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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 9:23:56 AM , Rating: 0
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.

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. If you deemed Netflix not worth it, good for you, but $14.99/month, for unlimited Bluray/DVD is still the best deal for me, & I easily go through 6 movies a week, so although, I, like, many of you are upset about what Netflix is doing, I think I understand costs go up, & every company passes along their price increases to the consumer, so when some get on their soap box talking free market this, free market that, which sounds like a Republican, or Tea Party soundbite, I can't help but want to chuckle.

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
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.

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