Netflix to Separate Streaming and DVD Services. DVDs by mail will come from “Qwikster.”
Netflix is in the news, once again, for a controversial corporate decision: one of several recently. In July, Netflix angered many subscribers by increasing the cost of their subscription service for people who received DVDs in the mail versus streaming. A few weeks ago they were unable to come to an agreement with Starz; so the streaming of Disney and Sony movies will end in February. This week, they announced that they were separating the “DVD by mail” service from their streaming service. So, if you want a streaming subscription, you’ll subscribe to “Netflix,” and if you want DVDs in the mail, you’ll soon subscribe to “Qwikster.”
The announcement was made Sunday by Steve Hastings on the Netflix blog; and the complaints started almost immediately after he posted. Fans are now going to have to subscribe to two services instead of one if they want streaming and DVDs. Streaming is where the business is headed, but it only has about 20% of the selection that the DVD service has. Also, there is a new “hassle factor” subscribers are going to have to deal with since they’ll have to update their information on both sites. So, personal account information, credit card numbers, movie queues for streaming & mail; these will all need to be maintained in two locations instead of one.
So, why is Netflix doing this? People who know Steve Hastings say he’s a very far sighted thinker – and this appears to be obviously true. Case and point: he launched Netflix on September 23, 1999 (they’ll celebrate their 11-year anniversary this week,) and even then, he knew the technology would change. In January 2009, he told Fortune magazine he named the firm “Netflix,” not “DVDs by Mail” when they founded it because they knew movies would eventually be delivered over the internet. When he would talk about the future of his business, he would say that he sees the days when DVDs become obsolete, and he’s going to have to adjust his business model to survive.
Well, that day of adjustment is here. Splitting the two delivery methods into two different companies does several things. First of all, it allows him to continue building the Netflix brand as emphasis is put on streaming movies versus providing DVDs. The split also allows two different management groups to concentrate on the unique issues for each of their respective companies. Netflix will need to constantly find and maintain content it can stream, while “Qwikster” owns the DVDs it mails out, so it can pretty much do what it wants with them.Continued on the next page