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Netflix splits its streaming, DVD businesses; Qwikster to add video game rentals

It's been a rough few months for Netflix. The company saw massive backlash when it decided to raise the prices of streaming + DVD plans. Netflix was once again in the hot seat when Starz decided not to renew its distribution deal, which means that streaming customers will lose out on Disney and Sony content when the current deal expires in February 2012.

Netflix knows that it has a PR nightmare on its hands, and CEO Reed Hasting apologized for the debacle in a blog post Sunday night:

I messed up. I owe everyone an explanation.

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...

I want to acknowledge and thank our many members that stuck with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly. 

Now, Netflix is making yet another change that is sure to ruffle a few feathers. Hastings announced this that Netflix will spin-off its DVD-only business into a new company called Qwikster

"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," said Hastings. "We chose the name Qwikster because it refers to quick delivery."

Qwikster will be headed by current Netflix DVD guru Andy Rendich.

The streaming service will still be called Netflix and both will be completely independent. That means that you will need a separate account for each, you will be billed separately for each, and reviews written for one Netflix content will not show up on Qwikster (and vice-versa). Likewise, Netflix pricing will remain the same at $7.99 for its streaming-only plan. Qwikster will retain the current DVD-only pricing of $8.99 for a single DVD out at a time, $11.99 for two DVDs and so forth.

This change will allow both companies to focus on their strengths, but it makes management on the customer's end even more complex. 

"Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our DVD by mail service," Hastings added. "Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail."

If there is one positive to come out of the deal, Qwikster will now have the option to rent Wii, PS3, and Xbox 360 games for an additional fee (similar to the way Blu-ray movies are handled currently).



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RE: This just makes me all the more certain...
By FITCamaro on 9/19/2011 8:32:34 AM , Rating: -1
You morons amuse me.

You constantly clamor for more content while completely ignoring the fact that that content costs money. Lots of money.


RE: This just makes me all the more certain...
By Da W on 9/19/2011 8:46:46 AM , Rating: 2
Yeah, short of piracy, Netflix is the cheapest way to watch movies.

From a company perspective, it makes perfect sence since the streaming aspect has MUCH HIGHER margin than the DVD by mail aspect. They want to get rid of it and keep the high profit part. Buisness is buisness. And, i'm still waiting for somebody ot offer a better alternative.


RE: This just makes me all the more certain...
By mcnabney on 9/19/2011 1:07:56 PM , Rating: 2
So which is it.
Has the expense of streaming increased so much that rates had to rise 60%? or are margins higher with streaming? One of those statements is false.


RE: This just makes me all the more certain...
By Labotomizer on 9/20/2011 10:56:31 AM , Rating: 2
It doesn't change the fact that, for the money, Netflix is by far the best deal out there. I didn't use the DVD service anyway, I'd rather go to Redbox and pick up a Bluray if the movie isn't there to stream. For $8/month I get unlimited streaming of every movie in their library. That is an insanely good deal considering the alternatives. I could pay $5/movie and get 1.5 movies through On-Demand. I could pay $1/movie and see 8 movies total through Redbox, as long as I actually got it back the next day (which rarely happens). Every service besides Netflix wants to charge on a per movie basis. Considering the use I get around my house from it, especially for my daughter who just discovered Ren and Stimpy, it is easily the best $8/month I spend. That's the price of a combo and most fast food places these days!

I don't understand the backlash. Netflix has gotten big and the content providers are trying to squeeze more money out of them. Starz wanted them to charge on a per movie basis, or additional money just for their service, and they refused. They offered them $300 million/year. Where do you think that money comes from. DVD delivery is more expensive for the delivery of the movie, cheaper for the licensing. Content providers are still incredibly anal about the idea of streaming a movie over the internet and because of that Netflix pays more per movie to offer it to the providers. Sure, delivery costs go down, but overall it's likely break even. Especially for high volume users like myself.


By thurston2 on 9/20/2011 11:23:18 PM , Rating: 2
quote:
For $8/month I get unlimited streaming of every movie in their library.


You can't stream every movie in their library.


RE: This just makes me all the more certain...
By room200 on 9/19/2011 9:08:56 AM , Rating: 1
You're the moron that pisses me off the more than anyone here. You always talk about "free market this", "free market that". Isn't one of the principles of the free market to offer a product at a price people are willing to pay? I'm not willing to pay, so I cancelled my account. I really don't give a shit how much their "content" costs are. That's between them, their providers, and their shareholers. Netflux isn't concerned about not making money; they're concerned about making HUGE money and want to pass it on to the consumer. When they start to care about what it costs for me to take care of my family, I'll start to care about the cost of their content. I'll speak on behalf of all of us who decided Netflix wasn't worth it when we cancelled; FITCamaro, you can bite me.


RE: This just makes me all the more certain...
By paydirt on 9/19/2011 9:13:21 AM , Rating: 2
Seriously? You're complaining about something that costs $8/month?


RE: This just makes me all the more certain...
By room200 on 9/19/11, Rating: -1
By Mortando on 9/19/2011 12:42:28 PM , Rating: 5
quote:
Who's complaining? I didn't complain one bit. I made a decision.

Lol, you must have learned that technique from my ex.


RE: This just makes me all the more certain...
By Reclaimer77 on 9/19/11, Rating: 0
RE: This just makes me all the more certain...
By room200 on 9/19/2011 10:39:32 AM , Rating: 4
Yes, seriously. You guys act as if we owe these companies our business. We don't. I haven't looked back since I cancelled, haven't missed them, and I haven't complained about their price increases. I'm replying to FITCamaro. Why do you find it so difficult to believe that other people don't find the same value in a product that you find?


By thurston2 on 9/20/2011 11:29:06 PM , Rating: 2
They are corporate whores.


RE: This just makes me all the more certain...
By Hiawa23 on 9/19/11, Rating: 0
RE: This just makes me all the more certain...
By room200 on 9/19/2011 10:53:10 AM , Rating: 4
hate to break it to you, but most company's that you buy product from cares not what it cost you take care of your family.

Actually, that was my point. I was throwing that talking point back in the faces of those who always preach that crap here. But if you notice, many posters here keep talking about what the content cost Netflix; my point is that THAT isn't my concern. I know that Verizon, AT&T, T-Mobile, and Sprint all have costs to run their businesses, but that doesn't concern me. My point is how much is each going to charge for a service that I want?

Can I afford the price increase of Netflix? Yes. Is it worth it to me? No. I didn't use the service that much anyway. Is it worth it to others? Yes. Then they should keep the service. I'm not advocating that anyone should cancel Netflix based on MY personal choice.


By sigmatau on 9/19/2011 11:31:02 AM , Rating: 2
quote:
Netflux isn't concerned about not making money; they're concerned about making HUGE money and want to pass it on to the consumer.


Um, ya... right. You must be from bizzaro world. Netflix actualy did the opposite of what most companies would have done. They only passed a portion of the cost to the consumer. Remember, their content costs when up 10x but only increased prices by 2x if that. That doesn't sound like they are trying to rob your pockets while having their foot on your neck holding you down.

I don't care for big businesses, but the only thing Netflix has done wrong is not convey the situation correctly to their customers.


By StanO360 on 9/19/2011 11:19:01 AM , Rating: 2
You may have made the rational choice for yourself, I don't begrudge you that at all. But "greedy" implies they're ripping people off, they clearly are not. My guess is that they have been losing money to dominate the market and now are trying to make money.

In most businesses "greed" is not an option, competing is the only option. Netflix made movies a commodity and it will forever be a thin margin business (great for consumers bad for Netflix/Blockbuster/Amazon etc. I realize you made a free market choice (and a good one for your family), I may make it too. But that's no reason to smear Netflix.


RE: This just makes me all the more certain...
By FITCamaro on 9/19/11, Rating: 0
By ClownPuncher on 9/19/2011 11:30:44 AM , Rating: 2
Is there any guarantee they will increase content with the price hikes?


RE: This just makes me all the more certain...
By sigmatau on 9/19/2011 11:35:57 AM , Rating: 2
It's not just that they are trying to purchase more content, but they are also trying to stay afloat.

Their current content will cost them 10x as much next year. How can a company not raise prices when their costs went up so quickly?

I also believe that those content providers are fighting tooth and nail to extort as much as they can from Netflix. Just look at Starz. Netflix offered them almost a half a billion dollars and they still walked. I don't understand exactly how Starz will make up for this loss but they wanted more money.


RE: This just makes me all the more certain...
By mcnabney on 9/19/2011 1:13:21 PM , Rating: 2
Nobody knows what their costs are.

Their licensing costs might have gone up from $0.05 per month to $0.50 per month. That is only one component of their costs of doing business. Verizon paid $10B for more spectrum three years ago and they actually DROPPED their prices shortly after.


By sigmatau on 9/19/2011 3:37:17 PM , Rating: 2
Your example is possible. I will say, though, that having "Verizon" and "dropped their prices" in the same sentence sounds so otherworldly to me since they are by far the most expensive wireless provider by a long shot.


RE: This just makes me all the more certain...
By sigmatau on 9/19/2011 11:24:37 AM , Rating: 1
Are you really that stupid? The cost to Netflix from the content providers has increased by 10 times. Yes, that is a 1000% increase in their cost. Are you really complaining about a 100% increase?

Exactly how is a company gonna offer you the same $1 burger when the hamburger costs 10x as much as it did last year?


RE: This just makes me all the more certain...
By room200 on 9/19/2011 9:01:21 PM , Rating: 2
They may not be able to. So, I'll stop eating their burgers until another burger joint comes along who can offer me what I want for a price that I'm willing to pay. Free market, right?


By sigmatau on 9/19/2011 10:49:50 PM , Rating: 2
Free market? LOL! You really believe that? So tell me, when 5 people control the hamburger market and won't allow anyone to buy hamberger any lower, how long will you wait? Infinity is a long time buddy.

You really think the content providers will reduce their prices? Starz walked away from hundred's of millions of fees. They wanted way more. There is no such thing as a free market except in books.


By thurston2 on 9/20/2011 11:27:37 PM , Rating: 2
quote:
FITCamaro, you can bite me.


I'm sure he would if there was a big brown log hanging out of your ass.


RE: This just makes me all the more certain...
By Dr of crap on 9/19/2011 9:55:27 AM , Rating: 3
While I understand your statement, their streaming content is crap.
Unless they increase what is available or change/put them on some kind of a rotation schedule, Netflix streaming customers will continue to jump ship.
I've been thinking of quiting streaming just for that reason.


RE: This just makes me all the more certain...
By Hiawa23 on 9/19/2011 10:01:40 AM , Rating: 2
While I understand your statement, their streaming content is crap.
Unless they increase what is available or change/put them on some kind of a rotation schedule, Netflix streaming customers will continue to jump ship.
I've been thinking of quiting streaming just for that reason.


They should jump ship, the selection is terrible for streamin if you look at new movies & shows like me, so we agree. Like I said I canceled the streamin service, for the very reason, & if they are splitting the business to show that physical media is the dinosaur, then like I said open up streamin with all the movies that we can get from the physical media side, & do away with the 30day rule on some new releases. $14.99 is still the best value for me, but Netflix is heading down the Blockbuster road.


By CityZen on 9/19/2011 1:07:24 PM , Rating: 2
I bet Blockbuster is smiling in its grave :)


By jjmcubed on 9/19/2011 11:59:51 AM , Rating: 2
Your personal attracts really do take away from your arguments. These types of personal attacks that aren't delt with, really do diminish the credibility of Dailytech in general.


By room200 on 9/19/2011 9:04:17 PM , Rating: 1
How is their content cost ANY of our business? If they can't provide the content we want, then if they lose enough customers, they'll either lower their prices, or they'll collapse, right? Soon enough, another company will come along and take their place. Free market, right?


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