“I messed up. I owe everyone an explanation.”

This is the first line Netflix CEO Reed Hastings wrote on his blog post Sunday night to address the growing concern of Netflix subscribers and investors.  After their devastating 2Q report last week, it sure felt like Netflix owe everyone an explanation.

Since their service price hike, Netflix was plagued with complaints and Hastings realized that he wasn’t transparent enough with the company goal: that’s why they suffered such a massive loss.  He knew it was about time he explained to everyone what was happening so they could understand where Netflix is coming from.

Hastings explained that they will be separating their DVD-by-mail service and renaming it  “Qwikster” which represents the company’s quick delivery service.  Andy Rendich, who has been working on the DVD-by-mail service for the last 12 years and led it for the last 4 years, will be the CEO of Qwikster.  Rendich and Hastings made a short welcome video (below) for users.  Netflix will now be known solely for streaming services.

The reason for the split is that they want to improve both the DVD and streaming services, and running them separately will make the transition a smoother one.  Hastings notes that as consumers and businesses alike adjust to new technology, Netflix’s streaming and DVD businesses have evolved around different cost structures. In addition, they’re adding video game rentals to their DVD-by-mail service, as it has been requested for a few years now.  Subscribers can now rent Wii, PS3 and Xbox 360 games.

Their signature red envelope will stay but will now be sporting the new logo of Qwikster.  Hastings admitted that it will take some time before the new logo grows on him but he believes that he will grow accustomed to it and the same goes for their subscribers.

Though the split may be promising, as both CEOs will be focusing on their own services, the split has a negative side as the two services will have separate websites, Qwikster.com and Netflix.com, which will not be integrated.  Simply put, if you subscribe to both services and you need to change some personal information like your credit card or your mailing address, you’d have to change them in both sites.  Comments on Qwikster will not be reflected in Netflix and vice-versa.  But Hastings assured everyone that Qwikster is just the renamed Netflix DVD service and they just added video games.  Subscribers will not have to do anything special or complicated to enjoy the service.

“It is possible we are moving too fast – it is hard to say. But going forward, Qwikster will continue to run the best DVD by mail service ever, throughout the United States,” Hastings stated.  “Netflix will offer the best streaming service for TV shows and movies, hopefully on a global basis. The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further.”

The Qwikster website is still under construction but Rendich and Hastings will inform everyone when the site is up and ready.

And for those hoping for a miracle that Netflix will go back to their original price, it’s not likely to happen.  According to Hastings, “There are no pricing changes (we’re done with that!).  Members who subscribe to both services will have two entries on their credit card statements, one for Qwikster and one for Netflix. The total will be the same as the current charges.”

Hastings addressed the concern of some with regards to the split and renaming the DVD service.  Though many believe that they shouldn’t split the services, Hastings believe that with the split, they will be better at streaming and also be better in delivering their DVD service.