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Netflix splits DVD, streaming services into separate companies


By Sean O’Connell
Hollywoodnews.com: Netflix announced that it is dividing its business model in half, renaming its DVD rental component Qwikster and expanding that side to potentially include video game rentals.

The news was announced by Netflix CEO Reed Hastings, who apologized to customers in an honest and open blog post, stating, “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.”

More from Hastings’ informative post:

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service.

So we realized 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 few weeks, we will rename our DVD by mail service to “Qwikster.”

As Hastings revealed, there will be no further increases to pricing, which should please subscribers. How about investors, though? The Washington Post says the company’s stock “was down slightly in pre-market trading.”

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