Netflix kills Qwikster DVD rental plans, says it’s “done with price changes”

Netflix‘s controversial plan to split off its DVD rental business as a new venture called Qwikster is no more.

“It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs,” Netflix CEO Reed Hastings wrote in a blog post this morning. Hastings went on to call Netflix’s recent pricing changes “necessary,” but added that “we are now done with price changes.”

The move is as much as a surprise as Netflix’s original announcement of Qwikster last month. It’s a sign that Netflix is taking consumer criticism seriously enough to dramatically shift its plans. I argued that Netflix’s handling of the Qwikster announcement was yet another example of how it doesn’t know how to talk consumers. Today’s post, which is short and to the point, is a big improvement.

“We underestimated the appeal of the single web site and a single service,” said Netflix spokesman Steve Swasey in an interview with the New York Times. “We greatly underestimated it.”

Qwikster wasn’t an entirely terrible idea. It makes sense for Netflix to split off its DVD rental business from its streaming offering at some point. The disc-by-mail business won’t be sustainable for much longer, and Netflix is better off focusing its energy on its more promising streaming video plans. But the Qwikster announcement came too soon after Netflix’s contentious pricing changes, and to subscribers, it appeared as if Qwikster had too few benefits to justify the added confusion of managing queues and subscriptions on two separate sites.

The biggest issue with Qwikster was that it split up Netflix’s DVD rental and streaming queues, which users had grown accustomed to being integrated. That integration had many benefits: for example, adding a movie to your DVD queue automatically added it to your instant queue. And having the queues integrated meant you could rate and review something in one spot — with Qwikster you would have had to write two separate reviews.

By saying Netflix is completely done with pricing changes, though, Hastings may have dug another hole for himself, since it leaves little room for the company to increase prices in the future. But given how long it took Netflix to dramatically increase its prices, today’s statement likely won’t come back to haunt the company for some time.