A Desperate Netflix Will Split Into Two Businesses

After losing an astounding 40-50% share value in two months over a botched and wildly-publicized price increase between DVD delivery and live streaming, Netflix just announced plans to split the company into two entities: Netflix (for streaming) and Qwikster (for DVD by mail). In a lengthy post, titled "An Explanation and Some Reflections," on the company's site, co-founder and CEO Reed Hastings explained:

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”.
We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies.

What does this mean for you? If you use both services, you will need to change your credit card or email address. And if you rate or review a movie on Qwikster, it will not show up on Netflix, and vice-versa. It also makes you might have to search twice if you're looking for a film on either site.

What's more, that the red envelope, which "has always been a source of joy" for Hastings, will remain red but will instead have a Qwikster logo on it.

Hastings went on to say:

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Contact the author of this article or email tips@sfist.com with further questions, comments or tips.

By Brock Keeling in News on September 18, 2011 9:54 PM

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Comments [rss]

Keith Ackerson

did some quick comparison shopping, I can't believe Blockbuster hasn't used this fiasco to finally one up Netflix. They must be hiring the MBA's that didn't make the cut at Netflix

MalcoveMagnesia

Blockbuster has just announced a split of their business. Company # 1 continues to be movie rentals. Company # 2 will be selling those tubs of popcorn by the checkout.

http://www.youtube.com/watch?v...

beartrash

As a former Netflix employee, it's great to see them flailing about try to fix their self inflicted bad PR.

I remember Reed gloating about Blockbuster's eminent demise during the Netflix employee all hands meetings. It's nice to see them get some well deserved comeuppance to counterbalance their over abundant hubris.

But they'll survive and thrive; They have a huge war chest of cash and they'll weather this transition, but they're scrambling to appease their stock holders whom they care about more than their customers or employees.

MrEricSir

I'm not sure I buy that it's just "bad PR." They really went out of their way to treat their customers like idiots, framing a price increase as a positive rather than a negative. Did they think we wouldn't notice?

Then if that wasn't bad enough, the CEO sends out this letter saying admitting they made a mistake -- but instead of apologizing for talking down to us, he describes the whole thing as a case of customer confusion.

It's like saying "I'm sorry you feel that way." A fake apology is offensive.

DeanCutlet

They should have named it Quitster. Netflix lost my business.

MrEricSir

The Oatmeal explains this in a way that makes sense:
http://theoatmeal.com/comics/n...

Keith

I've been a client of theirs since 1999, back
when they mailed them out in Jewel cases and rented really bad softcore so the
initial price hike didn't bother me to much; going from $15 to $20 a month with
the sales pitch that it was to compensate for the streaming access made some
sense though they should have hiked the price over a period of time but in
reality, I paid that much in late fees each time I returned a VHS to either
Blockbuster or Hollywood video back in the day.

What annoys me is the corporate BS of resolving the issue by
not resolving it. How is dividing up the company and creating a new name going
to resolve anything when all that's happening is new website independent of the old which now creates confusion and a bad experience for the user? This sounds like something designed by an MBA trying to
keep the stock holders happy after they just shat a brick with a sudden dive in
revenue.

I don't think this will be what puts a bullet in netflix mostly because the competitors are still far behind them in what is offered but I do think they've let the desire
to please the shareholders overwhelm their ability to make a smart decision.

fizzandpop

I bet that made sense in the PowerPoint.

Heather Cummings

Their recent site redesign sucked bad enough, but there is no way I am using two sites for this service. I guess it's time to get cable.

wsanders

Good luck, you are going to pay FAR more for anything decent on cable.

Basically Netflix is screwed; their licensing costs are
going up by 10X in the next year because the it's just as easy for the
studios to stream content themselves instead of through a third party. If you think Netflix's
increases are outrageous, wait two years when you'll only be able to
stream Sony movies from Sony, Fox from Fox etc. Welcome to the cloud.

njudah

While I hate to contribute to the endless chatter about this non-event, I will say this: Netflix's DVD inventory has been declining for some time now. Many of the DVDs are scratched, and many more DVDs that used to be available are no longer around, and Netflix isn't replacing them, either via Streaming, or via DVD.

The streaming service is lovely if it has something you want - too often, though it has a lot of crappy movies and knockoffs, and the good things don't stay on. So neither service alone works well, and splitting them ensures I'll cancel both after 10 years of membership.

hhumbert

"Market-share hubris can be a bitch."
--Some famous economist.

Fukui_San

Qwikster will have video games as well, so thats something.

mrf

Problem is those games come with an unspecified monthly fee.

MalcoveMagnesia

There will be two different sites and two line items on your credit card (one for Netflix, one for Qwikstop -- both totalling up to the same "new" price as before; and yes, they're not backing down on that).

But what I'm guessing (and I don't think it's been made explicit yet) is that they're going to split out the queues into those *two* different websites.

So they're going to double the work that customers have to do in order to get movies. They're setting up yet another big business blunder right in front of us.

Sean H

Yeah I didn't really mind the price increase because I have always thought it was extremely affordable to begin with, but this change looks to be a bit more dubious and cumbersome.

teewordy

also easier to cancel one or both of the subscriptions if you have to log in to update all your shit anyway. major blunder.

Elizabeth Rehme

idiots! they had a good thing going and totally blew it. Whoever proposed the price hike should be fired.

Tendernob

Without the price hike, they would have gone bankrupt.

tylerw

I'll stick to Pirate Bay.

MrEricSir

I don't see this company being around much longer.

Matty J.

Which one?

If they truly are splitting off into two independent companies, I don't see how Netflix can bring in enough revenue to pay to license their streams. They're still behind the times on selection. The DVD-by-mail business was propping up the streaming business.

I realize that streaming was always their intention (what sense does the name Netflix make for a DVD-by-mail company?) but I think they pulled the trigger on this way too soon.

MrEricSir

It's still only one company, afaik. They now just have two different "brands." I just meant that with such crappy management, they won't survive long.

Also I've been exploring Amazon's streaming video selection, and it looks *much* better than what Netflix ever offered. It's an a la carte plan rather than unlimited, but the selection is amazing.