the price hike in July? How do you feel about having to log in to two separate sites to access movies and streaming video?

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