Mr. [Reed] Hastings said he realized that the company’s attempt to both raise prices and separate into two companies, one the legacy DVD-by-mail business and the other the up-and-coming broadband streaming business, was trying to do too much too fast. Angry subscribers abandoned the company in droves (800,000 in the fourth quarter of 2011 alone), revenue missed estimates and the stock plunged.
“I messed up,” Mr. Hastings wrote in an unusually forthright September 2011 blog post. Citing the precedents of AOL and Borders Books, which struggled or failed to make the digital transition, “my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming.” But in the rush to accelerate the transition, he wrote, “In hindsight, I slid into arrogance based upon past success.” He also made a video apology.
Mr. Hastings said he didn’t expect the apology alone to “turn it around,” adding, “I wasn’t naÃ¯ve enough to think most customers care if the C.E.O. apologizes, but I thought it was honest and appropriate.”