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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: Qwikster?
By VoodooChicken on 9/19/2011 12:47:59 PM , Rating: 3
Calling anything -"ster" does not project a positive image (shyster, huckster, trickster, napster...). Personally, I would have called it Mailflix (unless that's already taken) so that it's obvious which company offers which service.

RE: Qwikster?
By Netscorer on 9/19/2011 3:03:40 PM , Rating: 3
Netflix is clearly preparing Qwikster as an independent separate entity that would be easy to spin off and then sell to the third party. This is why name can not remind of Netflix and movie queues would be completely separated. My guess, Netflix would try to move itself out of mail business within the next 12-18 months, while it still can. Because with the way the internet streaming is going, the traditional distribution models for entertainment (TV, mail) are quickly becoming obsolete.

RE: Qwikster?
By priusone on 9/19/2011 5:16:03 PM , Rating: 2
Sure, traditional distribution models are changing, but with bandwidth caps and HD media both becoming more prevalent, it will be interesting to see what happens.

RE: Qwikster?
By Hieyeck on 9/21/2011 8:22:40 AM , Rating: 2
Bandwidth caps? What 3rd world country do you live in?

RE: Qwikster?
By idiot77 on 9/20/2011 1:07:37 AM , Rating: 2
1. quickster
Being able to get girls in the sack quick.
Did you see that quickster in action? It only took him 5 minutes to get that girl to his bedroom.


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