Netflix CEO Reed Hastings announced tonight that the company will be splitting its business in two, with its DVD-by-mail service getting a name change to Qwikster, while Netflix will focus on streaming video.
Yes, the company that has become synonymous with DVD rentals by mail will no longer associate its core brand with disc rentals. But as a consolation, Qwikster will include video game disc rentals for the Xbox 360, PlayStation 3, and Wii, something that Netflix users have long been begging for. Qwikster will also continue to use the company’s traditional bright red mailing envelopes.
Hastings stresses that Qwikster, whose CEO will be former Netflix executive Andy Rendich, will be the exact same Netflix disc rental service consumers are used to. However, Qwikster’s site won’t be integrated with Netflix at all, meaning you’ll have two subscriptions to manage, and you’ll have to review movies separately on both sites.
Hastings wanted to be extra communicative about the Qwikster name change, since he felt he didn’t adequately explain Netflix’s most recent price hike, which separated fees for streaming and disc rentals, to consumers. He wrote:
In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, “Actions speak louder than words,” and we should just keep improving our service.
But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.
Hastings argues the company will be able to focus better on its DVD and streaming offerings by having two separate teams working on each service. “[W]e 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,” he wrote.
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