Qwikster It

Netflix splits into two: CEO apologizes, but is it too late?

Netflix splits into two: CEO apologizes, but is it too late?

News_Netflix_logo_March 2011
Courtesy photo

Reed Hastings, CEO and Co-Founder of Netflix recently announced Sunday that their services will now run on two separate websites. The DVD by mail service will now be marketed under the name, Qwikster while Netflix’s current website will focus solely on its streaming content. The change will go into effect in the coming weeks.

Hastings explained that having two completely separate divisions will allow the company to serve customers the best they can on both fronts instead of having one (streaming content) overshadow the other (DVD by mail). Andy Rendich, leader of the current Netflix DVD service, will be CEO of Qwikster. In the blog Hastings posted Sunday, he wrote, “…we 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.”

Hastings also apologized for the recent controversial string of changes that Netflix has undergone in the past few months and admitted quite frankly, “I messed up. I owe everyone an explanation.” But is it too late for apologies and explanations? Netflix has already reported a loss of one million subscribers after their price hike went into effect at the beginning of the month and the number may continue to grow as a result of this split.

Looking at the big picture, it’s a tale as old as…technology. As technology continues to evolve, demand begins to change (in this case, the demand has shifted to streaming content) and if businesses can’t keep up, they risk dying out. AOL had trouble getting past their once successful dial-up business model and Borders also struggled to stay open and compete with the advent of eReaders and eBooks as Hastings himself pointed out. Hastings also admitted that he’s always been fearful of not being able to find success in the streaming business and it was that fear coupled with a rapidly evolving business that led to the controversial changes that continue to plague Netflix.  

News of the change up has everyone from subscribers to market analysts speculating about the future of Netflix. Subscribers such as David Issacson was offended by Hastings apology and called it “self-serving,” while he and scores of others threaten to find other alternatives such as Amazon Prime and Hulu Plus. Others have noted that Netflix’s library of streaming content has grown anemic and will continue to get smaller in February of next year as their deal with Starz is set to end. This will result in taking 8% of their streaming catalog offline, many of which are the more popular movies available. Still, it’s too soon to tell if this change will be the final straw that broke Netflix but it certainly isn’t looking good.

If you are still a subscriber to both the streaming service and the DVD by mail service, here’s a rundown on what changes you can expect in the coming weeks:

  • Whenever you want to rent a DVD from Netflix, log onto Qwikster – when you want to stream, go to Netflix
     
  • Subscribers will receive two different billing statements – one from Qwikster and one from Netflix. Prices will not change. 
     
  • Qwikster will be adding a subscription tier that involves video game rentals for the Wii, PS3 and XBOX360.
     
  • Should you need to change credit card information or e-mail addresses, you will have to change the information on both websites. They will not be integrated.
     
  • Reviews and ratings from your original Netflix account will not transfer over to Qwickster.
     
  • Searches will not work across both websites when finding a movie or TV show.