Netflix Spins Off DVD Rental Service Focuses on Streaming

In an email to members, Netflix Co-Founder and CEO Reed Hastings announced it is dropping the DVD by mail rental service and moving it to a new service called "Qwikster", while maintaining the streaming service under the Netflix brand.

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.

After 10 years of mailing DVD's it's a sad announcement yet expected since the company is called "Netflix".  I imagine their intention from the very beginning was to offer streaming, but the technology wasn't ready up until 4 or 5 years ago.  Unfortunately, it's a little too early to make such a drastic change.  The streaming video library is nowhere near as complete as the DVD library.  Many will be upset (if not angry) at the news.

The decision does seem rushed and is clearly a reaction to the 1 million subscribers recently lost.  It was about 2 months ago that Netflix announced a significant price increase and members expressed their negative feedback with both their voice and wallets.  It also looks like the CEO didn't spend much time in coming up with a new name for this service.  The name Qwikster sounds like someone just coughed it up out of nowhere. It's the "Quick" and "Sinister" death of Netflix. 

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the website is up and ready.

The CEO goes on to say their will be no more price increases; an empty promise in my opinion.  Although the CEO doesn't clearly state it; it's more than inevitable that Netflix and Qwikster will be two separate companies sometime in the future. 

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

Netflix has made a fatal mistake.  Members will now see two charges on their bills and psychologically see an additional expense.   This will only result in more cancellations on the Netflix side.  Many members have complained that the streaming service was a great perk for the DVD rentals but not worth subscribing to it as a standalone product.

It's an ill fated move that will end badly for Netflix.  The Qwikster brand will be the major revenue generator and the Netflix brand will disappear into obscurity.  Netflix had a great run, but all great things must come to an end.

By editor on 19 September 2011 |