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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 Hiawa23 on 9/19/2011 9:05:21 AM , Rating: 0
If the margins are lower for physical media, then open streamin up so we can rent new releases in HD on day 1, & just kill the whole in the mail service. I would rather be able to watch all my movies, new releases & other by just turning on my t, or Xbox or Playstation, than having to wait a day for them to come in the mail. Why won't they do that if it's cheaper to stream than mail?

By paydirt on 9/19/2011 9:14:48 AM , Rating: 2
In order for them to license for streaming the good stuff, it would cost a lot more per month.

RE: This just makes me all the more certain...
By quiksilvr on 9/19/2011 9:21:55 AM , Rating: 2
Good lord man. The first point I made was the insatiably high streaming costs. I even fully capitalized the word "billion". Do you need a frigging picture? It's expensive to stream!

Here's a visual representation of how expensive it is:

By Ringold on 9/19/2011 10:08:17 AM , Rating: 5
Exactly, and you dont mean bandwidth either. And the movie industry seems to view streaming over the internet as a mortal threat to their very existence, so that Netflix has been able to get what they have out of them impresses me. Business equivalent of negotiating nuclear disarmament practically.

What people should really rail against is the content creators and providers that, like the music industry, is having a hard time figuring out how to adapt to change. Attacking Netflix is shooting the messenger.

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