Joseph O'Halloran ©RapidTVNews | 19-09-2011

In an extraordinary me culpa, Netflix CEO Reed Hastings has admitted to the fact that “he messed up” for actions in which he “slid into arrogance based upon past success” but will lead to the over the top (OTT) provider losing a million customers.

The move comes after Hastings and CFO David Wells revealed that contrary to the guidance issued on 25 July, Netflix was lowering its expected Q3 2011 domestic subscriber estimates to see a loss of a million subs. At the heart of the fall is the OTT firm’s decision two months ago to separate streaming video and DVD-by-mail services and to raise basic tariffs.

Admitting that that he owes “everyone an explanation”, Hastings conceded that the company’s actions “lacked respect and humility” in the way it announced the separation of DVD and online video, and the price changes. Even though he apologised to members who may have felt that they had been treated them thoughtlessly, Hastings was unremitting in his defence of the price rises themselves.

“When Netflix is evolving rapidly, however, I need to be extra-communicative,” he said, “This is the key thing I got wrong.”

Attempting to explain how the rise came about, Hastings revealed that his greatest fear was that Netflix would not be able to “make the leap from success in DVDs to success in streaming.” Yet he added he should have done more to justify the hikes.

“I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both,” he said. “It wouldn’t have changed the price increase, but it would have been the right thing to do.”

“We realised that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best.”

In a further development, the company is to rename the DVD by mail service to Qwikster while keeping the Netflix brand for streaming, a move that Hastings is adamant will make the business better at streaming.