Tuesday, September 20, 2011 at 3:37 pm.

Here’s where Netflix screwed up this whole Qwikster thing

Reed HastingsThe future of Netflix’s business is streaming video — not mailing plastic discs to your home. So the business motivation behind Netflix’s move to split its DVD rental business off as Qwikster is clear. If it allows Netflix to focus on the future, this decision could pay off big, and people will someday laugh and joke about this weird transition.

But Netflix did screw up in two key areas:

  • It communicated change poorly, again. It’s too bad, because the whole point was that Netflix CEO Reed Hastings — an up-front and honest guy — was apologizing for goofing up the communication around Netflix’s price increase. But then he went and made another big change in an awkward way, and now people are acting confused and upset again. Part of the problem was the way the message was delivered and framed. Instead of a late Sunday night blog post and YouTube video, how about a fancy launch event where the focus was on celebrating Qwikster’s new videogame rentals, and not the confessional about worrying about becoming the next AOL or Borders? Save that for the earnings call, when consumers aren’t paying attention.
  • It made customers feel like they weren’t Netflix’s priority, which is unusual for Netflix. People are used to hating their cable company and loving Netflix — its fanatic customer base has long been one of its strongest assets. After all, this is the company that emails you in the morning and asks you if you want an account credit for an outage — that happened while you were sleeping, that you didn’t even notice. This is not, usually, the company that does wacky, unexpected things that make your life more expensive and annoying. Now, I think Netflix customers will quickly get over these changes, especially as viewing shifts over even more to streaming. But they will still have a funny memory about this.

How to make this a non-issue? Create the best streaming subscription service ever, make it a great value, and people will continue to love Netflix.

And please, next time you have a big change to announce, think a little more about how it’s best to convey it. I still think Netflix is one of the great companies of this generation. But it needs to think a little more about its messaging.

Bonus: Check out my appearance on G4TV’s “Attack of the Show” last night, where we talked about this and more.

Related: 10 things to remember about Netflix while scratching your head about Qwikster